Vodacom Group Limited · JSE:VOD
Vodacom — H1 2006 Earnings Presentation
47 slides from Vodacom's earnings presentation, Nov 14, 2005
Slide 1: Driving the future of communication
Driving the future of communication Vodacom Group (Proprietary) Limited Interim results for the six months ended September 30, 2005 November 14, 2005
Slide 2: Content
Content Alan Knott-Craig Chief Executive Officer Operational highlights Leon Crouse Chief Financial Officer Financial review
Slide 3: Operational highlights
Operational highlights Alan Knott-Craig Chief Executive Officer
Slide 4: Worldwide prepaid tariff comparison
Poland, Centertel Mexico, Telcel Prepaid basket Hungary, T-Mobile South Africa, Vodacom Poland, Era Czech Republic, T-Mobile Ireland, Vodafone Canada, Bell Mobility Affordable cellular service Korea, SK Telecom Source: Teligen T-Basket Model developed for OECD Portugal, TMN Worldwide prepaid tariff
Slide 5: Worldwide medium and high-end user comparison
Luxembourg, LuxGEM Austria, Mobilkom UK, T-Mobile in 30 countries. High-end basket Italy, Vodafone South Africa, Vodacom Hungary, T – Mobile Iceland, og Vodafone France, SFR Affordable cellular service Vodacom ranked 33rd out of 61 operators Australia, Telstra Source: Teligen T-Basket Model develope
Slide 6: Affordable cellular service and a high penetration rate (2004)
Affordable cellular service and a high penetration rate (2004) 0.45 45 0.399 39.3 0.40 0.379 40 0.354 0.355 0.35 0.332 0.336 35 0.315 0.297 0.298 Aggregated retail tariff (in US Dollar cents) 0.30 30 0.267 0.239 0.240 0.242 0.244 Teledensity 0.25 25 0.195 0.20 20 17.38 0.168 0.15 0.126 15 8.73 9.9 0
Slide 7: Vodacom South Africa prepaid tariffs
Vodacom South Africa prepaid tariffs 4U peak off-net 4U peak on-net 4U “Happy Hours” on-net R2.99/min R2.99/min R1.49/min 16.9% 8.0% 58.6% Average outgoing prepaid tariff Average outgoing prepaid tariff 4U off-peak off-net on-net R1.05/min R2.26/min R1.89/min 1.0% 3.9% 18.8%
Slide 8: Group highlights
Group highlights for the six months ended September 30, 2005 vs. the same period in the previous financial year Total customers Revenue EBITDA 19.1 million R16.2 billion R5.6 billion 41.8% 22.3% 32.8% EBITDA margin Net profit Dividends 34.4% R2.4 billion R1.7 billion 2.7% pts 65.1% 6.3% High gross c
Slide 9: South Africa – market share 57%
South Africa – market share 57% Population 48.3 million, penetration 58.0% % H1 2005 H1 2006 change • Total customers 11.3 million 15.8 million 39.0% • Revenue R12,057 million R14,764 million 22.5% • Profit from operations R2,754 million R4,060 million 47.4% • ARPU R165 R147 10.9% • Customers per em
Slide 10: Strong Vodacom South Africa operational indicators
Strong Vodacom South Africa operational indicators • Gross connections up Vodacom South Africa gross connections 55.9% year-on-year to a new 6,000 high of 4.2 million 4,181 4,000 3,499 Thousand • Customers up 39.0% year-on- 2,750 2,681 2,248 year to 15.8 million 2,000 1,625 1,870 • Total traffic inc
Slide 11: South Africa – impressive mobile market growth
South Africa – impressive mobile market growth 30 27.7 25 23.0 20 18.1 Customers (million) 15.8 15 13.9 12.8 11.9 10.8 10.2 9.7 10 7.9 8.4 6.6 6.0 5.1 5 0 2002 2003 2004 2005 H1 2006 Other operators Vodacom Total
Slide 12: Improved South Africa churn and inactive customers
Improved South Africa churn and inactive customers • Contract churn low at 9.3% Vodacom South Africa churn history 50 • Prepaid churn decreased 41.3 40 34.0 to 18.7% 30.1 36.6 30.3 30 • Contract inactive customers 30.4 18.7 % 20 27.2 27.1 increased from 1.5% in 10 17.4 14.5 March 2005 to 1.8% 0 11.9
Slide 13: Lower South Africa prepaid and contract ARPU
Lower South Africa prepaid and contract ARPU • Prepaid ARPU decreased Vodacom South Africa ARPU per month 10.1% to R71 year-on-year 800 • Contract ARPU decreased 560 629 634 624 588 600 7.7% to R588 year-on-year Rand • Blended ARPU decreased 400 10.9% to R147 year-on-year 200 182 183 177 163 147 Low
Slide 14: 3G and Vodafone Live!
3G and Vodafone Live! • Over 13 thousand increase 3G data cards 18.7 in 3G data cards from 20 15.8 March 2005 15 13.2 Thousand 10.5 10 8.4 6.7 5 0 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Vodafone Live! users 120 • Over 94 thousand increase in 102.4 100 Vodafone Live! users from 87.6 80 71.2 April
Slide 15: South Africa market estimated at 43 million by 2011
South Africa market estimated at 43 million by 2011 • Vodacom strategically placed for Vodacom South Africa market share continued market leadership 80 Lowest cost operator 70 Extensive distribution 60 % Market share defence 61 57 56 57 Key market and focus 50 54 Strong recognised brand 40 Strong an
Slide 16: Service Provider strategy in South Africa
Service Provider strategy in South Africa • Vodacom South Africa Control 81.8% of contract customers Control 99.2% of prepaid customers • Autopage Vodacom contract customers of 183 thousand Vodacom prepaid customers of 92 thousand • Nashua Vodacom contract customers of 197 thousand Vodacom prepaid c
Slide 17: Coverage Map South Africa - GSM & GPRS
Coverage Map South Africa - GSM & GPRS
Slide 18: Coverage Map South Africa EDGE
Coverage Map South Africa EDGE
Slide 19: 3G Phase 1 & 2 Coverage - Live on air
3G PHASE 1 & 2 Coverage - (Live on air) 3G SITES Current 1,332 1 December 1,445 1 February 1,580
Slide 20: Tanzania – market share 58%
Tanzania – market share 58% Population 36.5 million, penetration 7.6% % H1 2005 H1 2006 change • Total customers 952,485 1,606,290 68.7% • Revenue R472 million R611 million 29.4% • Profit from operations R72 million R115 million 59.7% • ARPU R91 R73 19.8% • Customers per employee 2,785 4,330 55.5% •
Slide 21: Lesotho – market share 80%
Lesotho – market share 80% Population 1.9 million, penetration 11.2% % H1 2005 H1 2006 change • Total customers 122,240 170,593 40.2% • Revenue R65 million R77 million 18.5% • Profit from operations R9 million R26 million 188.9% • ARPU R91 R77 15.4% • Customers per employee 1,971 2,625 33.2% • Capex
Slide 22: Democratic Republic of Congo (DRC) – market share 49%
Democratic Republic of Congo (DRC) – market share 49% Population 65.0 million, penetration 3.9% % H1 2005 H1 2006 change • Total customers 902,897 1,235,860 36.9% • Revenue R594 million R649 million 9.3% • Profit from operations R7 million R47 million >200.0% • ARPU R111 R89 19.8% • Customers per em
Slide 23: Mozambique – market share 26%
Mozambique – market share 26% Population 18.6 million, penetration 7.0% % H1 2005 H1 2006 change • Total customers 164,423 336,152 104.9% • Revenue R43 million R74 million 72.1% • Loss from operations (R341 million) (R25 million) 92.7% • ARPU R63 R41 34.9% • Customers per employee 1,934 2,271 17.4%
Slide 24: Financial review
Financial review Leon Crouse Chief Financial Officer
Slide 25: Accounting changes
Accounting changes For the six months ended September 30, 2005 Balance Profit from sheet operations R million R million Prior year adjustments (before taxation): IAS 17: Leases (retained earnings) 93.5 IAS 38: Intangible assets: cost (at 31/03/05) 2,123.3 accumulated depreciation (1,419.8) Current y
Slide 26: Group results
Group results Income statement % R million H1 2004 H1 2005 H1 2006 change Revenue 10,984 13,231 16,175 22.3% Operating expenses excluding depreciation, amortisation and impairment (7,291) (9,042) (10,612) (17.4%) EBITDA 3,693 4,189 5,563 32.8% Depreciation and amortisation (1,247) (1,418) (1,406) 0.
Slide 27: Group revenue analysis by country
Group revenue analysis By country % R million H1 2004 H1 2005 H1 2006 change South Africa 10,293 12,057 14,764 22.5% Tanzania 431 472 611 29.4% Lesotho 55 65 77 18.5% DRC 205 594 649 9.3% Mozambique – 43 74 72.1% 10,984 13,231 16,175 22.3% Revenue driven by strong customer growth Other African opera
Slide 28: EBITDA growth and margin analysis
EBITDA growth and margin analysis EBITDA 32.8% year-on- • Strong EBITDA performance 8,000 year Increased 32.8% year-on-year to R5.6 billion 5,563 6,000 5,401 EBITDA margin increased 2.7% points year-on- 4,189 4,064 R million 3,693 year to 34.4% 4,000 • South Africa EBITDA 2,000 Increased 32.3% year-
Slide 29: Group revenue analysis by revenue type
Group revenue analysis By revenue type Revenue analysis – H1 2005 Revenue analysis – H1 2006 R13,231 million R16,175 million 3.3% 1.0% 3.0% 0.7% 10.0% 11.8% 22.2% 19.7% 59.1% 59.2% 4.4% 5.5% Airtime, connection and access Data revenue Interconnection Equipment sales International airtime Other sales
Slide 30: Data revenue growth
Data revenue growth 51.5% By country 900 821 800 700 600 542 R million 500 462 400 300 42.9% 144.4% 200 100 48 35 50 22 2 9 0 H1 2004 H1 2005 H1 2006 South Africa Tanzania Other South Africa data revenue up 51.5%, due to customer growth and new technologies (3G, Vodafone Live!, BlackBerry®) Tanzania
Slide 31: Group operating expenses
Group operating expenses By expense type Operating expense analysis – H1 2005 Operating expense analysis – H1 2006 R10,696 million R11,950 million 7.2% 7.7% 7.1% 8.0% 15.5% 11.2% 53.3% 55.0% 18.1% 16.9% Direct network operating costs Payments to other operators Depreciation, amortisation and impairm
Slide 32: Operating expenses
Operating expenses • Acceptable growth in other direct Operating expenses network costs, despite high levels 14,000 11,950 of connections 12,000 10,696 10,141 • 20.2% growth in payments to 10,000 8,538 9,092 R million 8,000 other network operators 6,000 • Depreciation and amortisation 4,000 Decrease
Slide 33: Group profit from operations analysis
Group profit from operations analysis % R million H1 2004 H1 2005 H1 2006 change South Africa 2,497 2,754 4,060 47.4% Tanzania 54 72 115 59.7% Lesotho – 9 26 188.9% DRC (6) 7 47 >200.0% Mozambique – (341) (25) 92.7% Holding companies and other (99) 33 2 (93.9%) 2,446 2,534 4,225 66.7% Profit from op
Slide 34: Profit from operations and margin analysis
Profit from operations and margin analysis • Profit growth of 66.7% year-on-year to Profit from operations R4.2 billion 5,000 4,225 3,944 • South Africa (47.4% year-on-year growth to 4,000 R4.1 billion) 2,779 R million 3,000 2,446 2,534 Exceptional growth of 39.0% in customers Reduced interconnect m
Slide 35: Factors affecting trends and margins
Factors affecting trends and margins 44.9% year-on- Equipment sales revenue • Gross South Africa customer year connections of 4.2 million 2,500 1,910 Prepaid customer connections of 3.9 million; 2,000 an increase of 62.5% 1,369 R million 1,500 1,318 1,202 1,073 Contract customer connections of 0.3 m
Slide 36: Factors affecting trends and margins (continued)
Factors affecting trends and margins (continued) • South Africa traffic mix Total South Africa traffic 19.3% year-on- year Outgoing traffic increased 23.2% year-on-year to 5.3 billion minutes 9,000 8,279 Incoming traffic increased 12.5% year-on-year to 8,038 8,000 6,735 2.7 billion minutes 6,523 Min
Slide 37: Productivity measures
Productivity measures • Consolidated customers Customers per employee per employee 5,000 4,330 3,829 Increased 28.1% year-on-year to 3,524 based 4,000 2,845 2,785 on 5,426 employees 3,000 2,625 2,271 1,971 2,119 2,070 1,934 • Consolidated gross capex as a % of 2,000 revenue increased to 15.3% from 1
Slide 38: Strong cash generation
Strong cash generation • Cash generated from operations Cash generated from operations 27.9% increased 27.9% to R4.9 billion year-on- year 7,000 • Cash utilised in investing activities 6,000 6,163 increased 36.0% to R2.2 billion 5,000 4,606 4,922 3,849 R million • Free cash flow increased 4,000 2,99
Slide 39: Capex additions and capex composition
Capex additions and capex composition Capex gross additions – H1 2005 Capex gross additions – H1 2006 R1,413 million R2,475 million 1.9% 0.5% 3.1% 0.5% 13.2% 5.7% 4.2% 5.9% 78.5% 86.5% South Africa Tanzania DRC Mozambique Lesotho and holding companies Capex as a % of revenue = 15.3% vs. last year of
Slide 40: Net debt maturity profile
Net debt maturity profile September 30, Total Total R million 2006 2007 2008 2009 2010 >2011 2005 2004 South Africa – finance leases 64 95 134 166 114 263 836 875 Tanzania 101 101 34 – 90 – 326 408 Lesotho 4 – – – – – 4 4 DRC 1,382 – – – – – 1,382 1,399 Other 39 – – – – – 39 – Debt excluding bank ov
Slide 41: Debt composition
Debt composition Gross debt composition Gross debt composition including bank overdrafts – H1 2005 including bank overdrafts – H1 2006 R4,499 million R6,018 million 9.1% 3.9% 26.2% 31.7% 59.2% 69.9% Foreign denominated, ring-fenced Foreign denominated, not ring-fenced ZAR denominated Net debt to equ
Slide 42: Shareholder distributions
Shareholder distributions Dividends and interest on shareholders’ loans 4,000 3,500 6.3% 3,000 year-on- year 2,500 1,800 R million 2,000 1,500 1,500 1,000 1,600 1,700 500 600 600 600 0 144 168 47 2002 2003 2004 2005 H1 2006 Interest Interim dividend Final dividend The level of future dividend paymen
Slide 43: Questions?
Questions?
Slide 44: Disclaimer
Disclaimer • This presentation has been prepared and published by Vodacom Group (Proprietary) Limited. • Vodacom Group (Proprietary) Limited is a private company and as such is not required by the Companies Act 61 of 1973, as amended, to publish its results. • Vodacom Group (Proprietary) Limited mak
Slide 45: Group balance sheets
Group balance sheets Extracts as at March % R million H1 2005 2005 H1 2006 change ASSETS Non-current assets 13,896 13,933 15,184 9.0% Current assets 7,785 8,662 10,173 17.4% Total assets 21,681 22,595 25,357 12.2% EQUITY AND LIABILITIES Capital and reserves 7,329 7,888 8,736 10.8% Non-current liabil
Slide 46: Group cash flow statements
Group cash flow statements Extracts for the six months ended September 30, % R million H1 2004 H1 2005 H1 2006 change Cash generated from operations 2,991 3,849 4,922 27.9% Net cash flows from operating activities 831 966 1,477 52.9% Net cash flows utilised in investing (1,254) (1,641) (2,231) (36.0
Slide 47: Thank you
Thank you