telkom sa soc limited group provisional annual...
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GroupProvisionalAnnualResultsfortheyearended31March2017
TelkomSASOCLimited
Introduction
3
Toughtradingenvironment
EconomicEnvironment
> LimitedGDPgrowth
> Sovereignratingdowngrade
> Consumersunderpressure
Regulatoryenvironment
> Spectrum
> ICTPolicy
> Costtocommunicate
Competitivelandscape
> Increasednumberoffibreplayers
> Competitioninthewholesalespace
> Consolidationinthemarket
Introduction
4
Keyactionslaidgroundworkforgrowth
Keyissuestoaddress
> Costandcapitalefficiencies
> SustainabilityofTelkomMobile
> Uncertainregulatoryandpolicyenvironment
> Corebusiness
> Capability
> Brandperceptionandcustomerservice
Keyactionstaken
> Stabiliseorganisation,clearturnaroundstrategy
> Sustainablecostefficiency;disciplinedcapitalallocation
> De-riskedmobilebusiness
> Proactiveregulatoryinteraction
> Growingnewprofitpools(Fibre,LTE,BCX,mobiledata)
> Executionofstrategy,skills,culturechange,systems,processes
> Resettingthebrandandongoingimprovementofcustomerexperience
Introduction
5
Newfitforpurposeoperatingmodel
Introduction
Group
6
Relentlessfocusoncost Capabilityandtalent Performanceculture Systemsandprocesses
> Instilarelentlessfocusondrivingdowncosts
> Ensurecostsefficienciesachievedarenottemporary
> Setupsystemsandprocessestoenableoperationsandcreatetransparencyonperformance
> Placetherightindividualsintherightroles
> Empowerindividualswiththerighttrainingandsupport
> Createcultureofperformance,groundedinFoundersMentality(i.e.ownershipmindset,insurgency,frontlineobsession)
Criticalenablersofthenewoperatingmodel
Introduction
Businessperformance
8
Groupfinancialhighlights
Businessperformance
*ThefiguresexcludevoluntaryearlyretirementandseverancepackagecostofR66millionandtherelatedtaximpactofR13million.ThecomparativenumbersexcludevoluntaryearlyretirementandseverancepackagecostofR2193millionandtherelatedtaximpactofR517million.
Capextorevenue21.1%
EBITDAmargin26.7%*
Annualdividendup56.3%
Operatingrevenueup9.8%
HEPSup12.4%*
Mobileservice
revenueup38.4%
9
Performanceagainstfocusstrategicareas
Businessperformance
> Mobilegrowththroughdata
> Highspeedbroadbandgrowth
> ContentandVAS
> Modernisethenetwork
> Commercialisethenetwork
> Servicedeliverytransformation
> Cloudcomputing
> Unifiedcommunications
> Bigdataanalytics
> InternetofThings
> Security
> MobileAdExchange
> ExpandingOmni-channelofferings
> Establishe-commercemarketplace
> ExpandpartnershiptoOTT
Keyfocusareas
ModernisenetworkCommercialisethenetworkTransformingservicedelivery
11
Modernisethenetwork–fibredeployment
Businessperformance
Passedover2.2millionpremises
Fibretothehome
219825up169.7%
Fibretothecabinet
1991449up37.2%
Fibrenetworkof
>149000kmdeployedtodate
12
Modernisethenetwork–POTN*deployment
Businessperformance
Oneofthe1st commercialdeploymentsintheworld
> Simplifiedoperationsthroughcommoninterworkingplatforms
> Improvedcostforhighbandwidths
> Increasedefficiencythroughmulti-layerutilisationbydelayeringthenetwork
*Packetopticalnetwork
13
Commercialisethenetwork–increasednetworkconsumption
Businessperformance
Fixedlinebroadband1
1.Accesslinks
Fibretothebusiness
52755endpointsterminating
Fibretothebasestations
5928basestations
Fibretothehome
18%connectivityrate
340472
632
0
100
200
300
400
500
600
700
FY2015 FY2016 FY2017
Tera
byt
es
33.8%
14
Transformingservicedelivery
Businessperformance
Optimiseservicedeliveryandcostefficiency
> Improvedispatchingmethodologythroughbundling
> IndividualincentivesthroughPerformancePays
Digitaliseandautomatebusinessprocesses
> Introductionofdigitaltechnician
> PhotoqualityAppandnewWorkforceManagementsolution“Click”
Continuouslyimprovecustomerexperience
> “RightFirstTime”approach
> Pro-activemaintenanceofthenetwork
Keyfocusareas
CloudcomputingUnifiedcommunicationsConvergedcommunicationsBigdataanalyticsInternetofThingsSecurity
16Businessperformance
Benefitsoftheintegration
R14.0billionTotalrevenue
15.1%EBITDAmargin
R1.8billionOperatingprofit
Financialprofile– 31March2017
> NewExco
> Onesalesforceteam
People
Resources> Unmatcheddatacentrescapabilities
> Strongfixednetwork
> GroupITtobemanagedbyBCX
> Offerend-to-endsolutions
> Convergedproductsandservices
> Increasedscaleandscopeofproducts,servicesandbusinesssolutions
Productoffering
17
Deliveredagainstkeyfocusareas
Businessperformance
CloudComputing
> LaunchedEnterpriseBusinessCriticalCloud
> EnhancedBCXCloud.com
> LaunchedSAPHANAEnterpriseCloud(HEC)
> StrengthenedOraclecapability
UnifiedCommunications(UC)
> MigratedcustomersontoNGNsuchasfibre,VoIP
> ExpandedUCofferstoincludefullsuiteofoptionsi.e.IPT,UC
> LaunchedCiscohostedcollaborationsolution
> LaunchedSkypeforBusinessUCpractice
> Launchedabroadbandsatelliteservices
BigDataAnalytics
> Abusinessunitwasset-up
> Bigdataplatformsdeployedfordatascientiststomineandmonetisedata
> AnalyticsasaService
> DataasaService
> IntegratedintoBCXIntelligentSolutions(Cloud,IoT,Digital,BigData)
18
Deliveredagainstkeyfocusareas(continued)
Businessperformance
Security
> FastnetPaymentCardIndustrySecurityStandardv3.2certification
> ISO27001certification
InternetofThings
> ContinuedgrowthwithintheIoTindustrialandretailecosystems
> ProductsdeliveredfocussedonthemanagementoftheIoTdataanddeviceecosystem
> EnabledabilityviaCloudserviceprovidertohostinAzureviaBCXCloud.com
19
DigitalTechnologyOrganisationthroughcollaboration,innovationandservicefocused
Businessperformance
CustomerFirstProgramstrengthenedtodrive:
> customerinsights
> capabilitytomanagecustomerlifecycles
> AbilitytoofferselfhelponcorecloudservicesatBCXCloud.com
CustomerRelationshipManagementsystemtoeffectivelymanage:
> Pipelineandopportunities
> GatherleadsfromBCXCloud.comviaautomatedticketingsystem
Keyfocusareas> Mobilegrowththrough
data-ledpropositions> Highspeedbroadbandgrowth
- LTE&fibre> Digitalservices> ContentandVAS
21Businessperformance
Solidexecutionbymobilebusiness
-684
-43
660
-1 000
-500
0
500
1 000
FY2015 FY2016 FY2017
Rm
1 8152 528
3 498
0
1 000
2 000
3 000
4 000
FY2015 FY2016 FY2017
Rm
38.4% 47.7%
1 608 1 9122 772
579794
1 227
0
1 000
2 000
3 000
4 000
5 000
FY2015 FY2016 FY2017
Pre-paid Post-paid
21872707
3999
EBITDA
Customergrowth(‘000)Servicerevenue
> Strongsubscribergrowthsupportedbynetworkrollout
> 2G/3Gbasestationsgrowthfrom2663FY2016to2986FY2017
• Ofwhichthereare2607re-farmedsitesand
• 1677LTEsites
22Businessperformance
Mobilebroadband
988
1 575
2 356
0
500
1 000
1 500
2 000
2 500
FY2015 FY2016 FY2017
R’m
Broadbandrevenue
Broadbandsubscribers 44.6%
390 511 724940
1313
1 913
0
500
1 000
1 500
2 000
2 500
3 000
FY2015 FY2016 FY2017
‘000
Dataonly Smartphoneusers
49.6%
Highspeedbroadband
> UptakeofFixedBroadband:
• Significantdemandforfibre
• MigrationfromADSL/VDSLtofibre
• Fixedbroadbanduncappedstrategyyieldingresults
> PartnershipswithShowMaxandotherOTTproviders
1330
1824
2638
23
Ongoingimprovementtocustomerexperience
Systemupgrades
> Reducedtimetocapture,process&vetting
> Paperlessapplications
> Digital&self-help
Storeinitiatives
> Queuemanagementsystem
> Customercallbacksupport
> V-Docs:paperlessapplicationprocess
Callcentres
> Improvedfirsttimeresolutions
> Reducedcallvolumes
> Livechat
Businessperformance
Keyfocusareas
MobileAdExchange
ExpandingOmni-channelofferings
Establishe-commercemarketplace
ExpandpartnershiptoOTT
25
Establishe-commercemarketplaces
Businessperformance
> Launchedwebandmobileapps(iOS&Android)inJanuary2017
> Agiledeliveryofbusinesscriticalfeaturesonamonthlybasis
> 8xleadsgeneratedperserviceprovider
> 100%trafficgrowthpermonth
> 200%growthintraffic
> 663117leadsgenerated
> 1000000consumersreached
> LaunchedfirstBlackFridayandCyberMondaydeals
26
MobileAdExchange
Businessperformance
OTTpartnership
NewPartners
34%GrowthinGoogle
Revenues> 997 deployedforprojects
> 1000registered> Innegotiationsfordeploymentof
1PrivateNetwork
27
ExpandingOmni-channelofferings
Businessperformance
100daysFromconcepttogo-live
75000newBusinessesAdded
15%ImprovementinNPS
CustomerandProcessImprovements
> 118000quotessenttobusiness
> 4000 appointmentssenttobusiness
> 50000consumersservicedindigitalqueue
Humanandsocialcapital
29
HR- Focusingonattractingandgrowingtalent
Humanandsocialcapital
Performancebasedincentives
> PerformancePays– upto12%
> PerformanceManagement
Recruitment
> BrightYoungMinds
> WeThinkCode
Leadership&development
> Talentmanagement&succession
> FemaleLeadership
30Humanandsocialcapital
CSR- Empoweringyouththrougheducationandentrepreneurship
Foundation–Mainfocusisoneducation
FutureMakers–EnterpriseandSupplierDevelopmentFund
R85millionallocatedtoeducation
9770Learnersbenefitedfromsupplementaryteaching
4140teacherstrainedinICT
R234millioninvestedintotheFutureMakersfund
40 blackownedbusinessesthroughourIFTprogrammewhointurnemployed
364 technicians
1102newjobscreatedbyFutureMakersbeneficiaries
Foundationoverthepast3yearsFutureMakersinvestmentsince7May2015
Financialoverview
32
DevelopmentsinFY2017
Financialoverview
Mobile MobileEBITDAprofitability
Acceleratedcapex
deployment120%growthincapexdeploymenttopriorityareas
BCX BCXinclusionforthefullyearandtheintegrationofEnterprisewithBCX
DividendIntroductionofinterimdividendanddividendpolicy
33
FY2017 FY2016 %
Profitforthe year 3854 2 321 66.0
VERP/VSPcost 66 2 193 (97.0)
TaxonVERP/VSPcost (13) (517) 97.5
ProfitfortheyearexcludingVERPs andVSPs 3907 3997 (2.3)
HeadlineearningspershareexcludingVERPsandVSPs*(cents pershare) 731.4 650.9 12.4
EarningsexcludingVERPsandVSPs
Financialoverview
*R217millionprofitonsaleofassetsinthecurrentyear(March2016:R704million)
34
FY2017 FY2016 %
Operating revenue 40970 37325 9.8
Netrevenue 31854 29521 7.9
Operatingexpenses 21647 19833 (9.1)
EBITDA 10941 10969 (0.3)
Capital investments 8 654 6040 43.3
Freecash flow (137) 3900 (103.5)
KeyfinancialindicatorsexcludingVERPsandVSPs
Financialoverview
35Financialoverview
Creatingadiversifiedrevenuebase
19%
20%
9%30%
18%
4% VoiceusageandinterconnectionSubscriptions
CustomerpremisesequipmentData
Informationtechnology
Other
FY2017
22%
22%
9%
31%
12%4%
FY2016
36
NetrevenuemovementR’m
29521 31854
3124
1526
199(1449)
(1067)
FY2016Netrevenue Informationtechnology Mobile Other Costofsales Voiceandinterconnection FY2017Netrevenue
Solidgrowthinfuturerevenuestreams
Financialoverview
R2333m7.9%
1. ITbusinessrevenueofR767million(March2016:R314million)previouslyreportedasfixeddataisnowdisclosedasinformationtechnology.
1
37
635736 677527 707379
FY2015 FY2016 FY2017
DatalinesSubscribers
Financialoverview
Growthinpriorityareas
-
8129 39640
FY2015 FY2016 FY2017
4.4%
387.6%FibreSubscribers
38
3346 4721 6531
FY2015 FY2016 FY2017
Metro-EthernetSubscribers
Financialoverview
Growthinpriorityareas(continued)
44.6%
340225 471958 631569
FY2015 FY2016 FY2017
1330 1824 2638
FY2015 FY2016 FY2017
21700 3730785770
FY2015 FY2016 FY2017
129.9%
38.3%
33.8%
MobilebroadbandSubscribers‘000
BroadbandtrafficvolumesTerabytes
MobiledatatrafficvolumesTerabytes
39
Goodperformanceinnewgrowthareas
Financialoverview
Rm
4430
25283353 3139 3410
14450
7554
3498 3501 3119 3171
13553
Informationtechnology Mobileservicerevenue Nextgenerationandfibrebased
Otherfixeddata Legacydata Fixedvoiceandsubscriptions
6.9%
2016 2017
70.5%
1. ITbusinessrevenueofR767million(March2016:R314million)previouslyreportedasfixeddataisnowdisclosedasinformationtechnology.
1
7.0%0.6%~
38.4% 4.4%
Fixed data
1.1%~
1
40
NormalisedEBITDAmovementRm
EBITDA
Financialoverview
10969 10941
2333151
(1441)(547) (524)
FY2016EBITDA Netrevenue Other SG&A Otherincome Employeeexpenses FY2017EBITDA
1. Theincreaseinselling,generalandadministrativeexpensesislargelyattributabletotheinclusionofthefullyearexpenseofBCXaswellasincreasedoutsourcingcosts.
2. TheincreaseinemployeeexpensesislargelyattributabletotheinclusionofthefullyearexpenseofBCXwhichamountedtoanyearonyearincreaseofR1.9billion.
R28m0.3%
ExcludinggainsonsaleofassetsEBITDAincreased4.5%
1 2
41
FY2017 FY2016 %
Fibre1 2 392 1 310 82.6
Mobile 1 936 660 193.3
OSS/BSSprogramme 741 544 36.2
Network rehabilitation/sustainment 567 674 (15.9)
Serviceondemand 1 251 1 540 (18.8)
Corenetwork 962 273 252.4
Increasedcapitalexpenditureinpriorityareas
Financialoverview
1. Includesaccessandbackboneexpenditure Ourcapexisscalableandallocationdependantongrowth
42
FY2017 FY2016 %Cashsources
Opening cashbalance 2542 3 642 (30.2)
Cash flowfromoperatingactivities 5542 6 701 (17.3)
Significantcashapplications
Dividend paid (2171) (1 402) (54.9)
BCXacquisition - (2 654) -
VERPsandVSPspaid (629) (1688) 62.7
Cashpaidoncapitalexpenditure (8479) (5 891) (43.9)
Cashattheendoftheyear 1519 2542 (40.2)
Discretionaryinvestments 2514 3989 (37.0)
Strongcashposition– Platformtosupportgrowth
Financialoverview
43
FY2017guidance
FY2017Actual
FY2018guidance
Netrevenue Modest growth 7.9% N/A
Operatingrevenue Mid-singledigits
EBITDA margin 23%- 25% 26.5%* 23%- 25%
Capextorevenue 15% - 18% 21.1% 17%- 20%
NetdebttoEBITDA ≤1 0.5 ≤1
MobileEBITDAbreakeven Achieve R660 million N/A
Guidance
Financialoverview
ü
ü
ü
ü
Annualdividendincreased56.3%to422.0centspershare
ü
*IncludesVERPandVSPcosts
44
Conclusion
Financialoverview
> Secondyearofsolidfinancialresults
> Shareholdershandsomelyrewarded=Totalshareholderreturn=38%
> Strongbalancesheet• 43.3%growthincapital
expendituretoR8 654million
• R2.1billiondividendpayment
• R629millionVSPandVERPpayments
> Enteringgrowthphaseofourtransformation
> Challengingenvironment• Lowgrowth• Highunemployment• Effectofdowngradeand
resultantimpactonkeyeconomicaldrivers
> Weareprepared• Measuredandfocused
capitalexpenditureagoodplatformforgrowth
• Wehavedevelopedanexecutionandinnovationmindset andculture.
• Strongbalancesheet
Outlook
46
An‘extrememakeover’tothriveinthechanginglandscape
Outlook
> Shiftingconsumerdemographics
> Increasinglycompetitiveindustry
> Deviceproliferationincreasingdataconsumption
> Newtechnologiesproviding“moreforless”toendusers
> ‘Nextfrontier’opportunitiesandtheriseofplatforms
> RegulatoryBest-in-Class
CorporateCentre
> MobileAdExchange
> ExpandingOmni-Channelofferings
> EstablishE-Commercemarketplace
> ExpandpartnershiptoOTT
> CloudComputing
> UnifiedCommunicationsandCollaboration
> ConvergedConnectivity
> Bigdataanalytics
> InternetofThings
> Security
> Mobilegrowththroughdataledpropositions
> Highspeedbroadbandgrowth- LTE&Fibre
> ContentandVAS
> Modernisethenetwork
> Commercialisethenetwork
> Servicedeliverytransformation
> Unlockvaluethroughcommercialisingpropertyportfolio
> Extractvaluefromexcessbuildingcapacity
> Enablesmartbuildingsolutions
> Diversifyincomestreams
…Wearerespondingwithan‘extrememakeover’Inachanginglandscape…
Strategy&BusinessPerformance
Risk,Control&Compliance
TalentManagement
CorporateFinancialEngineering
Best-in-ClassCorporateCentre
47
WhoisGyro
PropertyDevelopment> Optimisetheutilisationofthe
existingpropertyportfolio
> Leadtheendtoenddevelopmentofexistingproperties
Mast&Towers> Improvetenancyof
Masts&Towersassetbase
> EfficientlymaintainTelkomMasts&Towersportfolio
> EfficientmanagementofnewbuildMasts&Towers
PropertyServicesManagement> Continuouslyimproveexisting
TelkomCRES*
> Providepropertymanagementservicesto3rdparties
> ImprovedcostefficiencyandreducedcarbonfootprintofenergysupplyinTelkomownedproperties
Outlook
*Corporaterealestateservices
Thank youQuestions
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