Safaricom Plc · NSEKE:SCOM
Safaricom — FY2015 Earnings Presentation
38 slides from Safaricom's earnings presentation, 2015
Slide 1: Safaricom Limited FY15 Presentation
Safaricom Limited FY15 Presentation
Slide 2: Contents
2 Contents FY15 Highlights FY15 Financial Review Strategic Focus and Guidance
Slide 3: FY15 Highlights
3 FY15 Highlights • Strong growth of non-voice service revenue. • Continued investment and innovation. o Significant improvements in voice and data service quality based on our ongoing Best Network in Kenya program o Ongoing deployment of 900MHz spectrum acquired from Essar for 3G, and modernization
Slide 4: What we have achieved
4 What we have achieved • Launched Kenya’s first 4G network in Nairobi and Mombasa • Successfully deployed the next generation (G2) MPesa system in Kenya Best Network in • 2,010 kms of metro fiber rolled out to date, with 1,070 (30%) of our base stations connected Kenya • 720 buildings connected to
Slide 5: What we have achieved…Cont’d
5 What we have achieved…Cont’d Rewarding and • Increased number of web self care service users to 2.67m delighting our • Made emergency top ups more accessible customers • Flexi loyalty redemption and credit facilities for customers to acquire smart devices • Mpesa 30 day active customers grew • Lau
Slide 6: What we have achieved…Cont’d
6 What we have achieved…Cont’d Partner of choice • Increased penetration of additional products into corporate customer base (Fixed data at for business 21% and MPesa at 22%) • County government penetration with 60% of counties using at least one Enterprise solution • Grew SME active customers by 10
Slide 7: Strong financial performance
7 Strong financial performance TOTAL REVENUE +13% to Kshs 163.4bn SERVICE REVENUE +13% to Kshs 156.2bn NON-VOICE SERVICE REVENUE +27% to Kshs 68.8bn EBITDA +17% to Kshs 71.2bn NET INCOME +38% to Kshs 31.9bn FREE CASH FLOW +21% to Kshs 27.5bn PROPOSED DIVIDEND PER SHARE +36% to Kshs 0.64
Slide 8: Contents
8 Contents FY15 Highlights FY15 Financial Review Strategic Focus and Guidance
Slide 9: Delivering on strategy: Strong financial results
9 Delivering on strategy: Strong financial results Total revenue EBITDA Net income Free cash flow Kshs. Billion Kshs. Billion Kshs. Billion Kshs. Billion +12.9% +16.8% +38.4% +21.3% 163.36 144.67 FY14 FY15 8.3% growth in 12.9% growth in Driven by growth Positive impact subscribers. revenue. in EBITD
Slide 10: Strong revenue growth
10 Strong revenue growth FY15 Total revenue 12.9% • 12.9% growth in total revenue Kshs. Billion • 8.3% growth in customer base to 23.35m 163.36 160.00 • Non-voice service revenue growth of 27.4% 144.67 140.00 • Voice service revenue growth of 3.7% 124.29 120.00 107.00 100.00 Total revenue breakdown
Slide 11: Service revenue: Growth across all segments
11 Service revenue: Growth across all segments 156.25 138.36 118.06 100.19
Slide 12: Voice revenue: Sustained growth
12 Voice revenue: Sustained growth Voice Revenue Kshs. Billion 3.7% • 3.7 % growth in voice service revenue 90.00 87.41 • 8.3 % growth in customers 84.32 80.00 • Strong prepay airtime distribution network 75.84 o Top-up cards distributed in over 275,000 70.00 68.12 retail outlets and 42 own retail s
Slide 13: Non-voice revenue: Strong growth across all segments
13 Non-voice revenue: Strong growth across all segments Non - Voice Revenue • Non-voice service revenue grew 27.4%, now Kshs. Billion 27.4% 70.00 68.84 42.1% of total revenue • Revenue growth of: 60.00 54.04 • SMS +14.8% 50.00 • Mobile data +59.2% 42.21 40.00 • Fixed service +21.7% 32.07 30.00 • MPe
Slide 14: MPesa: Driving financial inclusion
14 MPesa: Driving financial inclusion MPesa Revenue Kshs. Billion 22.8% • 22.8% growth in MPesa revenue, driven by: 35.00 • 14.0% increase in 30 day active users to 13.86m 32.63 • 6.2 chargeable transactions per month per 30 day 30.00 active users (13% growth) 26.56 25.00 • Total MPesa transactional
Slide 15: MPesa: value transacted (Ksh bn)
15 MPesa: value transacted (Ksh bn) +34% CAGR •CAGR FY ’11-’FY15’ 4,181 +84% 3,321 +31% 2,636 2,061 +27% 1,301 +33% Value transacted is 34% of GDP* Computation based on transfers and other payments (B2C, C2B, IMT, Buy goods, etc) and rebased GDP of USD 55.2bn *According to Kenya National Bureau of S
Slide 16: SMS: Attractive bundles & active users driving growth
16 SMS: Attractive bundles & active users driving growth SMS Revenue • 14.8% growth in SMS revenue, driven by; Kshs. Billion 14.8% 20.00 • 8.2% growth in 30 day active SMS users to 13.35m 15.63 15.00 • 33.8% increase in active SMS bundle users to 13.62 4.0m 10.00 10.15 • 14.1% growth in SMS usage pe
Slide 17: Data: Customers, usage & devices driving growth
17 Data: Customers, usage & devices driving growth Mobile Data & Fixed Service Revenue Kshs. Billion 51.1% • Mobile data revenue growth of 59.2% driven by: 20.00 17.95 • 21.2% growth in 30 day active mobile data users to 11.6m – now 50% of our customer base 15.00 • 3G & 4G enabled devices in our net
Slide 18: Sustained ARPU growth in non-voice services
18 Sustained ARPU growth in non-voice services Voice SMS MPesa Mobile Data Service ARPU Kshs. Kshs. Kshs. Kshs. Kshs. -5.7% +7.3% +9.4% +26.4% +5.20% ARPU decline 14.1% increase 13.1% growth in 37.9% increase in Driven by attributed to usage driven chargeable usage per increased reduction 21% in by
Slide 19: Direct Costs control improves contribution margin
19 Direct Costs control improves contribution margin FY15 Direct costs FY15 Direct costs breakdown Kshs. Billion Kshs. Billion +9.1% 60.00 56.71 51.96 50.00 47.20 44.00 40.00 30.00 20.00 FY12 FY13 FY14 FY15 • 9.1% increase in direct costs, compared to 12.9% increase in total revenue • Contribution m
Slide 20: Continued focus on cost control initiatives
20 Continued focus on cost control initiatives FY15 OPEX Kshs. Billion - • Steady operating costs as % of total revenue 23.8% of 22.1% 40.00 22.1% 25.0% 22.4% 22.0% 35.00 20.0% • Continuous operational cost reduction initiatives focus on 30.00 15.0% Transmission costs 25.00 IT operating costs 31
Slide 21: Strong growth in EBITDA
21 Strong growth in EBITDA EBITDA Kshs. Billion FY15 71.2 FY14 60.9 FY13 49.1 FY12 37.5 • 16.7 % growth in FY15 EBITDA to Kshs 71.2bn • FY15 EBITDA margin at 43.6%, however, the underlying EBITDA margin is 42.6% after removing material one-off items
Slide 22: Largest & Fastest Network in Kenya
22 Largest & Fastest Network in Kenya FY15 CAPEX Base stations Kshs. Billion 40.00 30.0% 35.00 24.0% 25.0% 30.00 20.0% 19.2% 20.6% 20.0% 25.00 33.70 20.00 15.0% 15.00 27.78 25.74 24.88 10.0% 10.00 5.0% 5.00 0.00 0.0% FY12 FY13 FY14 FY15 CAPEX CAPEX Intensity Capital expenditure of Kshs 34bn invested
Slide 23: Improved cash generation
23 Improved cash generation FY15 Free Cash Flow* FY15 Net Cash Kshs. Billion Kshs. Billion • 21.3% growth in Free Cash Flow to Kshs 27.5bn • Kshs 4.49bn corporate bond at 7.75%, from Kshs 22.7bn in FY14 expires Dec 2015 • Driven by improved trading results and • Kshs 1.35bn two year loan facility at
Slide 24: Key Financials
24 Key Financials: FY15 FY14 GROWTH H2 FY15 H2 FY14 GROWTH Voice revenue 87.41 84.32 3.7% 43.74 43.27 1.1% MPesa revenue 32.63 26.56 22.8% 17.03 14.06 21.1% Messaging revenue 15.63 13.62 14.8% 8.46 7.27 16.4% Mobile data revenue 14.82 9.31 59.2% 8.32 5.06 64.3% Fixed service revenue 3.13 2.57 21.7%
Slide 25: Contents
25 Contents FY15 Highlights FY15 Financial Review Strategic Focus and Guidance
Slide 26: Strategic priorities
26 Strategic priorities Our strategy will be driven by; • Putting our customers first, • Delivering relevant products, and • Ensuring excellence in operations
Slide 27: Strategic priorities for next year
Strategic priorities for next year 27 • Increase 3G population coverage from 69% to 80% in FY16 Continue the Best • Extend 4G deployment to additional 13 towns and cities across Kenya by Dec 2015 Network In Kenya • Implement big data capability to improve customer experience program • Continue to ro
Slide 28: Strategic priorities for next year…cont’d
Strategic priorities for next year…cont’d 28 • Offer personalised value propositions Delighting our • Improve retail queue waiting time customers • Remove call reasons into the call centre • Robust acquisition of subscribers • Leverage the new G2 MPesa system • Drive growth of Lipa Na MPesa Deepenin
Slide 29: Strategic priorities for next year…cont’d
Strategic priorities for next year…cont’d 29 • Continue to leverage on own fiber in key towns Partner of choice • Accelerate commercialization and growth of managed services for business • Develop key vertical specific propositions to drive product penetration among corporates • Drive fixed voice gr
Slide 30: FY16 Guidance
30 FY16 Guidance Net Income for FY16 Expected to be in the range of Kshs 32 - 34bn Free Cash Flow for FY16* Expected to be in the range of Kshs 25 - 26bn (a decrease on FY15 due to payments for the build of the National Police Security Network) *Free Cash Flow as we present it excludes the impact of
Slide 31: FY15 Highlights
31 FY15 Highlights • Strong growth of non-voice service revenue. • Continued investment and innovation. o Significant improvements in voice and data service quality based on our ongoing Best Network in Kenya program o Ongoing deployment of 900MHz spectrum acquired from Essar for 3G, and modernizatio
Slide 32: Slide 32
Slide 33: Appendices
Appendices : ¥ Seanen gegs ue
Slide 34: Safaricom Certification Benchmark - Management Summary March/April 2015
Safaricom Certification Benchmark - Management Summary March/April 2015 34 Achieved ‘Best in Test’ P3 Certification Commissioned independent drive tests covering Areas covered and interconnecting highways: Safaricom and its two competitors: Nairobi, Ruiru, Thika, Makuyu, Embu, Chuka, Meru, Nanyuki,
Slide 35: How we will account for the Police Network Project
35 How we will account for the Police Network Project P& L FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Fixed data revenue 554 665 665 665 775 Service Revenue 554 665 665 665 775 Other income Total revenue 554 665 665 665 775 Other income 11,583 Contribution margin 12,136 665 665 665 775 Network
Slide 36: US$ 1.5bn of real time payments per month
36 US$ 1.5bn of real time payments per month A B C D Person to Person US$ 1,035m per month Real time transfer P2P B2P 10% YoY growth Person A pays the transaction fee, 100% to Safaricom: avg 1.11% The 3rd Horizon Deposit Withdraw Business to Business cash cash P2B B2B MPesa MPesa The 2nd Horizon B2C
Slide 37: MPesa Tariffs (Transfers & withdrawals)
37 MPesa Tariffs (Transfers & withdrawals) Transaction Range (KShs) Transaction Type and Customer Charges (Kshs) Transfer to other Withdrawal from MPesa Min Max MPesa users agents 10 49 1 N/A 50 100 3 10 101 500 11 27 501 1,000 15 27 1,001 1,500 25 27 1,501 2,500 40 27 2,501 3,500 55 49 3,501 5,000
Slide 38: Summary - Industry Performance: Mar 2014 vs Mar 2015
Summary - Industry Performance: Mar 2014 vs Mar 2015 Safaricom Airtel and YU Orange Equitel Mar ‘14 Mar ‘15 % Mar ‘14 Mar ‘15 % Mar ‘14 Mar ‘15 % Mar ‘14 Mar ‘15 % Market Share by 67.8 67.1 -1% 24.2 20.2 -17% 8 10.8 35% 1.9 N/A Subscribers (%) Mobile Subscribers 21.6 23.3 8% 7.8 7.0 -10% 2.5 3.8 52%