Vodacom Group Limited IR Presentation | 17 February 2017 2
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Vodacom Group Limited Investment case February 2017 Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentations may lawfully be communicated (‘relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Group. Promotional material used in this presentation that is based on pricing or service offering may no longer be applicable. This presentation contains certain non-GAAP financial information which has not been reviewed or reported on by the Group’s auditors. The Group’s management believes these measures provide valuable additional information in understanding the performance of the Group or the Group’s businesses because they provide measures used by the Group to assess performance. However, this additional information presented is not uniformly defined by all companies, including those in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, although these measures are important in the management of the business, they should not be viewed in isolation or as replacements for or alternatives to, but rather as complementary to, the comparable GAAP measures. This presentation also contains forward-looking statements which are subject to risks and uncertainties because they relate to future events. These forward-looking statements include, without limitation, statements in relation to the Group’s projected financial results. Some of the factors which may cause actual results to differ from these forward-looking statements are discussed on slide 23 of this presentation. Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox, Vodafone WebBook, Vodafone Smart tab, Vodafone 858 Smartphone, Vodafone Passport, Vodafone live!, Power to You, Vodacom, Vodacom M-Pesa, Vodacom Millionaires, Vodacom 4 Less and Vodacom Change the World are trademarks of Vodafone Group Plc (or have applications pending). Other product and company names mentioned herein may be trademarks of their respective owners. Vodacom Group Limited IR presentation | 17 February 2017 2 • A leading African mobile communication company providing a wide range of communication services including mobile voice, messaging, data and converged services to over 65 million1 customers. Vodacom DRC Licenced 2002 Population 71 million Vodacom Tanzania • Vodacom is majority owned by Vodafone Plc (65%) and Licenced 1999 we are listed on the JSE Limited. Population 55 million • Market capitalisation of R225.1 billion#. • Group revenue of R80.1 billion. Vodacom Mozambique Licenced 2003 Population 29 million Head office in Midrand, South Africa Vodacom Lesotho Vodacom South Africa Licenced 1995 History – consistent track record of innovation Licenced 1993 Population 2 million Population 55 million 1996 2004 2008 2009 2011 2012 2016 Vodacom First to launch Vodacom rebrands from LTE-Advanced All information in presentation is as at 31 March 2016, unless otherwise stated. prepaid services launches a 3G Vodacom Vodacom listed First to launch “Green and Blue” launched # in the world on IN HSDPA network Business on the JSE 4G in Market capitalisation value as at 17 February 2017. to Vodafone platforms in South Africa launches (18 May) South Africa 1. As at 31 December 2016 RED Vodacom Group Limited IR presentation | 17 February 2017 3 Share information As at 5 February 2017 Institutional shareholding1 JSE Ticker symbol VOD ADR code VDMCY 4% PIC = 51% Stock exchange JSE Limited 2% 8% Shares in issue 1 487 954 000 South Africa Freefloat 35% United States 52 week low and high R139 – R172 20% United Kingdom Rest of Europe Market capitalisation R223.4 billion 66% Rest of world Transfer agent ComputerShare FTSE/JSE Top 40 Index Indices JSE Socially Responsible Index Nedbank BGreen Exchange Traded Fund 1. As at 27 January 2017 Vodacom Group Limited IR presentation | 17 February 2017 4 Five reasons to own Vodacom shares 1 Market leadership 2 Focus areas of growth potential 3 Scale benefits driving efficiencies 4 Experienced, diverse management team 5 Track record of delivering shareholder returns Vodacom Group Limited IR presentation | 17 February 2017 5 5 #1 | Market leadership # 1 mobile operator in all markets 61.3 million customers in > 18 000 base stations, >80% 3G st 5 countries in Sub-Saharan Africa 1 to launch 4G in South Africa, Lesotho and Tanzania R14 billion enterprise revenue from 30 countries in Africa R13 billion Investment per annum to maintain our leading network quality All information is as at 31 March 2016 Vodacom Group Limited IR presentation | 17 February 2017 6 #2 | Focus areas of growth potential FY14: +33% FY14: +24% FY15: +25% FY15: +10% (32% of Group service revenue) International (27% of Group service revenue) Data FY16: +29% FY16: +17% • Group: 29 million active data customers; 57% of total base • 27% of Group service revenue • SA: 14 million active smart devices; 37% of active • Data revenue growth +32% customers • Active customers 27 million • SA: 572MB per smart device growing 23% o Active customers now 44% of Group active customers FY14: +37% FY15: +13% Enterprise (21% of Group service revenue) New services (SA) (4.2% of Group service revenue) FY16: +19% • Enterprise contributes 21% to Group service revenue • Insurance revenue +19% • SA fixed and managed services revenue +27% o Expanding portfolio: life, funeral, device, cover o Pan African MPLS network • Capture Internet of Things opportunity o Fibre to the business/home • Fibre to home +25 000 homes and businesses passed . Vodacom Group Limited IR presentation | 17 February 2017 7 7 #3 | Scale benefits driving efficiencies Focussed savings programmes – Fit 4 Growth • Reduced transmission rentals through self-provisioning • Cost optimisation through sharing, outsourcing and supply chain management • Improved return on investment in customer acquisition spend • Reduced support costs offsetting inflationary pressures Benefits from being part of the Vodafone Group • Global technology and product roadmap • Better pricing through Vodafone Procurement Company • Benefits from best practice sharing and benchmarking • Talent and skills sharing Vodacom Group Limited IR presentation | 17 February 2017 8 8 #4 | Experienced, diverse management team 4 CEO: Shameel Aziz Joosub (45) CFO: Till Streichert (41) 20 years industry experience 15 years industry experience Previously CEO of Vodafone Spain Previously CFO of Vodafone Romania IT Person of the year 2015 European and emerging market experience Executive Committee (12 members) Female Intern- 17% ational White Black 25% 42% South 58% African Male 83% 75% Vodacom Group Limited IR presentation | 17 February 2017 9 #5 | Consistently delivering shareholder returns Relative share price performance1 Dividend per share Cents per share 775 795 400 400 1. As at 15 February 2017. Total shareholder return2 Telkom 35.6% 375 395 395 Millicom 34.3% Bharti 15.1% FY15 FY16 FY17 Vodacom 6.3% Interim dividend Final dividend MTN -12.8% -15.0% -5.0% 5.0% 15.0% 25.0% 35.0% 2. ZAR year to date for the 12 months ending 15 February 2017 Vodacom Group Limited IR presentation | 17 February 2017 10 Targets | Group medium-term targets Service revenue growth Low to mid single-digit EBITDA growth Mid to high single-digit Capex intensity 12% to 14% 11 Vodacom Group Limited IR presentation | 17 February 2017 11 Continuing to deliver returns Best network Diversify Deliver cost Best talent Transform --------------------- revenue to and process --------------------- society and Best value deliver growth efficiency Best practice build --------------------- stakeholder Best service trust Vodacom Group Limited IR presentation | 17 February 2017 12 Customer | Best network, Best value, Best service Best network Best value Best service • Network customer satisfaction #1 in all • Personalised pricing and offers • Connectivity markets but one • Driving pricing transformation • Always in control • 4G coverage in SA at 58% • Reducing communication costs • Rewarding loyalty • International sites +17% • Stimulating bundle adoption • Easy access • SA dropped call rate @ 0.41% • 1st in SA with commercial mobile LTE-A Average download speeds in SA Total prepaid bundle sales in SA SA Consumer NPS1 points differentiation Source: MyBroadband (March 2016) (Mbps) Million % +6 ppts +15 ppts 86 189 23 18 17 10 314 387 383 369 1H15 2H15 1H16 2H16 FY15 FY16 Vodacom SA Operator A Operator B Operator C Total prepaid bundle sales Just 4 You Vodacom Competitor A Competitor B 1. Net Promoter Score Vodacom Group Limited IR presentation | 17 February 2017 13 Growth | Diversifying revenue to deliver growth Data contribution International contribution FY16 • Growth +28.5% FY16 • Growth +17% • Average usage per smart • EBITDA contribution FY14 device - 572MB FY14 26.6% 17.7% (FY14: 15.6%) 31.9% 21.4% • 2G to 3G; 3G to 4G 24.6% • M-Pesa revenue +19% ARPU uplift +20% Contribution to Group service revenue Contribution to Group service revenue Enterprise contribution