vodacom group (pty) ltd€¦ · disclaimer this presentation has been prepared and issued by...

Vodacom Group (Pty) LtdA l t P t tiAnalyst Presentation

5 March 2009

DisclaimerThis presentation has been prepared and issued by Vodacom Group (Proprietary) Limited (“Vodacom” or the “Company”) solely for your information and for use at the presentation to research analysts to be made on or about 5 March 2009 in connection with the proposed listing (the “Listing”) of the Company on the main board of the JSE Limited (the “JSE”). By attending the meeting where this presentation is made and/or by accepting this document, you agree to be bound by the following limitations. This presentation is not a prospectus or offer document. Information regarding the Company is set out in the pre-listing statement published by the Company on 3 March 2009 in connection with the Listing. Copies of the pre-listing statement are available from the Company’s registered office. This presentation does not constitute or form part of any offer or invitation to sell or issue any shares in the Company or any other securities, nor does this presentation constitute a solicitation for any such offer, nor shall this presentation or any part of it (or the fact of its distribution) form part of or be relied on in connection with any contract or investment decision relating

Disclaimer

p y , p y p ( ) p y gthereto. This presentation does not constitute a recommendation regarding the securities of the Company.Neither this document or any part or copy of it may be taken or transmitted into or distributed in or into, directly or indirectly, the United States. Any failure to comply with these restrictions may constitute a violation of US securities laws. The distribution of this document in other jurisdictions may also be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe any such restrictions. This document is not an offer of securities for sale in the United States or elsewhere. The Company’s ordinary shares have not been and will not be registered under the United States Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the United States unless they are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. No public offer of the securities referred to herein is being made in the United States. This document is intended for distribution in member states of the European Economic Area to persons who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (“Qualified Investors”). This document must not be acted or relied upon in any member state of the European Economic Area by persons who are not Qualified Investors. Any investment or investment activity to which this communication relates is available in any member state of the European Economic Area only to, and will be engaged in only y p y y y p y , g g ywith, Qualified Investors. This document is intended for distribution in the United Kingdom only to: (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (ii) persons falling within Article 49(2)(a) to (d) of the Order or to those persons to whom it can otherwise lawfully be distributed (all such persons together being referred to as “relevant persons”). This document must not be acted upon by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. UBS Limited and its affiliates are acting exclusively for the Company and for no one else in connection with the Listing and will not be responsible to any other person for providing the protections afforded to their respective clients, or for providing advice in relation to the Listing or any other transaction or arrangement referred to in this presentation. This presentation has been prepared by, and is the sole responsibility of, the Company. This presentation speaks at the date hereof. No representation or warranty, express or implied, is or will be made by or on behalf of the Company, its advisers, UBS Limited or any of their respective directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation

Disclap y, , y p , p y , y p y, p p p

and any reliance you place on them will be at your sole risk. In particular, certain market data has been obtained by the Company from third party sources. The Company has not independently verified such data and whilst the Company has compiled and extracted the market data, it can provide no assurances of the accuracy and completeness of such information and takes no responsibility for such data. The Company is not under any obligation to update or keep current the information contained in this presentation or to correct any inaccuracies which may become apparent, and any opinions expressed in it are subject to change without notice. None of the Company, its advisers, UBS Limited or any of the respective members, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation contains statements about Vodacom that are or may be forward looking statements. All statements, other than statements of historical facts included in this presentation, may be forward looking statements. Any statements preceded or followed by, or that include the words “forecasts”, “believes”, “expects”, “intends”, “plans”, “prediction”, “will”, “may”, “should”, “could”, “anticipates”, “estimates”, “seeks”, “continues” or similar expression or the negative thereof, are forward looking statements. Forward looking statements include, among others, statements relating to the following: future capital expenditures, acquisitions, divestitures, expenses,

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p g g g g g g p p q prevenues, economic performance, financial conditions, dividend policy, losses and future prospects; business and management strategies relating to the expansion and growth of Vodacom; the effects of regulation of Vodacom’s businesses by governments in the countries in which Vodacom operates, including the SA Government; Vodacom’s expectations as to the launch and roll out dates for products, services or technologies offered by Vodacom; expectations regarding the operating environment and market conditions; revenue and growth expected from Vodacom’s total communications strategy; growth in customers and usage; the expected contribution to Vodacom’s revenue of voice services, messaging services, data services, broadband services, fixed location pricing, internet services and mobile advertising; the rate of dividend growth by Vodacom or its existing investments; possible future acquisitions, including increases in ownership in existing investments, the timely completion of pending acquisition transactions and pending offers for investments, including licence acquisitions, and the expected funding required to complete such acquisitions or investments; mobile penetration and coverage rates and Vodacom’s ability to acquire spectrum; the impact of regulatory and legal proceedings involving Vodacom and of scheduled or potential regulatory changes; overall market trends and other trend projections; the effect of the current economic crisis on Vodacom’s operations; the ability of Vodacom to continue to obtain financing on commercially reasonable terms; the effect of competition on Vodacom; the effect of expansion on Vodacom’s management, financial and technical systems; the ability of Vodacom to attract and retain key personnel; and exchange control restrictions in the jurisdictions in which Vodacom operates. By their nature, forward-looking statements are inherently predictive, speculative and, because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and other facts or factors which may cause the actual results, performance or achievements of Vodacom, or its industry, to be materially different from any results, performance or achievements expressed or implied by such forward looking statements. These forward looking statements are not guarantees of future performance and are based on numerous assumptions regarding Vodacom’s present and future business strategies and the environments in which it will operate in the future. These statements are further qualified by the risk factors set out in Part VI of the pre-listing statement published on 3 March 2009, which could cause actual results to differ materially from those in the forward-looking statements. All subsequent oral or written forward looking statements attributable to the Company or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statements above and below. Vodacom expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein or to reflect any change in their expectations with regard thereto or any change in events, conditions or circumstances on which any such forward looking statement is based.

Analyst presentation 2009

AgendaPieter UysCEO

AgendaShameel JoosubMD: South Africa

Willem SwartCO: International

Johan van der Watt CFO (Acting)

Peter GbedemahMD: Gateway

AgeWally Beelders Mike van den Bergh ndaED: Vodacom Business COO: Gateway

G S h Af iGroup overview10:30

Financial review11:15

South African operations13:00Lu

nch International

business14:30

Gateway

15:15Tea


Group overview and investment case


Key Vodacom investment highlightsKey Vodacom investment highlights

L di k t iti

Gro

Leading market positions

Unique platform for growth oup overview an

Unique platform for growth

E t bli h d t k d

nd investment ca

Established track record

P t t t d b V d f

aseProven management team supported by Vodafone

Attracti e balance bet een gro th and ret rnsAttractive balance between growth and returns


Leading market positionsNumber one position in four of five countries, with strong challenger status in Mozambique and enhanced pan-African coverage through Gateway


Market position1

93.75%

Shareholding Gro

South Africa

Tanzania # 1

93.75%

65%

# 1

oup overview an

DRC

Mozambique

# 1

# 2

51%

85%

nd investment caMozambique

Lesotho

# 2

# 188.3%

ase

Gateway2 # 1100%

Notes:1 As at 31 December 2008 per Vodacom estimates 2 Gateway is the leading pan-African carrier services and connectivity provider


Platform for growth attractive existing markets and regionPlatform for growth – attractive existing markets and regionVodacom’s mobile footprint covers a population of approximately 180 million with growing, but still low, mobile penetration and limited broadband uptake

26 6 26 5

Mobile penetration Broadband penetration

Gro

For the year ended December 2008E (%)10,000

As at 30 September 2008

26.6 26.5

oup overview an

Botswana

South Africa6,000

7,000

8,000

9,000

$)

8.0 7.8

nd investment ca

Namibia

LesothoMorocco

Algeria

Egypt2 000

3,000

4,000

5,000

GD

P/c

apita

(US

6.04.7

3.2 2.8

0.04

a n e d n e m C A a n A)

ase

Zimbabwe

Mozambique

Ghana

Uganda

KenyaSudan

Tanzania

DRC

Egypt

Ethiopia

Nigeria

(1,000)

0

1,000

2,000

(20) 0 20 40 60 80 100 120 140

Mobile penetration (%)

Nor

thAm

erica

Wes

tern

Euro

pe

Wor

ld

Easte

rnEu

rope

Lata

m

APAC

MEN

A

Sout

h Af

rica

Sub-

Saha

ran

Afric

a (e

x SA

Notes:1 Size of bubble represents population 2 Green bubbles represent markets where Vodacom operates a mobile network

Source: EIU, ITU, MyBroadband (SA)Source: EIU, Mobile World

Notes:1 Eastern Europe includes Russia

Mobile penetration (%)


Platform for growth total communications providerPlatform for growth – total communications providerProviding total communications is at the core of Vodacom’s strategy and we have committed significant resources to delivering converged services

Recruited skills

♦ Top talent from leading regional ICT players

♦ Leveraging the strength of Vodacom’s brand

Gro

Acquired Gateway

♦ Sub-Saharan Africa’s largest provider of satellite services

♦ Supplier of broadband and value-added telecommunications services

♦ Channel to distribute Vodacom Business services internationally

oup overview an

Organic infrastructure

investment

♦ 1,000m2 fully enabled Tier 4 data centre

♦ Self-built transmission infrastructure (fibre and microwave solutions)

♦ Earth stations and international connectivity

nd investment ca♦ Earth stations and international connectivity ase


Platform for growth brand distribution and customer carePlatform for growth - brand, distribution and customer careVodacom’s leading brand is underpinned by unparalleled distribution and superior customer care

Brand

♦ Leading brand across all footprint markets

♦ South Africa’s top telecommunications and 4th best overall brand

“S b d t t ” d i E t Af i

Gro

♦ “Superbrand status” award in East Africa

♦ Unparalleled distribution network

♦ Physical and electronic voucher

oup overview an♦ Physical and electronic voucher

distribution

♦ More than 25,000 distribution points in South Africa alone

Distribution

nd investment ca

Customer care

♦ Walk-in and call centre service

♦ Vodacare centres at the core of customer service

ase

care♦ Email, SMS and web-based self-service

available


Established track record innovationEstablished track record – innovation

Operational launch in S th Af i

Vodacom opens the ld’ fi t ll l

First to launch GPRS d MMS i

Launch of Vodafone Live!

Gro

1998 2002 2005

South Africa world’s first cellular shopping mall

GPRS and MMS in South Africa

Vodafone Live! And first to launch BlackberryTM

1994

oup overview an

1996 2001 2004 2006

Launch of the world’s first prepaid service on an

Launch of 4U in South Africa

First to launch3G in South Africa

First to launchHSDPA in South Africa

2008

Launch of Vodacom Business

nd investment caservice on an

IN platformSouth Africa ase


Established track record profitable growth

Customers Revenue

Established track record – profitable growth

23.5 30.2

34.0

34.0 41.1

48.2

For the year ended 31 March (Millions) For the year ended 31 March (R billion)

Gro

2006 2007 2008 2006 2007 2008

20.2% CAGR 19.1% CAGR

oup overview an

EBITDA OpFCF1

For the year ended 31 March (R billion) For the year ended 31 March (R billion)

nd investment ca

11.8 14.2

16.5

6.3 8.0

9.8

ase

2006 2007 2008 2006 2007 2008

18.2% CAGR 24.7% CAGR

1. Cash generated from operations (before interest, taxation and dividends) less capex (additions and disposals to property, plant and equipment and intangible assets) and capex creditor movement


10

Proven management teamProven management teamVodacom has an experienced management team with an established track record in telecommunications

Pieter Uys (46)CEO

16 years with Vodacom

Gro16 years with Vodacom oup overview

annd investment caase

Johan van der Watt (42) Shameel Joosub (37) Lungi Ndlovu (50) Bob Collymore (51) Willem Swart (47)Johan van der Watt (42) CFO (Acting)

15 years at Vodacom

Shameel Joosub (37) MD: South Africa

15 years at Vodacom

Lungi Ndlovu (50) Chief Officer of Human Resources

9 years at Vodacom

Bob Collymore (51)Chief Officer of Corporate Affairs

10 years at Vodafone

Willem Swart (47)Chief Officer of International Business

12 years at Vodacom


11

Supported by VodafoneSupported by VodafoneAccess to Vodafone’s expertise, product innovation, marketing and centralised procurement supports Vodacom’s in-house strength

♦ World’s leading international mobile communications group with c. 289 million proportionate subscribers in 27 countriesThe Vodafone Group G

ro

♦ Access to Vodafone’s expertise, product innovation, marketing and centralised procurement

B fit f

oup overview an

♦ Sharing of best practices and benchmarking within Vodafone Group

♦ Vodacom is Vodafone’s exclusive investment vehicle in sub-Saharan Africa

Benefits of partnership

nd investment caase

♦ Access to Vodafone branded products and services


12

Experienced and well balanced Board

Independent non-executive directors Executive directors

Experienced and well balanced Board

Government 1

Board of directors with effect from the date of the listing

Gro

ThokoMokgosi-

Mwantembe

PhutiMalabie

Tom Boardman

Pieter UysCEO

Peter MoyoChairman

oup overview an

Non-executive directors (Vodafone representatives)

nd investment ca

RichardMorten James Michael Ronald

aseShameel JoosubMD: South Africa

Richard Snow

MortenLundal

James Maclaurin

Michael Joseph

Ronald Schellekens

1. The South African Government has a right to appoint a non-executive director for as long as it holds 10% or more of the Vodacom Group issued share capitalJohan van der Watt

CFO (Acting)


13

Attractive balance between growth and returnsAttractive balance between growth and returns

Dividends Dividend policy

♦ For the financial year ended 31 March 2010, Vodacom anticipates a dividend payout ratio of approximately 40% of headline earnings

R million

Gro

approximately 40% of headline earnings

♦ Dividends to be paid semi-annually with first dividend payable for H1 2010

oup overview an

♦ Dividends will be determined at the discretion of the Board having regard to operating results, financial position, cashflow requirements, investment strategy, capital requirements and

nd investment cagy p q

other factors

R2.2bnR2.2bnfinal dividend

ase

declared for H2 2009


Vodacom’s strategies for growthVodacom s strategies for growthVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth

Gro

Leadership in broadband

and oup overview anGrow core Expansion

connectivity services

nd investment ca

G o co emobile

businesses

Expansion in

sub-SaharanAfrica

ase

Develop converged

ICT l tiICT solutions


15

Vodacom’s strategies for growth grow core mobile businessVodacom s strategies for growth – grow core mobile businessVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth

Grooup overview

anGrow core nd investment ca

G o co emobile

businesses

ase


16

How have we become market leaders?How have we become market leaders?The interaction of our six core competencies is a fundamental feature of our ability to be a leading total communications provider

Network Customer

care

Gro

STR

ATE

GIProducts

oup overview an C

RE

VIE

W

Supply chain

management

Products and

services

nd investment ca

Brand

ase

Distribution


17

Growth strategies for existing mobile marketsGrowth strategies for existing mobile markets

♦ Enhance retention programmes

♦ Drive further penetration

♦ Increase market share

Retain and grow our customer base G

ro

♦ Launch affordable and innovative products and services

♦ Provide high speed broadband access solutionsDrive usage and

i

oup overview an♦ Provide high speed broadband access solutions

♦ Offer converged services for total communications solutions

♦ Use of new technologies and infrastructure

new services

nd investment ca♦ Use of new technologies and infrastructure

♦ Further extract synergies from within Vodacom Group

♦ Exploit benefits of Vodafone relationship

Target efficiencies

ase


18

Vodacom’s strategies for growth broadband leadershipVodacom s strategies for growth – broadband leadershipVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth

Gro

Leadership in broadband

and oup overview an

connectivity services

nd investment caase


19

Vodacom’s strategy is to lead in broadbandVodacom s strategy is to lead in broadbandBroadband uptake has historically been impacted by a variety of structural, regulatory and pricing issues which Vodacom is positioned to overcome

♦ Use of mobile technologies to deliver servicesLack of fixed-line infrastructure in

Factors inhibiting growth Vodacom’s solutions

Gro

1 ♦ VSAT solutions for rural areas

♦ Continue self-build transmission programmes

Lack of fixed-line infrastructure in Africa

♦ Expansion of Gateway services

STR

ATE

GI

oup overview an

1

Lack of international capacity and bandwidth

♦ Expansion of Gateway services

♦ Development of a continent-wide MPLS network

♦ Involvement in new submarine cable projects

C R

EV

IEW

nd investment ca

2

Access and affordability

♦ Low cost 3G handsets

♦ Bundled laptop and data packages

♦ Launch of affordable data products

ase

3♦ Launch of affordable data products


20

Mobile can fill the African fixed line voidMobile can fill the African fixed-line void

Evolution of mobile technology

High speed 2GGSM 2.5G

GPRS2.5G

EDGE 3.5GHSDPA

LTE“4G”

3GW-CDMA

Gro

GA

TELow speed WiMAX802 16e

HSDPA

Flash-OFDM

obili

ty

oup overview an EW

AYPedestrian

Nomadic

Indoor BluetoothWi-Fi

802.11bWi-Fi

802.11g

802.16d

802.16e

evel

s of

mo

nd investment ca

Fixed Dial-Up CablexDSL

FibreBWA

802.16/a

Le

ase

10kbps 100kbps 1Mbps 10Mbps 100Mbps

Narrowband Broadband


21

New international capacity will boost bandwidthNew international capacity will boost bandwidth

Prospective African submarine cables Vodacom’s approach

♦ Series of new international submarine

Prospective African submarine cables

Gro

Vodacom’s approach

GA

TE

cables expected to come onstream during next 2 to 3 years

♦ Vodacom is investing in Undersea Cable Systems

oup overview an EW

AY

Systems

♦ Vodacom is working in collaboration with a number of other operators to cost effectively enhance capacity

nd investment ca

♦ Vodacom is developing in-country links to connect directly to international landing points

ase


22

Affordable solutions should drive uptakeAffordable solutions should drive uptake

South African broadband pricing evolution Lower cost devices increase addressable market

Gro52%72%

R

R 50 00

R 60.00

3,599

STR

ATE

GI

oup overview an

52% reduction

72% reduction

R 40.00

R 50.00

2,099

C R

EV

IEW

nd investment ca

R 20.00

R 30.00

999 999

ase

R 0.00

R 10.00

3 3 4 4 4 5 5 6 6 7 7 7 8 8

3G

handset

2004 3G

handset

current

3G data

card

2004

3G data

card

current

Source: Vodacom Source: Vodacom examples

Apr

-03

Sep

-03

Feb-

04

Jul-0

4D

ec-0

4

May

-05

Oct

-05

Mar

-06

Aug

-06

Jan-

07

Jun-

07

Nov

-07

Apr

-08

Sep

-08

Average Price (per MB) ARPU


23

Vodacom’s strategies for growth converged ICT solutionsVodacom s strategies for growth – converged ICT solutionsVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth

Grooup overview

annd investment caase

Develop converged

ICT solutionsICT solutions


24

Delivering new converged corporate solutionsDelivering new converged corporate solutionsVodacom Business has developed a suite of converged solutions to ensure growth in the ICT market segments as well as retention of corporate customers in an increasingly competitive market place

Access services

Gro

Managed network services

oup overview an

Managed hosting services

nd investment ca

Converged application services

ase


25

Delivering new converged consumer solutionsDelivering new converged consumer solutionsNew converged services provide an additional customer retention tool and can support ARPU growth

Online services

Media & entertainment Gro

Advertising

Financial

oup overview annd investm

ent caase


26

Vodacom’s strategies for growth sub Saharan AfricaVodacom s strategies for growth – sub-Saharan AfricaVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth

Grooup overview

anExpansion nd investment ca

Expansion in

sub-SaharanAfrica

ase


27

Africa remains an exciting telecommunications marketAfrica remains an exciting telecommunications marketOne of the fastest growing markets with unique attractions for further mobile growth and growing upside from data services given the low internet and broadband penetration levels

♦ Mobile penetration of 20–49%

♦ Highest rate of customer growth,

♦ Mobile penetration <20%

♦ Markets awaiting liberalisation or ff /

♦ Mobile penetration of >50%

♦ Slowing customer growth but

Developing NascentAdvanced

Gro

STR

ATE

GI

g g ,with ARPUs pressured by declining usage of incremental subs

affected by political and/or economic instability

♦ Customer growth limited by structural shortcomings

g ggrowing ARPU

oup overview an C

RE

VIE

Wnd investm

ent caase


28

Gateway provides new market entry pointsGateway provides new market entry points

A l i i l

Gro

Accelerates international expansion

STR

ATE

GI

oup overview an

Provides platform for further expansion

C R

EV

IEW

nd investment ca

Strengthens the total communications strategy

ase

Potential synergiesy g


29

Key investment highlightsKey investment highlights

♦ Leading MNO in four of five countries of operation♦ Largest pan-African carrier service providerLeading market positions ♦ Largest pan African carrier service provider♦ South Africa’s largest broadband provider

♦ Further growth from existing mobile operationsN t k d t h l i t t f b db d

Gro


Unique platform for ♦ Network and technology investment for broadband♦ Resources in place for total communications strategy

♦ Historically first to market

oup overview an

Unique platform for growth

♦ History of sustained revenue growth and strong cash flow generation ♦ Discipline in cost control and capital allocation

♦ Combination of founding employees and experienced executives

nd investment ca

Established track record

Proven management♦ Leveraging the benefits of the Vodafone Group♦ Supported by a strong and well balanced Board

♦ Robust business model

ase

Proven management team supported by

Vodafone

Att ti b l ♦ Robust business model♦ Between 2006 and 2008, 18% and 25% CAGR in EBITDA and OpFCF♦ Continued growth allied with sustainable cash returns to shareholders

Attractive balance between growth and

returns


30

Q&AGroup overview and investment casep


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