MTN Group Limited. Review of results and funding outlook Presented on 17 April 2008

Transcription

1 MTN Group Limited Review of results and funding outlook Presented on 17 April 2008

2 Agenda Introduction Debbie Millar General Manager: Corporate Finance Financial overview Rob Nisbet Group Finance Director Questions.. 2

3 DIVIDER: Strategic and operational overview Introduction Debbie Millar General Manager: Corporate Finance 3

4 Strategy and rationale for meeting Update of treasury activities FX hedging Deal in name of Holdings and Mauritius Basel II Interest rate Dubai Funding initiatives Risk management Credit rating 4

5 Structure and team GM: Corporate finance Debbie Millar Group treasury Dubai treasury Administrator [Jacky Mtswisha] Structured and project finance Senior manager Group treasury Lucky Ncobela Senior manager Dubai treasury [vacant] Senior manager Structured and project finance [vacant] Treasury administrator Melita Fourie Treasury administrator [vacant] Senior manager Structured and project finance [vacant] Front office/dealer [vacant] Project finance consultant Heloise Smith IR Treasury consultant Kate Gush Investor relations Yuraisha Moodley 5

6 Structure of debt MTN Group Full recourse funding guarantees R40 billion MTN Holdings 100% Offshore full recourse funding guarantees R2 billion 100% 100% 100% MTN Service Provider MTN (Pty) Ltd MTN International* 100% MTN Mauritius * Intercompany unproductive debt of R12.1bn MTN Dubai 100% As at 31 March

7 Offshore cashflow strength MTN Group 100% MTN Holdings MTN South Africa 100% MTN International 100% MTN Mauritius 100% 2007 Management fees and dividends received of ZAR8.5bn MTN Dubai 100% Network Operations 60% Côte d Ivoire 76% Nigeria 75% Guinea Republic 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 99% Cyprus 49% Iran 85% Sudan 100% Afghanistan 30% MTN Swaziland 100% Mednet All amounts are utilised facilities 7

8 Analysis of net debt position As at 31 Dec 2007 ZAR million Net (cash) debt Interest bearing liabilities* Cash and cash equivalents South & East Africa South Africa Other operations West & Central Africa Nigeria Ghana (1 355) Other operations Middle East & North Africa Iran Sudan Syria (2 038) Other operations (402) Head Office Companies Total * Including long-term borrowings, short-term borrowings and overdrafts 8

9 Interest bearing liabilities split as at 31 December 2007 Currency analysis (liabilities) 12% 17% 71% ZAR USD/EUR Local currency Fundraising at operational level Nigeria approx US$2bn (80% LC) Côte d Ivoire approx US$100m (100% LC) Cameroon approx US$80m (100% LC) Unproductive interest reduced further to ZAR14.9bn (Dec 07) and ZAR13.5bn (Feb 08) Cash accumulation Syria Ghana Nigeria Net debt to EBITDA of 0.5x (Dec 06:1.02x) Moody s rating upgrade National scale rating to A2.za from A3.za Global scale rating of Baa3 provides two notch headroom to reflect the possible impact of further acquisitions Outlook upgraded to positive from neutral 9

10 Group covenants and repayment profile Mar-03 Mar-04 Mar-05 Dec-05 Dec-06 Dec-07 Repayment profile ZAR million 20, (ZAR 32,979) 18, (ZAR 33,657) 16,000 Net debt / EBITDA EBITDA / Capex 16,972 17,222 Syndication financial ratios Leverage Consolidated total net borrowings / Adjusted consolidated EBITDA. Grid levels of >1.5x, >1.0x, <1.0x Interest cover Consolidated EBITDA / Consolidated net finance costs > 5x Syndication permitted indebtedness Existing debt, and refinancing thereof All project finance $1.7 billion Bond and syndication cross default Material subsidiaries ZAR250 million or US$25 million Available facilities across the Group of ZAR22.2 billion (Dec 07) 14,000 12,000 10,000 10,650 10,047 8,000 6,000 4,000 2,000 4,392 4,024 1,568 1,761 0 <1 year >1 year but <2 years >2 years but <5 years >5 years 10

11 South African facilities Company Source of facility Currency Facility amount (m) Utilisation in ZAR Undrawn facilities in ZAR Comments South Africa General banking facilities* ZAR Have R3.3 additional uncommitted facilities Structured finance ZAR Building lease Bond* (DMTN) ZAR Unutilised under DMTN Bond MTN 01 (2 yr term) ZAR Unlikely to repay Bond MTN 02 (6 yr term) ZAR Unlikely to repay Syndicated loan facility* ZAR Facility A1 (4 yr term) USD 656 $94m repaid Jan 08 Facility A2 (4 yr term) ZAR R875m repaid Jan 08 Facility B (RCF) USD To keep at this stage Mauritius Bridge facility* USD Rollover from Sep 07 To consider refinancing Investcom LLC Banque Audi RCF Term ZAR USD USD To keep at this stage but consider refinancing Total ZAR All numbers at 31 March 2008 (R8.1053:$1) * MTN Group cross guarantee 11

12 Non South African facilities Company Source of facility Currency Facility amount (m) Utilisation in ZAR Undrawn facilities in ZAR Comments Nigeria* International debt Local debt USD NGN US$2bn non recourse facility concluded in October 2007 Uganda* Total UGX Syndicate UGX New facility raised in 2006 Bilateral UGX Short term PN s UGX Short term Motor vehicle leases UGX 564 Cameroon* Syndicated loan facility CFA New facility secured from local banks in June 2007 Ghana* Loan USD Refinancing being considered Côte d Ivoire* Various XOF Additional fundraising in progress Zambia Club loan ZMK Facility guaranteed by MTN International Total ZAR Syria, Cyprus and Congo B currently utilise mainly vendor finance 2. Afghanistan, Sudan, Guinea Conakry, Liberia, Guinea Bissau funded by MTN Dubai at present 3. Afghanistan project finance drawdown delayed due to increased funding need All numbers at 31 March 2008 (R8.1053:$1) * Non recourse funding 12

13 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 and should be limited Recourse debt in operations Limited use, usually vendor based 13

14 2008 priorities Reduce unproductive interest Fully functional Dubai treasury Formalise treasury policy in the operations Evaluate opportunities for ECA funding Cash up streaming across the group Syria, Nigeria, Ghana Project finance of start up operations Afghanistan Sudan Iran Provide facilities for gearing of operations on a non recourse basis Benin Cameroon Congo B Cote d Ivoire Ghana Rwanda Uganda Yemen 14

15 Financial review Rob Nisbet Group Finance Director 15

16 MTN vision To be the leader in telecommunications in emerging markets National player African player Emerging market player 16

17 Key economic developments South Africa Nigeria Ghana Iran Sudan Syria GDP Growth (2007 est) 5% 6.1% 6.2% 4.3% 12.8% 3.5% Inflation rates Dec 07 9% 9% 11% 14% 8.5% 9% Market size million (2012) GDP/Capita nominal US$ (2007 est) 6, ,252 1,262 1,516 High growth markets Source GDP growth and GDP/capita: CIA Factbook 17

18 Group highlights Group subscribers Up 53% to 61,4 million Revenue Up 42% to ZAR 73,145 billion EBITDA Up 42% to ZAR 31,845 billion EBITDA margin Marginally up from 43.4% to 43.5% Adjusted headline EPS Up by 17% to cents Dividend declaration Up 51% to 136 c/share totalling R2,536 billion Net debt/ebitda 0.5x 18

19 Key developments Expansion opportunities Continue seeking value accretive opportunities in existing and new territories Broadened local shareholder base in Uganda, Nigeria and Côte d Ivoire Increased MTN shareholding in Rwanda and Botswana Rollout Convergence Demand continues to outstrip supply in key markets Aggressive infrastructure rollout to ensure capacity and quality Rollout gathered momentum in second half of 2007 Capex spend of ZAR15,348 billion (Dec 07), an increase to 21% of revenue from 19% (Dec 06) Acquisitions of ISPs and other technologies in Nigeria and Cameroon Mobile banking JV with Standard Bank Mobile television JV with Multichoice Optimise operations Capital structure Strong execution of brand rollout, product offering, operational efficiencies and procurement De-leverage group debt from 1.0xEBITDA (Dec 06) to 0.5xEBITDA (Dec 07) US$2 billion fund-raising in Nigeria Moody s upgrade to A2.za from A3.za and outlook to positive from neutral 19

20 Key accounting considerations Group tax PPA Amortisation Put option Change in ownership FX Total tax 7 791m (Normal tax 5 965m, deferred tax 1 361m, STC 209m and withholding taxes 256m) 39.5% effective tax rate YTD AHEPS effect (MTN share): Deferred tax credit, ZAR 223m (total ZAR 264m) Unwind of pioneer status deferred tax assets ZAR 1 664m (total ZAR 1 968m) 492m to unwind in 2008 PPA amortisation ZAR 1 411m (Investcom ZAR 1 077m) Impact of put option (MTN share ZAR 366m) Finance cost ZAR 230m Fair Value adj. ZAR 262m Forex Gain (ZAR 20m) Minority share of profits (ZAR 106m) Increased stake in Rwanda from 40% (JV) to 55% (subsidiary) Nov 07 Reduced stake in Côte d Ivoire from 68.3 % to 59.7 % - May 07 Increased stake in Botswana from 51% to 53% (remains a JV) May 07 Reduced stake in Uganda from 97% to 95% - Dec 07 Forex gain (ZAR 29m) in MTNI Mauritius (ZAR functional currency) after transfer to reserves (IAS21) Exchange gains in Conakry of ZAR 141m due to 34% strengthening against USD since Dec 2006 transferred to equity (IAS21) Net forex loss ZAR 804m (2006: ZAR 18m) 20

21 Key indicators Subscribers ( 000) 31-Dec-07 % change Dec-06 ARPU (ZAR/US$) 31-Dec-07 ARPU (ZAR/US$) 31-Dec-06 South and East Africa South Africa R149 R159 Uganda $10 $12 Botswana $15 $20 Rwanda $12 $17 Swaziland $18 $20 Zambia $10 $19 West and Central Africa Nigeria $17 $18 Ghana $14 $17 Côte d Ivoire $13 $18 Cameroon $14 $15 Guinea Conakry $15 $17 Benin $12 $21 Congo Brazzaville $20 $20 Liberia $19 $18 Guinea Bissau $17 $12 Middle East and North Africa Iran $10 $9 Syria $20 $17 Sudan $12 $16 Yemen $9 $10 Afghanistan $11 $14 Cyprus $39 $35 Total MTN $16 $19 21

22 Subscriber contribution by region MTN Group Total (subscriber million) Proportionate* (subscriber million) % 49% % 48% 23% 46% % 46% % 46% 19% 45% 39% 35% 31% 43% 39% 36% Dec-06 Jun-07 Dec-07 Dec-06 Jun-07 Dec-07 SEA WECA MENA * Based on % ownership Increased diversification 22

23 EBITDA analysis EBITDA Contribution % EBITDA Margin % * Difference in HQ companies 23

24 Earnings per share cents 12 months ended Dec months ended Dec 2006 % change Basic headline earnings per share (3.6) Reversal of put option in respect of subsidiaries Reversal of the subsequent utilisation of deferred tax asset 89.4 Reversal of deferred tax asset (12.0) (37.1) (67.6) Adjusted headline earnings per share HEPS (681.9 cents) 2006 HEPS (584.7 cents) South & East Africa South & East Africa (80.1) West & Central Africa Middle East & North Africa (33.3) 2.7 West & Central Africa Middle East & North Africa Head Office Companies Head Office Companies 24

25 Exchange rates analysis Average (PAT) Closing Dec 2007 Dec 2006 % var Dec 2007 Dec 2006 % var Rand per Dollar 7,04 7,04 6,78 7,05 4 Nigerian Naira per Dollar 125,98 128, ,40 128,41 8 Iranian Rials per Dollar 9 300, ,96 (1) 9 446, ,00 (2) Ghana Cedis per Rand 1 318, ,55 (3) 1 445, ,99 (10) Sudanese Dinars per Rand 28,69 32, ,23 28,82 (5) Nigerian Naira per Rand 17,89 18, ,46 18,23 4 Syrian Pound per Rand 7,09 7,11 7,08 7,24 (2) Iranian Rial per Rand 1 320, , , ,73 (6) 25

26 Income statement ZAR million 12 months ended Dec months ended Dec 2006* % change % change excl. Investcom Revenue EBITDA EBITDA MARGIN 43.5% 43.4% Depreciation (6 774) (5 030) Amortisation (2 199) (1 289) Profit from operations Net finance costs (3 173) (1 427) Share of profits of associates 8 23 (65.2) Profit before taxation Income tax expense (7 791) (2 591) Profit after taxation (1.5) Minority interest (1 308) (1 489) (12.2) Attributable profit * Includes 6 months of Investcom 26

27 Revenue analysis restated (12 months Investcom 2006) ZAR million 12 months ended Dec months ended Dec 2006 * % change South & East Africa South Africa Other operations West & Central Africa Nigeria Ghana Other operations Middle East & North Africa Iran Syria Sudan Other operations Head Office Companies ** Total Excl. Investcom * Unaudited Includes 12 months of Investcom ** Includes adjustment on Ghana revenue 27

28 EBITDA analysis restated (12 months Investcom 2006) ZAR million 12 months ended Dec months ended Dec 2006 * % change ZAR Dec 2007 EBITDA margin % Dec 2006 EBITDA Margin % South & East Africa ,0 35,2 South Africa ,8 33,9 Other operations ,9 50,1 West & Central Africa ,8 53,6 Nigeria ,3 57,2 Ghana ,9 54,4 Other operations ,9 42,4 Middle East & North Africa ,5 27,4 Iran (180) (58) (210.3) Syria ,5 32,1 Sudan ,7 18,9 Other operations ,8 25,9 Head Office Companies Total ,5 43,3 Excl. Investcom ,5 44,1 * Unaudited Includes 12 months of Investcom 28

29 Profit after tax ZAR million 12 months ended Dec months ended Dec 2006 ** % change South & East Africa South Africa Other operations West & Central Africa Nigeria* Ghana Other operations Middle East & North Africa Iran (474) (144) Syria Sudan 191 (3) Other operations Head Office Companies (1 498) (691) Total * Excluding deferred tax impact: 2007 R1 704m (Dec 2006 R825m) ** Includes 6 months of Investcom 29

30 Tax considerations Effective tax rates % MTN Group Investcom Jun-06 Dec-06 Jun-07 Dec-07 Nigeria expected trends in effective tax rates Illustrative % Accounting tax rate Cash tax rate Dec-07 Dec-08 Dec-09 Dec-10 Effective rate reconciliation (to 29%) Nigeria 6.41% Expiry of Pioneer Status in Nigeria application of commencement provision and effect of investment allowance. Nigeria effective tax rate 46% this year, expected to decline to low 40 s. Tax 3,673 Normal tax 1,991 Deferred tax 1,681 Effective tax rate 46.3% Non allowable interest on Investcom acquisition 2.23% STC and withholding taxes suffered The negative impact of STC and WHT is offset by Nigerian investment allowance and foreign tax rate adjusted Looking forward Group effective rate expected in mid to high 30 s based on Nigerian tax Disallowed expenses 30

31 Cash flow statement ZAR million Cash inflows from operating activities 12 months ended Dec months ended Dec Net cash generated by operations Net interest paid (2 576) (143) Taxation paid (4 233) (4 086) Dividends paid (1 675) (1 083) Cash outflows from investing activities (17 152) (35 711) Acquisitions of PP&E (excluding software) (14 458) (9 379) Other investing activities (2 694) (26 332) (18 089) Cash (outflows) / inflows from financing activities (2 135) Net movement in cash and cash equivalents

32 Erlang Erlang: The Erlang is a unit of traffic density in a telecommunications system. One Erlang is the equivalent of one call in a specific channel for an hour. 40% 50% 12% 702% 14% 42% 94% 36% 139% 32% 53% 24% 28% 16% 3906% 168% F South Africa Nigeria Iran 32

33 Capital expenditures (incl. software) ZAR million Approved 2007 Actual 2007 Approved 2008 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 * * Balance sheet impact expected to be R25bn at Dec

34 Iran operational highlights Commercial Launch Dec 2006 Market share 23% Population 70.6m Market sizing 52m (2012) Penetration 37% Shareholding 49% Subscribers/ARPU MTN Subscribers ( 000) ARPU (USD) 1, , Dec-06 Jun-07 Dec-07 Outgoing MOU Capex ZAR million H1 H Dec Dec-07 Strong start-up performance Market share up from 12% (Jun 07) to 23% (Dec 07) Total subscribers at mid March: Increasing MOU keeping ARPU stable Positive market response to brand and value proposition Step change in network capacity Improved perception of service quality due to network rollout 2003 live sites 1500km road coverage 339 cities covered Compliant with network rollout licence conditions Logistical challenges with transmission links First to market in providing GPRS Capex as % of revenue 116 Strong start up performance 34

35 Balance sheet ZAR million As at Dec 2007 As at Dec 2006 Non-current assets Property, plant and equipment Goodwill and Intangible assets Other non-current assets Current assets Bank balances Other current assets Total assets Capital and Reserves Non-current liabilities Long term liabilities Deferred taxation and other non current liabilities Current liabilities Non-interest bearing liabilities Interest bearing liabilities Total equity and liabilities * Net debt

36 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 international 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 35% market share and a robust track record in subscriber / revenue growth Stable three-player market with strong cash generation Leading market positions in high-growth and profitable African / Middle-Eastern countries including Nigeria, Ghana and Syria with penetration upside Economic growth fundamentals still strong in most markets Penetration below 35% (average) Strong performance across the portfolio Benefits from best practice across the Group and ability to leverage accumulated know-how (e.g. new network launches in Iran) 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 Peak spending in 2008 Positive free cash flow generation still anticipated Cash up streamed through dividends and management fees 2 notch headroom in Moody s credit rating to reflect the possible impact of further acquisitions 36

37 Potential Challenges MTN has already a strong track record and an experienced management team to address potential challenges Potential Challenges Exposure to high risk markets Significant investment requirement Mitigating Factors Portfolio of selected markets Experienced local management teams limit execution risks Local partners Proven ability to generate sound returns commensurate with investment Capex/sales expected to decline towards low teens over medium term Uncertain political / regulatory regimes Managing regulatory challenges and uncertainties Risks reduced through efficiency of the markets and practical importance of the networks Nationalisation always a concern Increased competition Current position in market Depth of resources Current rollout coverage advantage Extraction of cash from foreign operations Established track record of extracting cash through dividends and management fees Significant headroom in SA facilities FX risk Local currency funding maximised to limit asset / liability mismatch Operations hedge foreign currency requirements where possible 37

38 DIVIDER Looking forward Rob Nisbet 38

39 Looking forward Expansion opportunities Continue to seek value accretive opportunities in emerging markets Rollout Ensure appropriate levels of capacity and quality for new and existing subscribers Convergence Data/corporate opportunities, new products and services Optimise operations Operational efficiencies Regional synergies Regulations Constructive engagement with regulatory authorities Input in developing effective regulations 39

40 Subscriber guidance 2008 South Africa Actual , net adds guidance 2,200 Nigeria 16,511 5,000 Ghana 4,016 1,300 Iran 6,006 7,000 Syria 3, Sudan 2,090 1,100 Rest 14,822 4,500 61,353 Expected 36% increased in subscriber growth 21,780 40

41 DIVIDER: Thank you Thank you Questions? 41

42 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. CONTACT DETAILS Telephone: Facsimile: Internet: 42