Cell C Limited Investor Roadshow 2-10 November 2017

Transcription

1 Cell C Limited Investor Roadshow 2-10 November 2017

2 TABLE OF CONTENTS 01 Financial Overview Conclusion Operational Questions Strategy Disclaimer Post Recapitalisation Governance 20

3 CELL C PRESENTING TEAM Tyrone Soondarjee - Cell C CFO Tyrone, a Chartered Accountant who holds a BCompt Honours, provides 30 years of experience in the financial services industry. Before joining Cell C, Tyrone s decade of distinguished service at the listed Sasfin Group started in 2007 as the Group s Chief Financial Officer. In 2010 Tyrone was appointed as the Financial Director. Throughout his tenure, Tyrone served on several Boards within the Sasfin Group. Previously, he also held several executive level positions at the Deloitte & Touche Group over a 10 year period, and was the Financial Director at TNBS Mutual Bank. Robert Pasley - Cell C CSO A qualified Theoretical Physicist and Chartered Accountant, Robert has combined experience in finance and telecommunications since before the launch of mobile communications in South Africa. Robert was involved in the launch of the South African mobile industry, through the development of the original Vodacom business plans. He remained with Vodacom as Finance Executive and as Director of Corporate Strategy until Robert joined Cell C in 2012 as Chief Strategy Officer and subsequently took on the additional role of Chief Financial Officer while Cell C was recapitalised. From June 2017 Robert has returned to his preferred role in strategy. 3

4 Financial Overview

5 SUMMARY 2017 H1 RESULTS Service Revenue 12% R6.3 Billion 01 Active Mobile Subscribers 12% 15.7 Million Total Revenue 11% R7.7 Billion Summary 2017 Results Capital Expenditure (68%) R561 million EBITDA 17% R1.6 Billion 04 EBIT (4%) R0.6 Billion 5

6 2017 HALF YEAR RESULTS Financial Key Performance Indicators R m H H Var Var % Service Revenue Non-Service Revenue Total Revenue EBITDA EBIT Net (loss)/profit (588) (24) (591) 12% 4% 11% 16% (4%) (>100%) Other Key Performance Indicators Million H H Var Var % Total Active Subscriber Data Revenue (R m) % 33% Data Traffic Growth YOY Smartphones on our network (million) 84% 8.1 6

7 2017 HALF YEAR RESULTS Total Expenditure R m H H Var Var % Direct Expenditure % Operating Expenditure % Total Expenditure % Capital Expenditure was strategically focused to provide mobile voice and data services through a combination of our own LTE-Advance network overlaying our LTE, 3G and 2G networks. Cell C s capital expenditure slowed in H due to the delayed recapitalisation but is expected to pick up again post recapitalisation. Total capital expenditure was: H R million H R 561 million 7

8 RECAPITALISATION IMPACT The company received R7.5 billion of fresh equity from new shareholders; Uplifted approximately R9 billion to the SPV s; Rolled over R6.1 billion of the existing debt at transaction date; Estimated tax losses of R19.8 billion of which R3.8 billion has been used to recognise a deferred tax asset at 31 December

9 POST-RECAPITALISATION STRUCTURE Option to acquire Believe Trust 100% MS15 Effective 8.82% 49% Effective 13.68% 100% OTSAH OTL 51% 100% OTSA Lanun CellSAf Effective 7.5% 60% 15% 25% 3C 100% 100% 100% BLT Net1 M5 SPV1 (Bonds) SPV2 (Chinese) SPV3 (Nedbank) 45.0% 15.0% 5.0% 5.0% 11.8% 16.0% 2.2% Subscription for equity in exchange for debt R3.6bn R4.6bn Cash equity to settle debt R0.7bn 9

10 REGULATORY UPDATE ON THE RECAPITALISATION ICASA Cell C has made the necessary notification to ICASA as required in respect of the recapitalisation. Despite this, CellSAf has made representations to ICASA that Cell C did not follow the correct process. Based on the many and various detailed legal opinions from eminent Senior Counsel obtained by the parties to the recapitalisation, Cell C has in fact followed the correct process. Cell C has now made extensive written and oral submissions to ICASA providing details of the structure and effect of the transaction. We are awaiting ICASA s decision as to whether to accept Cell C s position or to refer the matter to ICASA s Complaints and Compliance Committee (CCC) for adjudication. Competition Commission The recapitalisation is not a merger within the meaning of the Competition Act. Despite this, CellSAf has laid a complaint with the Competition Commission that Cell C has not obtained approval from the Competition Commission. Cell C has now made an extensive submission to the Competition Commission to explain the factual and legal position as to why this is not a notifiable merger. CellSAf: High Court Litigation In November 2016, CellSAf issued summons in the High Court of South Africa against the then parties to the recapitalisation transaction seeking to have the agreements that had been signed prior to that date set aside. If this matter is ever heard by the Court on the merits of CellSAf s claim, this is unlikely to be before

11 POST RECAP DEBT ANALYSIS & SUMMARY TERMS Lender Currency Amount (USD'm) Amount (ZAR'm) Tenor Interest payment profile Capital repayment profile Hedge type Interest rate Bonds USD years Semi-Annual Bullet FX Future 8.625% CDB USD years Semi-Annual 2020 Cross currency swap LIBOR % ICBC ZAR n/a years Semi-Annual 2020 n/a JIBAR % Nedbank ZAR n/a years Semi-Annual 2020 n/a JIBAR + 5% DBSA ZAR n/a years Semi-Annual 2020 n/a JIBAR + 5% Total

12 Operational

13 KEY PERFORMANCE INDICATORS Active Mobile Subscribers/millions H H ARPU H H Data percentage per subscriber MB per customer per month Year on Year Growth 72% Fibre H New Connections

14 HANDSET FINANCE OVERVIEW 08 Provision for future losses 01 Purchase handsets from CEC 02 Sale to channel partners Subscriber pays handset portion to CEC 07 Interest and subsidy paid monthly on behalf of customer 06 Handset and contract sold to CEC Contract activated for Telco and handset Handset contractually funded by CEC 14

15 Strategy

16 THE MOBILE TELECOM MARKET HAS GROWN ABOVE INFLATION Mobile market service revenue (R bn) Operator service revenue growth YOY Cell C % ( %) 43% 47% Vodacom Telkom MTN CellC % 9% 8% 3% 1% -5% -3% 12% 10% 4% 17% 16% 9% 10% 6% 4% 3% 2% Mobile market subscribers (mln) Voice vs data revenue (R bn) Voice revenue Data revenue Cell C 16.6% ( %) CAGR (1.2%) with Cell C gaining market share

17 OPERATOR CONSOLIDATION IS A REAL POSSIBILITY IN THE FUTURE Spectrum Allocations 850Mhz 4.92Mhz 4.92Mhz Liquid Liquid 900Mhz 9.6Mhz 11Mhz 2.4Mhz 1.4Mhz 8.6Mhz Cell C Vodacom MTN Cell C MTN 1800Mhz 12Mhz 12Mhz 12Mhz 12Mhz 12Mhz 12Mhz 10Mhz Liquid MTN Telkom Cell C Vodacom Rain Rain TDD 5Mhz 10Mhz 15Mhz 15Mhz 15Mhz 15Mhz 2100Mhz Voda MTN Vodacom Cell C MTN Telkom TDD TDD 2300Mhz 60Mhz 28Mhz 28Mhz 28Mhz 28Mhz 3500Mhz Telkom Telkom Liquid Telkom Liquid 2600Mhz 2.5Ghz Sentech 15Mhz Rain TDD 17

18 INNOVATION & VALUE To achieve revenue and subscriber growth through affordable and disruptive product propositions, that offers our customers tremendous value, whilst ensuring customer satisfaction, as well as retaining the exiting subscriber base. PREPAID Enable great value and realise growth in the High end Subscriber market segment CONTRACT Enable great value and realise growth in the High end Subscriber market segment DATA Promote strong Data rich proposition relevant to the market CONTENT/ VAS Disruptive and Innovative Propositions to achieve new Revenue streams (Digital / Content) WhatsApp Bundles Connector SmartData Share Free Facebook Pinnacle SmartData Bundles Social Bundles Pinnacle Topup LTE A 18 Increase Prepaid Additions Reduced Prepaid Churn Offer great affordable value, and differentiating propositions Ultimate Converged Bundles Increased Postpaid and Hybrid Additions Reduced High Value Subscriber Churn Increased Customer Loyalty Increased Contract Base Differentiate on value creation Increased Data additions with Data rich value propositions Reduced High Value Subscriber Churn Increased Customer Loyalty Increased Contract Base Increase Market share with strong Digital and Content positioning Create Stickiness Increase Customer Loyalty Increase Upsell and Cross Sell Revenue upliftment

19 RETAIL DISTRIBUTION COMPANY OWNED STORES Strategy: Less reliance on 3 rd party retail distribution A chain of 400 stores with regional stock-holding hubs enabling stock distribution between stores and/or quick delivery from the regional hub. Segmentation of South Africa into economic clusters, priority 1 to 3 Priority 1: High population density and majority of economic activity plus good own coverage Priority 2: Future Network coverage and opportunities Priority 3: Limited coverage and only operating in economic hotspots Identified areas where we will not venture into at all Priority 1 Priority 2 Priority 3 Priority 4 19

20 Post Recapitalisation Governance

21 GOVERNANCE CHANGES Newly constituted Board with a broad range of skills and expertise Chaired by Independent Chairman Re-constituted Board committees Strengthened and Broadened Management Team with key new appointments of CFO, CHRO, COO and CDO 21

22 GOVERNANCE Executives Directors Jose Dos Santos CEO Tyrone Soondarjee Chief Financial Officer Robert Pasley Chief Strategy Officer Non-Executives Directors Kuben Pillay Independent Chairman Laurence Nestadt Deputy Chairman Joe Mthimunye Independent Director Non-Executives Directors - Shareholder Nominees Brett Levy Nominated by: Blue Label Telecoms Mark Levy Nominated by: Blue Label Telecoms Herman Kotzé Nominated by: Net1 Chris Seabrooke Nominated by: Net1 22

23 BOARD COMMITTEES REPRESENTATION Audit and Risk Committee Joe Mthimunye (Chairman) Social and Ethics Committee Joe Mthimunye (Chairman) Remuneration and Nominations Committee Chris Seabrooke (Chairman) Members Chris Seabrooke Chris Seabrooke Kuben Pillay Robert Pasley Robert Pasley Larry Nestadt Invitees CEO, CFO CEO CEO, CHRO 23

24 TOP MANAGEMENT STRUCTURE Tyrone Soondarjee Chief Financial Officer Previous Companies: Sasfin Group, Deloitte & Touche Group & TNBS Mutual Bank Financial Services Experience: 30 years At Cell C since: Jul 2017 Graham Mackinnon Chief Legal Officer Previous Companies: MTN Telecom/Africa Experience: 19+ years At Cell C since: 2010 Juliet Mhango Chief HR Officer Previous Companies: Life Healthcare; Momentum Group; Standard Bank, Sanlam Capital and Ernst & Young At Cell C since: Sep Robert Pasley Chief Strategy Officer Previous Companies: Coopers & Lybrand (UK), Vodacom Telecom/Africa Experience: 20+ years At Cell C since: 2012 Jose dos Santos Chief Executive Officer Previous Companies: Vodacom, Alcatel, Altech Autopage Cellular Telecom/Africa Experience: 20+ years At Cell C since: 2014 Michelle Beetar Chief Customer Experience Officer Previous Companies: Experian, Novell, Oracle and MWeb CommerceZone Telecom/Africa Experience: 15 years At Cell C since: 2016 Björn Flormann Chief Executive: Wholesale Business Previous Companies: Unisys, Telefonica O2 and Vodafone Telecom/Africa Experience: 20+ years At Cell C since: 2011 Joshua Moele Managing Executive for Government Relations Previous Companies: Telkom & IDT Corporation Telecom/Africa Experience: 25+ years At Cell C since: 2012 Surie Ramasary Chief Executive: Content Previous Companies: MTN Telecom/Africa Experience: 15 years At Cell C since: 2012 Nihmal Marrie Chief Digital Officer Previous Companies: Liberty Group, Old Mutual Mass Market At Cell C since: Aug Douglas Craigie Stevenson Chief Operations Officer Previous Companies: Telekom Networks Malawi Plc & Vodacom Business Africa Telecom/Africa Experience: 20 years At Cell C since: Sep Dana Bakker Chief Technical Officer Previous Companies: Vodacom Telecom/Africa Experience: 18 years At Cell C since: 2013 Sherhaad Kajee Chief Property & Procurement Officer Previous Companies: Vodacom Telecom/Africa Experience: 24 years At Cell C since: 2012 Regional Managing Executives and Commercial Division 24

25 Conclusion

26 CELL C A TURNAROUND STORY RECAPITALISATION PROCESS Cell C launch New management team engaging with a price driven reboot strategy Price strategy evolves to customer value and quality strategy Growth stifled by limited capital investment and narrow commercial focus whilst securing recapitalisation Customer experience centric strategy with focused capital spend and innovation ambitions re-establishing aggressive growth curve and profitability Total Revenue R bn EBITDA R bn % % % 7.6 >100% % % 1.6 H1 H H1 H # reported EBITDA 0.8 vs operational EBITDA 26.. with high growth re-established with new investment & focus

27 Questions?

28 DISCLAIMER This presentation was produced in November 2017 by Cell C Limited solely for use as a source of general information regarding the financial condition of Cell C Limited and its consolidated subsidiaries (Cell C Limited together with its consolidated subsidiaries, Cell C ). This presentation and its contents are confidential and may not be reproduced, redistributed, published or passed on to any other person, directly or indirectly, in whole or in part, for any purpose without the prior written consent of Cell C. If this presentation has been received in error, it must be returned immediately to Cell C. Unless otherwise expressly stated, all financial figures in this presentation are unaudited. This presentation contains certain forward-looking statements relating to the business, financial performance and results of Cell C, and the industry in which Cell C operates, and these statements are generally identified by using phrases such as aim, anticipate, believe, estimate, expect, forecast, guidance, intend, objective, plan, predict, target, project, and will be and similar phrases. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Cell C s control that could cause Cell C s actual results or performance to be materially different from future results or performance expressed or implied by such forward-looking statements. These forward-looking statements speak only as at the date of this presentation. Cell C expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. This presentation and the information contained herein does not constitute an offer of any securities of Cell C or any other company or an invitation, solicitation or advertisement to purchase or subscribe for any securities in South Africa, the United States, any member state of the European Economic Area or any other jurisdiction. THIS PRESENTATION IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO THE UNITED STATES. Moreover, this presentation is not for publication, release or distribution in South Africa, Australia, Canada or Japan or any other jurisdiction where such publication, release or distribution would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. 28

29 Thank you.