MTN Group Limited Review of results and funding outlook Presented May 2009

Transcription

1 MTN Group Limited Review of results and funding outlook Presented May 2009

2 Agenda Financial review Rob Nisbet Group Finance Director Funding outlook Debbie Millar GM: Treasury, Funding and Investor Relations Looking ahead Rob Nisbet Group Finance Director 2008 Mobile Telephone Networks. All rights reserved. 2

3 Strategy and rationale for meeting Update on financial and operational performance Update of treasury activities Credit considerations 2008 Mobile Telephone Networks. All rights reserved. 3

4 Financial and operational review Rob Nisbet, Group Finance Director

5 MTN in context Global backdrop MTN Global recession Strong balance sheet and cash flow Banking crisis and access to funding Increased risk aversion Economic slowdown in Africa and ME Cash is King 99% prepaid Well positioned Market share 2008 rollout Varied impact on telco spend to date Slowing GDP growth Governance Impact of oil and commodity prices Management depth, quality and stability 2008 Mobile Telephone Networks. All rights reserved. 5

6 MTN vision To be the leader in telecommunications in emerging markets Consolidation & diversification Leverage existing footprint & intellectual capacity Convergence & operational evolution Increased competitiveness Best practice Hub and cluster Diversification Procurement synergies Skills optimisation Brand Value proposition Execution excellence 2008 Mobile Telephone Networks. All rights reserved. 6

7 Key indicators Subscribers ( 000) 31- Mar- 09 % change Dec-08 ARPU (ZAR/US$) 31-Mar Mobile Telephone Networks. All rights reserved. 100 million subscriber milestone reached ARPU (ZAR/US$) 31-Dec-08 % Change local currency South and East Africa 25, South Africa 17, R139 R148-6 Uganda 3, $7 $8-7 Botswana 1, $10 $13-14 Rwanda 1, $7 $11-30 Zambia $6 $11-5 Swaziland $11 $14-17 West and Central Africa 44, Nigeria 25, $13 $16-6 Ghana 6, $8 $12-15 Cameroon 3, $9 $11-10 Côte d Ivoire 3, $9 $10-3 Benin 1, $13 $15-6 Guinea Conakry 1, $8 $10-27 Congo Brazzaville $12 $18-6 Liberia $12 $14-17 Guinea Bissau $10 $11-6 Middle East and North Africa 28, Iran 18, $8 $9-16 Syria 3,428-3 $17 $19-6 Sudan 2,658 0 $5 $7-8 Afghanistan 2, $5 $6-14 Yemen 1, $7 $8-11 Cyprus $36 $44-7 Total MTN 98,

8 Subscriber contribution by region MTN Group Total (subscriber million) 700 Proportionate* (subscriber million) % % % % % % % 44% 46% 45% % 11% 45% 45% 46% % % % 31% 27% 26% % 36% 32% 31% 0 0 Dec-06 Dec-07 Dec-08 Mar-09 Dec-06 Dec-07 Dec-08 Mar-09 * Based on % ownership SEA WECA MENA 2008 Mobile Telephone Networks. All rights reserved. Increased diversification 8

9 Key developments Economic Varied impact on consumer spending to date Economic volatility (oil and inflationary pressures) Currency impact on ZAR reported Dec 08 results of approx 15% Rollout Strong delivery on capital expenditure, rollout of ZAR28.3 billion in 08, up 84% Well positioned in an increasingly competitive environment Operational evolution Acquired ISP s Innovative products, MTN Zone Backbone rollout including Nigeria, Ghana, South Africa 3G investment mobile broadband Access to meaningful cable capacity US$25 invested in submarine network cables Centralised procurement tightened including standardisation of network equipment and rationalisation of network suppliers Actively seeking infrastructure, transmission and site sharing opportunities across operations 2008 Mobile Telephone Networks. All rights reserved. 9

10 Key developments Unwind of 13.1% BEE structure BEE Dividend in specie of 34.1 million shares paid to beneficiaries in Feb 09 Shareholder approval obtained to implement unwind Board decision to postpone new BEE transaction until more conducive trading environment Expansion opportunities Scarcity - expectation gap due to falling prices Value enhancing opportunities explored Leveraging diversity within common culture & value framework People Skills investment and talent management Knowledge share and collaboration 2008 Mobile Telephone Networks. All rights reserved. 10

11 11 EBITDA analysis EBITDA Contribution % EBITDA Margin % SEA WECA MENA *MTN Group * Difference in HQ companies

12 Earnings per share Cents Year ended Dec 08 Year ended Dec 07 % change Basic headline earnings per share Reversal of put option in respect of subsidiary Reversal of the subsequent utilisation of deferred tax asset (73.6) Reversal of deferred tax asset - (12.0) - Adjusted headline earnings per share (75.9) 22.2 (80.1) South & East Africa West & Central Africa Middle East & North Africa Head Office Companies

13 Group highlights to Dec 2008 Group subscribers Up 48% to 90.7 million Revenue Up 40% to ZAR 102,5 billion EBITDA Up 36% to ZAR 43,2 billion PAT Up 44% to 17,1 billion Adjusted headline EPS Up by 33% to cents Capex execution Up by 84% to ZAR 28,3 billion Strong balance sheet Net debt / EBITDA 0.3X Dividends declared of 181 cents All comparatives to Dec 07 13

14 Exchange rates closing rates USD: Local currency Naira Rand Cedis Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 ZAR: Local currency Naira Cedis Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 14

15 Income statement ZAR million Year ended Dec 08 Year ended Dec 07 % change Revenue EBITDA EBITDA MARGIN 42.1% 43.5% Depreciation (9 939) (6 774) 46.7 Amortisation (2 820) (2 199) 28.2 Profit from operations Net finance costs (1 917) (3 173) (39.6) Share of profits from associates Profit before taxation Income tax expense (11 355) (7 791) 45.7 Profit after taxation Minority interests (1 820) (1 308) 39.1 Attributable profit

16 Revenue analysis ZAR million Year ended Dec 08 Year ended Dec 07 % change ZAR South & East Africa % change LC s South Africa Other operations West & Central Africa Nigeria Ghana Other operations Middle East & North Africa Iran Syria Sudan (1.6) (12.2) Other operations Head Office Companies Total

17 EBITDA margin analysis ZAR million Dec 08 EBITDA margin % Dec 07 EBITDA margin % % pts change South & East Africa (2) South Africa (2) Other operations (3) West & Central Africa (1) Nigeria Ghana (5) Other operations (2) Middle East & North Africa Iran 30.2 (13.4) - Syria (3) Sudan (19) Other operations Total (1) 17

18 Tax considerations - Group Material reconciling items Effective tax rate reconciliation to 28.0% Nigerian commencement provisions 4.3% Effective tax rates % STC and withholding taxes 1.9% Withholding taxes on post Pioneer profit dividends from MTN Nigeria 1.5% Nigeria Put option effect 1.2% Other 1.8% Looking forward Dec 09 Group effective rate expected in lower to mid 30 s based on 17.6 Effect of Nigeria Put option? STC and withholding taxes Dec-06 Dec-07 Dec-08 18

19 Cash flow statement ZAR million Year ended Dec 08 Year ended Dec 07 Net cash generated by operations Net interest paid (1 283) (2 576) Taxation paid (6 781) (4 233) Dividends paid (2 536) (1 675) Cash inflows from operating activities Acquisitions of PPE (excluding software) (26 896) (14 458) Other investing activities (281) (2 694) Cash outflows from investing activities (27 177) (17 152) Cash in/(out)flows from financing activities 292 (2 135) Net movement in cash and cash equivalents Cash and cash equivalents at the beg. of the year Realised gains/(losses) on bank accounts (25) Cash and cash equivalents at the end of the year

20 Capital expenditures ZAR (incl. software) ZAR million Actual 2008 Authorised 2009 Actual 2007 South & East Africa South Africa Other operations West & Central Africa Nigeria Ghana Other operations Middle East & North Africa Iran Sudan Syria Other operations Head Office Companies Total

21 South Africa operational highlights Launched Jun 1994 Market share 36% Population 49m Market sizing 64m (2013) Penetration 97% Shareholding 100% Continued success of MTN Zone (46% of prepaid base) Introduced off-net Postpaid segment still robust MTN Anytime (approx 259k subs) Improved distribution Acquisition of the remaining 51% of I-Talk (12 Jan 09) Acquisition of remaining 49% Cell Place acquired (1 Aug 08) Ownership in branded channel now 49% Regulatory Licences (ECS and ECNS) issued by ICASA on 15 Jan 09, although still engaging on corrections and omissions Competition Commission (CST s), hearing may commence in H209 RICA amendment act published on 9 Jan 09 * 9 months 2008 Mobile Telephone Networks. All rights reserved. Subscribers ( 000) Prepaid Postpaid Net additions ( 000) H2 H1 17,169 14,799 12, ,415 12,306 10,368 8,596 1,784 2,288 2,493 2,754 Dec-05 Dec-06 Dec-07 Dec-08 2,379 2,370 2,275 2,144 1,198 1,579 2,379 2, Dec-05* Dec-06 Dec-07 Dec-08 21

22 South Africa operational highlights Increase in prepaid ARPU MTN Zone stimulated revenue (55% of prepaid revenue) Lower denomination still key Increase in postpaid ARPU On-biller affecting comparatives Blended ARPU affected by mix Improved outgoing MOU in H208 Outgoing MOU Jun08-63 Attributable to MTN Zone Acquisition of Verizon Business (28 Feb 09) Well positioned in data (23% market share) To be fully integrated into MTN SA (MTN business) ARPU ZAR Postpaid Blended Prepaid Avg. total MOU comprises both incoming and outgoing minutes Dec-05* Dec-06 Dec-07 Dec Outgoing MOU Access to corporate segment * 9 months 2008 Mobile Telephone Networks. All rights reserved. 22

23 Nigeria operational highlights Launched Aug 2001 Market share 44% Population 143m Market sizing 107m (2013) Penetration 36% Shareholding 76%** Significant investment results in improved network quality and capacity Strong subscriber growth Well received value proposition (Happy hour XtraCool) New competitor launched in Q408 Subscribers ( 000) /ARPU ($) MTN Subscribers ('000) ARPU (USD) 23,077 16,511 12,281 8, Aggressive competition from PTO s Increase in MOU (improved quality) Dec-05* Dec-06 Dec-07 Dec-08 Outgoing MOU Relatively stable APRU (LC ARPU decreased by 6%) Net additions ( 000) 6,566 Seamless roaming launched in Oct 08 Promotional campaigns ban lifted in Q308 3,978 3,911 4,230 4,512 Naira devaluation H2 H1 3,978 2,645 2,475 1,266 1,755 2,054 **Legal 2008 * 9 months Mobile Telephone Networks. All rights reserved. Dec-05* Dec-06 Dec-07 Dec-08 23

24 Iran operational highlights Launched Dec 2006 Market share 37% Population 71,9m Market sizing 53m (2013) Penetration 61% Shareholding 49% Strong subscriber growth Attractive tariff plans Increase in market share from 23% (Dec07) to 37% Strong brand image Subscribers ( 000) /ARPU ($) MTN Subscribers ('000) ARPU (USD) 16,039 6, Relatively stable ARPU (10% decrease in LC ARPU) Reducing churn and dormancy remains a priority Reward based promos Declining MOU Dec-06 Dec-07 Dec-08 Outgoing MOU Net additions ( 000) 10,033 Due to removal of promo MOU 3 rd mobile licence (preferred bidder named) H2 5,852 4,446 H1 4,023 5, , Mobile Telephone Networks. All rights reserved. Dec-06 Dec-07 Dec-08 24

25 Balance sheet ZAR million As at Dec 08 As at Dec 07 Non-current assets Property. plant and equipment Goodwill and other intangible assets Other non-current assets Current assets Bank balances Restricted cash Other current assets Total assets Capital and reserves Non-current liabilities Long term liabilities Deferred taxation and other non-current liabilities Put option Current liabilities Put option Non interest bearing liabilities Interest bearing liabilities Total equity and liabilities Net debt Net debt / EBITDA

26 Funding outlook Debbie Millar, GM: Treasury, Funding and Investor Relations

27 Key stats Market cap R206 billion (US$24bn) Total assets R170 billion Fitch AA- (zaf) Outlook remains stable Credit rating Moodys A2.za Baa3 Positive outlook 27

28 Rationale for debt structure Non recourse debt is still key Improves currency match to revenue stream Unlocks local debt capacity and builds local market capacity Improves efficiency of balance sheet for local partners Central banks often prefer Improved risk sharing Holding company debt cross guarantee structure Limited use, only for operations that do not suit project finance Usually for expansion (acquisition) or bridging purposes Tax inefficient Recourse debt in operations Limited use, usually vendor based Best use of assets 28

29 Cash flow to holding companies MTN South Africa MTN Group 100% MTN Holdings 100% MTN International 100% MTN Mauritius 2008 Management fees and dividends received: MTN South Africa ZAR5,4bn Mauritius & Dubai ZAR13,5bn 100% MTN Dubai 100% Network Operations 65% Côte d Ivoire 78% Nigeria 75% Guinea Conakry 75% Benin 100% Service Providers 100% Zambia 70% Cameroon 75% Syria 60% Liberia 100% Network Solutions 53% Botswana 55% Rwanda 98% Ghana 100% Guinea Bissau 100% Congo-B 95% Uganda 83% Yemen 50% Cyprus 49% Iran 85% Sudan 100% Afghanistan 30% MTN Swaziland All amounts are utilised facilities 100% Mednet 29

30 Structure and team GM: Treasury, Funding & Investor Relations Debbie Millar Group treasury Senior manager Group treasury Lucky Ncobela Administrator Neo Monhki Front office/dealer Charity Logabane Treasury administrator Melita Fourie Dubai treasury Senior manager Dubai treasury Samer Jano Treasury administrator [vacant] Administrator Sizakele Madalane Structured and project finance Senior manager Structured and project finance Deepen Jhina Senior manager Structured and project finance Resimate Baloyi Project finance consultant Heloise Smith IR Treasury consultant Kate Gush Investor relations Yuraisha Moodley 30

31 Analysis of net debt position As at 31 Dec 08 ZAR million Net debt/(cash) Interest bearing liabilities* Cash and cash equivalents South & East Africa South Africa Other operations West & Central Africa Nigeria Ghana (1 770) Other operations Middle East & North Africa Iran Sudan Syria (3 536) Other operations Head Office Companies Intercompany eliminations (17 090) (17 090) - Total * Including long, short-term borrowings and overdrafts 31

32 Interest bearing liabilities as at Dec 08 Intercompany funding from head office co s of ZAR17.1bn includes: Iran ZAR 4.9bn (49%) RSA ZAR 7.3bn Sudan ZAR 2.1bn Conakry ZAR 0.9bn Uganda ZAR 0.6bn Unproductive interest reduced further to ZAR2.5bn from ZAR10.9bn (Dec 08) Cash accumulation Holding Co s July repayment of capital and interest on term loans and Verizon acquisition Syria, Ghana, Nigeria Net debt to EBITDA of 0.3x (Dec 07:0.5x) Impact of FX Interest bearing liabilities ZAR USD/EUR Local currency Cash and cash equivalents ZAR USD/EUR Local currency 45% 25% 20% 55% 37% 18% 32

33 Holding company facilities Company Source of facility Currency Facility amount (m) Utilisation in ZAR Undrawn facilities in ZAR Comments South Africa Mauritius General banking facilities* ZAR Have R3.3 additional uncommitted facilities Structured finance ZAR Building lease Bond* (DMTN) ZAR Not utilised under DMTN Bond MTN 01 (matures July 2010) Bond MTN 02 (matures July 2014) Syndicated loan facility* Facility A1 (matures 2011) Facility A2 (matures 2011) ZAR ZAR ZAR USD R1 750m p.a. ZAR $875m p.a. Facility B (RCF) USD To expire Bridge facility* USD Rollover from Sep 07 MTN Dubai Banque Audi ZAR Term USD $10m p.a. Total ZAR All numbers at 31 March 2009 (R9.488:$1) * MTN Group cross guarantee 33

34 Funding achievements to date $40 million fixed interest unsecured syndicated term loan in XAF Congo- Brazzaville 5 year tenor with 3 months availability and 6 months grace period Participants EcoBank (MLA), Credit du Congo and Banque Commerciale Internationale, Union Gabonaise de Banque, Societe Camerounaise de Banque, BCI and BICEC $150 million fixed interest secured syndicated term loan in XOF Côte d Ivoire 5 year tenor with 12 months availability period and 6 months grace period Participants Citibank N.A. (MLA), Bank of Africa Côte d Ivoire, Banque Internationale pour l Afrique de l Ouest Côte d Ivoire, Ecobank Côte d Ivoire, Omnifinance, Societe Generale de Banque de Côte d Ivoire and United bank of Côte d Ivoire 34

35 2009 priorities Uganda Rwanda Swaziland Afghanistan Benin Yemen Liberia $100 million syndicated term loan Global coordinator has been appointed. A selected number of MLAs will be invited to participate in the syndicate $50 million syndicated term loan A combination of local currency syndicated loan and an ECA backed facility. RFP has been issued for the local currency portion R120 million A bond issue, syndicated loan or a club deal; or any combination of these sources. RFP has been issued $130 million Commitment received for $65m. Still looking for funders for the remaining $65m $80 million syndicated loan A term loan funded by a syndicate of local banks. RFP for MLA to be issued in May 2009 $20 million local currency syndicated loan RFP has been issued to the local banks. The company has capacity to borrow an additional $60m offshore should we receive proposals acceptable to MTN $20 bilateral facility A bilateral facility with any bank that has capacity. RFP has been issued to selected regional banks 35

36 2009 priorities Holding company funding Capital markets Utilise capital markets in South Africa Use of commercial paper. Current domestic medium term note programme can accommodate Review of existing MTN 01 tenor International bond not appropriate unless the cash can be utilised ECA funding Leverage significant CAPEX spend to obtain funding Bank funding Existing RCF of $1.25bn to expire, not refinanced Fund raising of between $250 - $400m envisaged Utilisation ZAR general banking facilities, explore extending tenor 36

37 Looking forward Rob Nisbet

38 Looking forward Expansion opportunities Rollout Actively seeking value-accretive opportunities in emerging markets Potential to act as consolidator in current market environment Tightly monitored capital expenditure, to ensure appropriate levels of capacity and quality of service for enlarged market potential Operational evolution Optimise cash and operational efficiencies Ensuring the Group is well positioned to benefit from a rapidly evolving technology market while maximising infrastructure sharing Regulatory Engage positively with regulatory authorities Regulatory certainty will improve investment case 2008 Mobile Telephone Networks. All rights reserved. 38

39 Subscriber guidance 2009 Net additions guidance to Dec 09 South Africa Nigeria Ghana Iran Syria 400 Sudan Rest Mobile Telephone Networks. All rights reserved. 39

40 Other considerations Capital expenditure management Extraction of cash from foreign operations Exposure to challenging markets Current rollout coverage advantage Continued monitoring of customer spending patterns Capital expenditure to be tightly monitored Established track record of extracting cash through dividends and management fees Managed with reference to local currency markets Co-invest with local partners Fully functional local boards, group executive appointment on all local boards Group risk function Engagement with regulators Highly experienced local management teams limit execution risks FX risk Local currency funding maximised to limit asset / liability mismatch Operations hedge foreign currency requirements where possible 2008 Mobile Telephone Networks. All rights reserved. 40

41 Key credit strengths MTN benefits from good fundamentals in its established markets underpinned by a strong brand MTN has a diversified portfolio of operations at different stages of growth Strengthening operations are expected to generate strong cash flows going forward Credit strengths Strong position in domestic SA market Leading market positions in key emerging markets with growth potential Strong track record of operating in emerging markets Attractive diversification of assets Cash flow generation Credit rating Rationale #2 operator with 36% market share and a robust track record in subscriber / revenue growth, albeit maturing Stable three-player market with strong cash generation Leading market positions in high-growth and profitable (#1 and #2 operator) African/Middle-Eastern countries. Penetration upside Economic fundamentals have had varied impact on telco spend Strong performance across the portfolio Benefits from best practice across the Group and ability to leverage accumulated know-how Achieve economies of scale in group procurement / purchasing power Pool of talent across operations Footprint covering 21 countries in Africa / Middle East Mix of established free cash flow generating operations and high growth start-ups Positive free cash flow generation still anticipated Proven cash up streaming through dividends and management fees 2 notch headroom in Moodys credit rating to reflect the possible impact of further acquisitions 41

42 Thank you Questions

43 Notice The information contained in this document has not been verified independently. No representation or warranty express or implied is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Opinions and forward looking statements expressed represent those of the Company at the time. Undue reliance should not be placed on such statements and opinions because by nature, they are subjective to known and unknown risk and uncertainties and can be affected by other factors that could cause actual results and Company plans and objectives to differ materially from those expressed or implied in the forward looking statements. Neither the Company nor any of its respective affiliates, advisors or representatives shall have any liability whatsoever (based on negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation and do not undertake to publicly update or revise any of its opinions or forward looking statements whether to reflect new information or future events or circumstances otherwise. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever Mobile Telephone Networks. All rights reserved. 43