Telkom Results Presentation. For the year ended 31 March 2010

Transcription

1 Telkm Results Presentatin Fr the year ended 31 March 2010

2 Frward lking statement Special nte regarding frward-lking statements Many f the statements included in this presentatin, as well as ral statements that may be made by us r by fficers, directrs r emplyees acting n behalf f us, cnstitute r are based n frward lking statements. All statements, ther than statements f histrical facts, including, amng thers, statements regarding ur mbile and ther strategies, future financial psitin and plans, bjectives, capital expenditures, prjected csts and anticipated cst savings and financing plans, as well as prjected levels f grwth in the cmmunicatins market, are frward lking statements. Frward lking statements can generally be identified by the use f terminlgy such as may, will, shuld, expect, envisage, intend, plan, prject, estimate, anticipate, believe, hpe, can, is designed t r similar phrases, althugh the absence f such wrds des nt necessarily mean that a statement is nt frward lking. These frward lking statements invlve a number f knwn and unknwn risks, uncertainties and ther factrs that culd cause ur actual results and utcmes t be materially different frm histrical results r frm any future results expressed r implied by such frward lking statements. Amng the factrs that culd cause ur actual results r utcmes t differ materially frm ur expectatins including but nt limited t thse risks identified in Telkm s mst recent annual reprt which are available n Telkm s website at We cautin yu nt t place undue reliance n these frward lking statements. All written and ral frward lking statements attributable t us, r persns acting n ur behalf, are qualified in their entirety by these cautinary statements. Mrever, unless we are required by law t update these statements, we will nt necessarily update any f these statements after the date f this dcument, either t cnfrm them t actual results r t changes in ur expectatins. making it happen taking Telkm frward 2

3 Overview Reuben September

4 Presentatin Overview Telkm under pressure ecnmic cnditins, regulatins and cmpetitin Mbile and bradband t imprve Telkm SA ffering - Mbile launch imminent Multi-Links realise sharehlder value thrugh partnerships r exit EBITDA imprvement plan signed ff by business units Capex tightly cntrlled, cash flw is king Organisatinal renewal key enabler f Telkm s success 4

5 Grup nrmalised financial features Nrmalised 0.7% ,784 37, (15.2%) ,574 9,809 (11.2%) Operating Revenue EBITDA HEPS Rm Rm Cents Cents per share Ordinary Special Nrmalised free cash flw increased t R5.5 billin 5

6 Traffic revenue Rm Lcal % 3,634 3,205 (11.8) Vice revenues cannibalised by: Lng distance 2,036 1,805 (11.3) Subscriptin based plans Fixed-t-mbile 7,409 6,452 (12.9) Virtual private netwrks Fixed-t-fixed Internatinal (2.5) Managed netwrk services Mbile substitutin Calling Plans 1,300 1, Retaining custmers is key 6

7 Defend and grw highlights Subscriptin based plans Clser package subscribers increased by 20.6% t 694,348 D Bradband subscribers increased by 25.4% t 236,512 Supreme Call subscribers increased by 41.2% t 20,873 Revenue (Rm) % Line Rental 4,929 4, Calling Plans 1,300 1, CPE rental Value added services Internatinal ther (4.3) Ttal Vice Annuity Revenue 7,387 7, Telkm cntinues t ffer custmers greater value 7

8 Data revenue Subscribers 18.1% 20.9% 29, % 33, , % 236, , , , ,535 Managed data netwrk sites D Bradband ADSL Internet all access Data annuity revenue (Rm) % Data cnnectivity 4,951 5, Leased line facilities 1,858 2, Internet access and related services 1,525 1, Managed data netwrk services 891 1, Multimedia services (15.5) Ttal data annuity revenue 9,309 9, Ttal data revenue increased by 7.1% t R10 billin Vice and data annuity revenue cnstitute 47.6% f ttal revenue

9 Intercnnectin revenue Rm % Mbile t fixed (5.2) Internatinal mbile utging Fixed dmestic intercnnectin Internatinal intercnnectin ,057 1, TOTAL 2,084 2, MTR cuts - revenue decreased by R71 millin and payments t mbile peratrs decreased R64 millin fr the mnth f March 2010

10 EBITDA imprvement targeting R2 billin + Telkm has develped an end state visin Sustainable mdel t serve custmers effectively, e.g. access strategy ptimising prduct prtfli sale channel usage field frce and cntact centre effectiveness Extract nn-labur efficiencies, e.g. prcurement excellence revenue assurance Explre new business mdels t imprve prfitability, e.g. payphnes, directry services IT applicatin develpment and maintenance strategic partnering

11 EBITDA imprvement - prpsed master plan Wave 1 (2010/11) Wave 2 (2011/12) Wave 3 (2012/13) Netwrk & IT Field Frce Effectiveness (netwrk infrastructure planning & field peratins) ITS utsurcing Access strategy Cpper decmmissining Further netwrk pprtunities Prduct & marketing Prduct prtfli ptimisatin (cmmercial) Payphnes Prduct prtfli ptimisatin (platfrm) Custmer & channel Crprate services Revenue assurance Prcurement HR initiatives Shared Services Electrnic billing & payments Channel Mix Optimisatin 1 Cntact centre utsurcing Cntact centre effectiveness Benchmarks

12 EBITDA imprvement - achievements t date Launched vluntary separatin package fr management Savings achieved t date - R214 millin cst efficiencies thrughut cmpany Reduced average handling times by 25% in the cntact centre pilt

13 Multi-Links financial features Revenue Ttal revenue increased 35.1% t NGN36.5 billin Traffic revenue decreased 6.2% t NGN16.4 billin Intercnnectin revenue increased 315.3% t NGN14.1billin Switched hubbing: NGN10.5 billin Data revenue increased 81.8% t NGN3.1 billin EBITDA Lss Operating expenses increased 67.7% t NGN51.2 billin EBITDA lss increased 191.6% t R659 millin Handset write-dwns: R298 millin Subsidies: R227 millin Negative EBITDA margin f 34.9% Gdwill impaired by R2,148 millin Impairments Assets impaired by R3,012 millin Multi-Links reflecting zer net asset value in Grup balance sheet 13

14 Multi-Links peratinal features Subscriber grwth Vice subscribers increased 18.7% t 2.2 millin at 31 March 2010 Data subscribers increased 1,580.0% t 45,340 Data cntributes 8.6% t Naira revenue Capital prjects Rlled ut additinal 373 base transceiver statins 4,639 km f fibre and additinal 2,034 km thrugh swapping Switch capacity subscribers increased frm 2.8 millin t 4 millin Extended cverage t 22 states ARPU declines frm US$12 t US$6 at 31 March 2010 due t: ARPU Distributin channels incentivised twards vlume Cmpetitive pressures, lack f scale Gd EVDO grwth but relatively small 14

15 Multi-Links fcus areas Imprve current peratins Targeted initiatives t grw prfitable revenue Segmentatin f existing custmer base Cntinued grwth in mbile bradband Increasing whlesale and enterprise services Renegtiate majr cntracts, attack fixed cst base Distributin csts Twer csts Netwrk management csts IT csts Expat csts Strategic directin Fcus n data centric prducts, bradband and VPN Bard cnsidering hw best t reduce expsure t risk in Nigeria CDMA technlgy increasingly disadvantaged

16 Telkm Mbile Mbile launch - imminent Brand and prducts develped C-lcatins signed Distributin agreements signed Initial 40% wn traffic cverage IT systems in place Raming agreements signed 16

17 Telkm mbile Fcus n simplicity, quality and value Launching pre-paid, pst-paid and hybrid vice & data, 2G vice & data, 3G vice & data Differentiated services Dmestic raming agreement signed with MTN Cvers vice, 2G & 3G data, SMS, MMS & USSD Flr price includes minutes; unutilised minutes rllver fr 12 mnths Internatinal raming agreement clse t cnclusin Full natinal and internatinal raming frm launch

18 Telkm mbile Dual ran sftware prvides 2G & 3G csteffectively Sftware upgrade t 4G in future Sftware Definable Radi significant flexibility and spectrum efficiency Backhaul is IP ver Ethernet r IP ver TDM Using infrastructure sharing and c-lcatin t reduce capex spend 2,000 base statins in prcess f being cnstructed in year ne

19 MWeb Africa and Africa Online Integratin cmplete by end September 2010 ne bard f directrs, ne executive cmmittee, single cuntry managers Rebranded as iway Africa New drive t push ISP business up ICT value chain Develping Pan-African city t city backbne infrastructure and hub t internatinal cable access infrastructure Ftprint cvers 32 African cuntries including primary lcatins and distributrships Prviding cnnectivity thrughut Africa t ur glbal custmers 19

20 Telkm cre glbal submarine cable netwrk (current & future) SAT3 and SAFE upgraded t full design capacity in excess f 300Gb/s and 400Gb/s respectively EASSY scheduled t be peratinal by August 2010 design capacity f 1.4Tb/s Eurpe/India gateway schedules t be peratinal by January 2011 design capacity f 3.84Tb/s The West African Cable System (WACS) peratinal by mid 2011 design capacity f 5.12Tb/s Clumbus 3 upgraded Octber 2009 SAT3/SAFE Seacm EASSy (Jun 2010) WACS (Jun 2011) EIG (Jun 2010) SMW3 COL3 Telkm prviding substantially mre internatinal bandwidth

21 Data Centre Operatins Cybernest launched in Nvember 2009 Independent business unit autnmy and agility Telkm s ttal Data Centre s capacity largest in Suth Africa 9700 m 2 Nminated by Cisc as the Mst Innvative Data Centre Prject f the year green apprach Selected IT staff transferred t Cybernest Appinted seasned industry experts, frmed dedicated Sales and Marketing divisin Leveraged ff existing client base; size f deals wn is increasing as credibility grws Key partnerships EMC fr strage, Cisc fr data centre technlgy and VM ware fr virtualisatin slutins tailr fit t custmer requirements Trend twards Clud Cmputing gaining mmentum new shared virtual hsting ffering launched 21

22 Telkm has ability t deliver n its strategy Leadership, cmmitted staff, capital, technlgy, innvatin Telkm has ability t deliver n its strategy Leadership, cmmitted staff, capital, technlgy, innvatin

23 2010 Wrld cup Wrld class technlgy fr 2010: Cmpliant t FIFA specificatins Dual ptic-fibre rutes redundancy with n single pint f failure frm stadium t bradcast centre percent availability f netwrk withut failure during matches Self healing capability f netwrk 40Gb/s bandwidth capacity fr high definitin TV bradcasting frm each stadium Track recrd: Flawless delivery f: Preliminary Draw - Nv 07 Cnfederatins Cup draw - 14 t 18 Jun 09 Cnfederatins Cup - June 09 Wrld Cup final draw - 4 Dec 09 FIFA demanded 99.9% - we gave 100%

24 Financial verview Peter Nelsn

25 Grup nrmalised statement f cmprehensive incme ZAR millin 2009 Nrmalised 2010 Nrmalised Operating Revenue 36,784 37, Other incme Operating expenses (30,220) (32,746) 8.4 Operating prfit 6,915 4,685 (32.2) Investment incme Finance charges and fair value mvements (2,434) (1,355) (44.3) Taxatin (2,219) (1,566) (29.4) Prfit frm cntinuing peratins 2,445 2,272 (7.1) EBITDA 11,574 9,809 (15.2) EBITDA margin (%) (15.9) Basic earnings per share (cents) (12.0) Headline earnings per share (cents) (11.2) %

26 Unusual items impacting results 2009 Effect f eliminatin f revenue frm and payments t Vdacm in the prir year Impact f the FIFA cntract f R119 millin revenue, perating expenses f R119 millin and R133 millin amrtisatin Impairment f gdwill f Multi-Links f R462 millin and Africa Online f R39 millin Vdacm transactin expenses f R177 millin Fair value lss n Multi-Links put ptin f R409 millin Vdacm and Swiftnet deferred tax asset R454 millin 2010 Impact f the sale f ur 15% stake in Vdacm and unbundling f the remaining 35% amunted t an after tax prfit f R40.5 billin Impairment f gdwill and net asset value f Multi-Links f R5,160 millin STC n special dividend f R135 millin Prfit n dispsal f Telkm Media f R68 millin Impact f the FIFA cntract f R398 millin revenue, perating expenses f R357 millin and R80 millin amrtisatin

27 Nrmalised EBIT cntributrs (R2,230 millin) EBIT 2009 Telkm SA Multi-Links Internatinal Crprate Centre MWEB Africa Africa Online EBIT ,915 ZAR millin (1,571) 4,685 Swiftnet Trudn (567) (100) (81) (16) (1) 15 91

28 Effect f adjustments n basic earnings per share Basic earnings Rm cents Rm cents Basic earnings as reprted (Rm) 2, ,352 7,404.7 Vdacm (899) (179.6) (40,506) (8,029.9) Vdacm eliminatins (655) (130.9) Vdacm transactin expense Vdacm deferred tax asset (421) (84.1) Prfit n sale f Vdacm (44,223) (8,766.8) Taxatin relating t the sale f Vdacm 1, TCSP Cmpensatin expense STC n R19 special dividend Fair value lss n Vdacm shares Other 1, ,299 1,050.4 Multi-Links put ptin revaluatin Impairment ,160 1,022.9 Swiftnet deferred taxatin asset (33) (6.6) STC n R2.60 special dividend Prfit n sale f Telkm Media (68) (13.5) FIFA transactin Nrmalised basic earnings 2, ,

29 Effect f adjustments n headline earnings per share Headline earnings Rm cents Rm cents Headline earnings as reprted (Rm) 3, Vdacm (899) (179.5) 1, Vdacm eliminatins (655) (130.8) Vdacm transactin expense Vdacm deferred tax asset (421) (84.1) TCSP Cmpensatin expense STC n R19 special dividend Fair value lss n Vdacm shares Other Multi-Links put ptin revaluatin Swiftnet deferred taxatin asset (33) (6.6) STC n R2.60 special dividend FIFA transactin Nrmalised headline earnings 2, ,

30 Nrmalised finance charges and fair value mvements ZAR millin 2009 Nrmalised 2010 Nrmalised Interest expense 1,732 1,313 (24.2) Lcal lans 1,895 1,535 (19.0) Freign lans Finance charges capitalised (163) (233) 42.9 Freign exchange lsses and fair value mvements Fair value adjustment n derivative instruments % (94.0) 434 (16) (103.7) Freign exchange lsses (78.4) Grup interest-bearing debt (46.7%) 18,275 9, Ttal 2,434 1,355 (44.3)

31 Grup statement f financial psitin ZAR millin % Nn-current assets 51,002 44,518 (12.7) 0.5x net debt t EBITDA 1.3 Current assets 11,287 12, Dispsal grup held fr sale 23, Ttal assets 85,771 56,819 (33.8) Capital & reserves 35,495 30,264 (14.7) Nn-current liabilities 16,970 14,204 (16.3) % return n assets 16.3 Current liabilities 17,433 12,351 (29.2) Dispsal grup held fr sale 15, Ttal equity & liabilities 85,771 56,819 (33.8) Net debt 15,497 4,723 (69.5)

32 Grup nrmalised free cash flw ZAR millin 2010 Cash generated frm peratins 8,063 Add back: CGT liability 1,353 STC n R19 dividend 977 STC n R2.60 special dividend 135 Nrmalised cash generated frm peratins 10,621 Prceeds n dispsal f PPE and intangibles assets 21 Additins n PPE and intangibles Additins t ther investments Acquisitin n MWEB Africa (4,545) - (497) Nrmalised free cash flw 5,507 Nrmalised free cash flw imprvement

33 Telkm SA revenue ZAR millin (0.7%) (9.3%) 3.0% 25.1% 7.1%

34 Telkm SA traffic revenue Traffic vlumes Traffic revenue (21.1%) 3,238 4,113 3, ,963 3,631 3,546 3,805 8,822 3,634 3,205 2,036 1, ,300 1,484 7,409 6,452 (11.8%) (11.3%) (12.9%) 236.4% Lcal Lng distance Fixed-t-mbile Fixed-t-fixed Internatinal utging Calling plans 7.3% (10.8%) (11.4%) (0.2%) 261.5% 14.2% (2.5%) Millins f minutes ZAR millin Lcal Lng distance Fixed-t-mbile Fixed-t-fixed Internatinal utging Calling plans

35 Grup nrmalised perating expenses drivers Categry Segment Driver Emplyee expenses SG&A Service fees Operating leases Depreciatin, amrtisatin, impairments & write-ffs Telkm SA Telkm SA Multi-Links Telkm SA Multi-Links Telkm SA Multi-Links Annual salary increases and an adjustment t accelerate the eliminatin f disparities Higher maintenance cst n new technlgies and higher maintenance material cst Write dwn f slw mving and technlgy bslete inventry ICASA changed base f calculatin f license fees Marketing fees Increased electricity Increased maintenance n the preparatin f the sites fr the Sccer Wrld Cup Increased utilisatin f leased infrastructure as ppsed t wned Increased maintenance csts as equipment cmes ut f warranty Investment in netwrk and data prcessing equipment

36 Grup nrmalised perating expenses ZAR millin % Emplyee expenses 8,015 8, Payments t ther peratrs 8,430 8,386 (0.5) Grup nrmalised perating expenses 8.4% 32,746 SG&A 5,704 6, Service fees 2,579 2, ,220 Operating leases Depreciatin, amrtisatin, impairments and write-ffs 4,659 5,

37 Cmpany nrmalised perating expenses H1 vs H2 ZAR millin 2010 H H2 % % Telkm SA perating expenses Emplyee expenses 4,178 4, ,631 8, Payments t ther peratrs 3,929 3,514 (10.6) 7,536 7,443 (1.2) SG&A 2,551 2,308 (9.5) 4,280 4, Service fees 1,320 1, ,583 2, Operating leases (3.9) Depreciatin, amrtisatin, impairments and write-ffs 2,208 2, ,225 4, Ttal 14,519 14,162 (2.5) 26,868 28,

38 Grup capital expenditure majr items ZAR millin % Access netwrk (31.5) Legacy (37.2) Mbile Next Generatin Netwrk 2,180 1,095 (49.8) Fiber (25.1) Internatinal Infrmatin peratins (53.1) Custmer premises equipment (30.8) Facilities (38.5) Other (48.0) Telkm SA 6,586 4,170 (36.7) Crprate Centre (34.5) Multi-Links 2,791 1,036 (62.9) Other Internatinal (37.5) Other Suth Africa (24.7) Ttal 9,629 5,377 (44.2)

39 Grup debt cmparisn ZAR millin Mvement TL 12 1,059 1,059 - TL 15 1,159 1,159 - TL 20 1,325 1, Syndicated lan (817) Syndicated lan 2 3,266 3,268 2 Private placements 1,480 1, Fixed term lan 2,000 - (2,000) Cmmercial paper bills 5,476 - (5,476) Freign lan (29) Finance leases (34) Ttal Telkm SA 17,704 9,630 (8,074) Subsidiaries (464) Ttal 18,275 9,737 (8,538)

40 Debt maturity as at 31 March 2010 ZAR millin 2010 Maturing in the 2010 calendar year Private placing (PP02 and PP03) 1,780 Freign lan 10 Maturing in the 2011 calendar year Freign lan 14 Maturing in the 2012 calendar year TL12 1,060 Freign lan 9 Maturing after 2012 Syndicated lans (maturing in 2013) 3,280 TL15 (maturing in 2015) 1,160 TL20 (maturing in 2020) 2,500 Freign lans (maturing between ) 76

41 Guidance Capex expected t range between 20% and 25% f revenue Lng term net debt t EBITDA f 1.4x

42 Au Revir TKG Grup CEO t retire Prir t becming CEO Established an undersea fibre cable system arund the African cntent Set up the Natinal Netwrk Operatins Centre (NNOC) Drve netwrk digitalisatin and upgrade initiatives Embedded Next Generatin Technlgies t supprt fixed-mbile cnverged services As CEO Led the withdrawal frm Telkm Media Strengthened the cre fixed line business Negtiated with Vdafne and 3 Presidents fr the dispsal f Telkm s 50% interest in Vdacm Launched Cybernest Drve the transfrmatin f Telkm int strategically fcused and distinct prfit & lss fcused business unit Drve the entry f Telkm int mbile market Imprved emplyee engagement levels thrugh a participative culture revitalisatin prcess Prviding seamless bradcast f the 2010 FIFA Wrld Cup A life and visin, dedicated t Telkm

43 Au Revir cnt. As he leaves... The strategy is in place The structure is in place All the perating cmpnents necessary t prvide the full spectrum f cnverged services are in place Investment in NGN set t begin reaping rewards and prvide cmpetitive advantage in the fixed, mbile and data envirnments A wrkable plan t imprve EBITDA by R2bn is in place Prvisins fr the future f the IT-Telecms envirnment are in place e.g. clud cmputing and data centre hsting Telkm is ready t make it happen!

44 Fr infrmatin purpses

45 Multi-Links statement f cmprehensive incme excluding Impairment Naira millins % Operating revenue 27,061 36, Other incme Operating expenses (34,111) (57,192) 67.7 Operating prfit (7,047) (20,378) EBITDA (2,814) (12,927) EBITDA margin (%) (10.4) (35.4) Average Naira/Rand exchange rate N14.39 N Clsing rate at beginning f the perid N14.39 N Clsing rate at end f the perid N15.56 N

46 Multi-Links perating expenses excluding impairment Naira millins % Emplyee expenses 1,888 2, Payments t ther peratrs 9,369 16, SG&A 15,405 25, Service fees (20.9) Operating leases 2,757 5, Depreciatin, amrtisatin, impairments and write-ffs 4,233 7,

47 Multi-Links statement f financial psitin Naira millins % Nn-current assets 64,829 13,361 (79.4) Current assets 22,746 7,889 (65.3) Ttal assets 87,575 21,250 (75.7) Capital & reserves (20,483) (38,987) 90.3 Nn-current liabilities 86,828 39,545 (54.5) Current liabilities 21,230 20,692 (2.5) Ttal equity & liabilities 87,575 21,250 (75.7)

48 Telkm Cmpany statement f cmprehensive incme ZAR millin % Operating Revenue 33,659 33, Other incme ,298 - Operating expenses (29,478) (37,032) 25.6 Operating prfit 4,705 18, Investment incme 2, (72.5) Gain n distributin f a asset - 30,466 - Finance charges and fair value mvements (1,460) (2,727) 86.8 Taxatin (625) (4,854) Net prfit 5,527 41,