| Wed 13 Jun 2007, 7:07 | | TKG - Telkom SA Limited - Vodacom Group (Proprieta |
|
TKG
TKG
TKG - Telkom SA Limited - Vodacom Group (Proprietary) Limited results for
the year ended March 31, 2007
Telkom SA Limited
(Registration number 1991/005476/06)
JSE and NYSE Share code TKG & ISIN ZAE000044897
("Telkom" or the "company")
Telkom SA Limited (TKG): Vodacom Group (Proprietary) Limited results for the
year ended March 31, 2007
COMMENTARY
Vodacom Group (Proprietary) Limited, South Africa`s market leader in the
provision of cellular services announces its results for the year ended
March 31, 2007.
SOUTH AFRICA
Customers
The total number of customers increased by 20.1% to 23.0 million (2006: 19.2
million), with the majority of the increase from the prepaid market. The
number of prepaid customers increased by 18.6% to 19.9 million, while the
number of contract customers increased by 27.6% to 3.0 million. The growth
in customers was a direct result of the record number of gross connections
achieved.
Contract gross connections increased by 31.6% to 666 thousand (2006: 506
thousand), while prepaid gross connections increased by 17.5% to 10.1
million (2006: 8.6 million), bringing the total number of connections for
the year to 10.9 million (2006: 9.1 million). The growth in the contract
connections was largely due to the increased connections in the hybrid
product named Family Top Up. During the year, 246 thousand (2006: 196
thousand) customers converted from prepaid to contract packages.
ARPU
During the period under review, ARPU decreased to R125 (2006: R139) per
month due to the continued dilution caused by the higher proportion of lower
ARPU prepaid and contract connections made as the lower end of the market is
penetrated.
Contract customer ARPU decreased by 9.6% to R517 (2006: R572) per month. The
main contributing factor to this decrease has been the high growth in data
customers as well as in the low end hybrid, Family Top Up package. The
prepaid customer ARPU decreased by 8.7% to R63 (2006: R69) per month.
Community services ARPU decreased by 49.8% to R902 (2006: R1,796) per month
mainly due to increased competition and the increased roll-out by Vodacom.
Churn
Through the continued high level of handset support and an improvement in
service to customers, Vodacom maintained a very low contract churn of 9.7%
(2006: 10.0%) in 2007.
The increase in prepaid churn experienced, for the year under review, of
37.5% (2006: 18.8%) is mainly as a result of the deletion of 3 million
customers during the period June to September 2006 when a clean-up of
inactive customers was done. Subsequent to the clean-up, prepaid churn has
stabilised around 20%, which is comparable to the 2006 ?nancial year.
Traf?c
Total traf?c on the network, excluding the impact of national and
international roaming, showed an increase of 19.4% to 20.4 billion (2006:
17.1 billion) minutes in 2007. This growth was mainly due to the 20.1% year
on year growth in the total customer base from 19.2 million to 23.0 million.
Contract minutes of use, in excess of bundled minutes, showed an 8.7%
decrease to 188 (2006: 206) minutes per customer per month, as a result of
high connections on the low end hybrid product, while prepaid minutes of use
showed a 4.1% decrease to 47 (2006: 49) minutes per customer per month.
Estimated market share
Despite strong competition, Vodacom retained its leadership in the highly
competitive South African mobile communications market with an estimated 58%
(2006: 58%) market share on March 31, 2007. The cellular industry in South
Africa grew by an estimated 20.7% since March 2006, of which Vodacom has
contributed approximately 56.2%. The market penetration of the cellular
industry is now an estimated 84% (2006: 71%) of the population.
NON-SOUTH AFRICAN OPERATIONS
Vodacom`s non-South African operations provide a world-class global system
for mobile communications ("GSM") service to 7.1 million customers. Pro?t
from these operations increased by 81.5% to R521 million.
Vodacom Tanzania achieved exceptional customer and pro?t from operations
growth. The customer base increased by 55.3% to 3.2 million (2006: 2.1
million) at March 31, 2007. The Tanzanian market remains highly competitive,
but with mobile penetration estimated at 16% of the population, it still
promises further growth potential. Vodacom Tanzania`s estimated market share
decreased to 55% (2006: 58%) at March 31, 2007.
Vodacom Congo remains the market leader with an estimated market share of
47% (2006: 48%) at March 31, 2007. The DRC has the lowest estimated mobile
penetration of all Vodacom`s operations at 9% of the population. Vodacom
Congo increased its customer base by 67.5% to 2.6 million (2006: 1.6
million) at March 31, 2007.
Vodacom Lesotho is expected to remain a small operation, but has positioned
itself well to minimise the impact of competitive activity and has
maintained its estimated 80% market share at March 31, 2007. Vodacom Lesotho
increased its customer base by 35.4% to 279 thousand (2006: 206 thousand).
Mobile penetration in Lesotho is now estimated at 17% (2006: 13%).
Vodacom Mozambique has an estimated market share of 35% (2006: 30%). Vodacom
Mozambique increased its customer base by 101.6% to 988 thousand (2006: 490
thousand) at March 31, 2007. Mobile penetration is estimated at 14% (2006:
8%).
FINANCIAL REVIEW
REVENUE
Geographical split
Rand millions % change
Year ended March 31, 2005 2006 2007 05/06 06/07
South Africa, including
holding companies 25,041 31,069 37,007 24.1 19.1
Tanzania 959 1,312 1,729 36.8 31.8
DRC 1,075 1,334 1,914 24.1 43.5
Lesotho 137 170 227 24.1 33.5
Mozambique 103 158 269 53.4 70.3
Revenue 27,315 34,043 41,146 24.6 20.9
Revenue composition
Rand millions
Year ended March 31, 2005 2006 2007
Airtime, connection and access 16,191 20,085 23,708
Data 1,340 2,038 3,342
Interconnection 5,924 6,697 7,835
Equipment sales 2,687 3,986 4,699
International airtime 887 971 1,306
Other sales and services 286 266 256
Revenue 27,315 34,043 41,146
Revenue composition
% of total % change
Year ended March 31, 2005 2006 2007 05/06 06/07
Airtime, connection
and access 59.4 58.9 57.7 24.1 18.0
Data 4.9 6.0 8.1 52.1 64.0
Interconnection 21.7 19.7 19.0 13.0 17.0
Equipment sales 9.8 11.7 11.4 48.3 17.9
International airtime 3.2 2.9 3.2 9.5 34.5
Other sales and services 1.0 0.8 0.6 (7.0) (3.8)
Revenue 100.0 100.0 100.0 24.6 20.9
Revenue increased by 20.9% for the year to March 31, 2007 mainly due to a
64.0% increase in data revenue and an increase of between 17% and 18% in
airtime revenue, interconnect revenue and equipment sales.
The increase in revenue was primarily driven by a 28.2% increase in the
customer base to 30.2 million customers, offset by declining ARPUs. Prepaid
customers represent 89.4% (2006: 89.6%) of the total customer base.
Data revenue
Geographical split
Rand millions
Year ended March 31, 2005 2006 2007
South Africa 1,246 1,886 3,113
Tanzania 74 108 146
DRC 9 25 52
Lesotho 9 16 23
Mozambique 2 3 8
Data revenue 1,340 2,038 3,342
Data revenue
Geographical split
% of total % change
Year ended March 31, 2005 2006 2007 05/06 06/07
South Africa 93.0 92.6 93.1 51.4 65.1
Tanzania 5.5 5.3 4.4 45.9 35.2
DRC 0.7 1.2 1.6 177.8 108.0
Lesotho 0.7 0.8 0.7 77.8 43.8
Mozambique 0.1 0.1 0.2 50.0 166.7
Data revenue 100.0 100.0 100.0 52.1 64.0
Airtime, connection and access
Vodacom`s airtime, connection and access revenue increased primarily due to
the increase in the number of customers, offset by declining ARPUs in all
operations.
Data
Vodacom`s data revenue increased mainly due to new data initiatives. Vodacom
South Africa transmitted 4.5 billion (2006: 3.5 billion) SMSs over its
network during the year ended March 31, 2007. The number of active data
users on the South African network as at March 31, 2007 was: MMS users 1.2
million (2006: 867 thousand); GPRS users 2.8 million (2006: 1.4 million);
3G/HSDPA users 139 thousand (2006: 38 thousand); 3G/HSDPA devices 733
thousand (2006: 180 thousand); Vodafone live! users 899 thousand (2006: 351
thousand); Unique Mobile TV users 33 thousand (2006: 13 thousand).
Data revenue now constitutes 9.4% (2006: 7.0%) of service revenue (service
revenue excludes equipment sales, starter pack sales and non-recurring
revenue). Data revenue in all countries increased substantially, con?rming
the trend of increased data spend by customers.
Interconnection
Vodacom`s interconnection revenue increased by 17.0% primarily due to the
growth in incoming mobile traf?c from other networks.
Equipment sales
In South Africa, handset sale volumes increased by 21.1% to 4.6 million
(2006: 3.8 million) units. The growth in equipment unit sales was primarily
driven by growth in customer bases, cheaper Rand prices of new handsets
coupled with added functionality of new phones. The average price per
handset sold was R1,067 compared to R1,116 in the previous ?nancial year.
International airtime
International airtime revenue of R1.3 billion, which increased by 34.5% year
on year, comprises international calls by Vodacom customers, roaming revenue
from Vodacom`s customers making and receiving calls while abroad and revenue
from international visitors roaming on Vodacom`s networks.
Other sales and services
Revenue from other sales and services includes revenue from Vodacom`s cell
captive insurance vehicle, wireless application service provider ("WASP")
revenue, site sharing rental income as well as other revenue from non-core
operations.
PROFIT FROM OPERATIONS
Geographical split
Rand millions % change
Year ended March 31, 2005 2006 2007 05/06 06/07
South Africa 6,618 8,602 10,293 30.0 19.7
Tanzania 183 263 346 43.7 31.6
DRC 50 117 277 134.0 136.8
Lesotho 25 51 75 104.0 47.1
Mozambique (454) (144) (177) 68.3 (22.9)
Holding companies 56 (23) 46 (141.1) >200
Pro?t from operations 6,478 8,866 10,860 36.9 22.5
Pro?t from operations
margin (%) 23.7 26.0 26.4 2.3 0.4
Pro?t from operations for the Group increased by 22.5% to R10.9 billion,
fuelled by buoyant consumer spending, relatively low in?ationary
environments as well as effective cost containment in all operations. A
healthy increase in traf?c also contributed favourably to pro?t margins.
Operating expenses increased by 20.3% which was slightly lower than the
revenue growth of 20.9%. This resulted in Vodacom`s pro?t from operations
margin increasing to 26.4% (2006: 26.0%).
The Mozambique loss from operations includes impairment of assets of R22.9
million (2006: reversal of R52.8 million; 2005: impairment of R268.4
million).
EBITDA
Geographical split
Rand millions % change
Year ended March 31, 2005 2006 2007 05/06 06/07
South Africa 8,995 11,053 12,963 22.9 17.3
Tanzania 345 465 584 34.8 25.6
DRC 252 373 603 48.0 61.7
Lesotho 48 67 97 39.6 44.8
Mozambique (111) (129) (69) (16.2) 46.5
Holding companies 61 (20) 49 (132.8) >200
EBITDA 9,590 11,809 14,227 23.1 20.5
EBITDA margin (%) 35.1 34.7 34.6 (0.4) (0.1)
EBITDA margin excluding
equipment sales (%) 40.1 39.9 39.9 (0.2) -
Vodacom`s EBITDA margin adjusted for the impact of low margin cellular phone
and equipment sales was in line with the previous year at 39.9%.
OPERATING EXPENSES
Rand millions % change
Year ended March 31, 2005 2006 2007 05/06 06/07
Depreciation, amortisation
and impairment 3,112 2,943 3,384 (5.4) 15.0
Payments to other
network operators 3,652 4,634 5,636 26.9 21.6
Other direct network
operating costs 10,966 13,663 16,804 24.6 23.0
Staff expenses 1,653 2,042 2,373 23.5 16.2
Marketing and advertising 767 977 1,146 27.4 17.3
Other operating expenditure 751 1,043 1,064 38.9 2.0
Other operating income (64) (125) (120) 95.3 4.0
Operating expenses 20,837 25,177 30,287 20.8 20.3
Operating expenses as a
% of revenue (%) 76.3 74.0 73.6 (2.3) (0.4)
Depreciation, amortisation and impairment
The depreciation expense is largely driven by capital expenditure on
upgrading the Group`s networks. Capital expenditure on network equipment has
increased in recent years with the implementation and expansion of 3G/HSDPA
networks.
The implementation of IAS 16: Property, Plant and Equipment, during the 2006
financial year, contributed to a lower depreciation charge for that year.
Depreciation and amortisation increased by 12.2% to R3,361.2 million for the
current financial year when compared to the increase of 5.4% to R2,995.8
million for the previous financial year. Mozambique`s asset impairment
amounted to R22.9 million (2006: reversal of R52.8 million; 2005: impairment
of R268.4 million).
Payments to other network operators
Payments to other network operators increased as a result of an increased
amount of outgoing traffic terminating on other cellular networks, rather
than on fixed-line networks. As the cost of terminating calls on other
cellular networks is materially higher than calls terminating on fixed-line
networks and as mobile substitution increases with the growing number of
total mobile users in South Africa, interconnection charges will continue
increasing, putting pressure on margins.
Other direct network operating costs
Other direct network operating costs include the cost to connect customers
onto the network as well as expenses such as cost of equipment and
accessories sold, commissions paid to the distribution channels, customer
retention expenses, regulatory and license fees, distribution expenses,
transmission rental costs as well as site and maintenance costs.
Staff expenses
Staff expenses increased primarily as a result of an increase in headcount
of 8.4% to 5,920 (2006: 5,459) employees in 2007, to support the growth in
operations as well as annual salary increases and an increase in the
provision for Vodacom`s deferred bonus schemes due to increased pro?ts.
Employee productivity has improved in all of Vodacom`s operations, as
measured by customers per employee, improving by 18.2% to 5,093 (2006:
4,308) customers per employee.
Marketing and advertising
Marketing and advertising expenses are mainly driven by advertising related
to new technology products, the introduction of mobile number portability in
South Africa and enhancing brand presence in all operations.
Other operating expenditure
The increase in other operating expenditure was primarily due to the growth
in the business. Other operating expenditure comprises of expenses such as
accommodation, information technology costs, of?ce administration,
consultant expenses, social economic investment and insurance.
Other operating income
Other operating income comprises income that Vodacom does not consider as
part of its core activities such as cost recoveries for risk management and
consultancy services and franchise fees received.
INTEREST, DIVIDENDS AND OTHER FINANCIAL INCOME AND FINANCE COSTS
Interest, dividends and other ?nancial income increased by over 118% to
R1,336.2 million of which R1,261.7 million (2006: R481.8 million) relates to
gains on foreign exchange contracts, liabilities and asset revaluations as
well as interest rate swaps.
Finance costs increased by 43.9% to R1,800.0 million of which R1,430.9
million (2006: R1,001.6 million) relates to losses on foreign exchange
contracts, liabilities and asset revaluations, interest rate swaps as well
as the Vodacom DRC put option liability revaluation of R249.3 million.
In terms of a shareholders agreement, the Group`s minority shareholder in
Vodacom Congo (RDC) s.p.r.l., Congolese Wireless Network s.p.r.l. ("CWN")
has a put option which came into effect on December 1, 2004, for a period of
?ve years thereafter. In terms of the option, CWN is entitled to put to
Vodacom International Limited such number of shares in and claims on loan
account against Vodacom Congo (RDC) s.p.r.l. as constitutes 19% of the
entire issued share capital of that company. CWN can exercise this option in
a maximum of three tranches and each tranche must consist of at least 5% of
the entire issued share capital of Vodacom Congo (RDC) s.p.r.l. The option
price will be fair market value of the related shares at the date the put
option is exercised. The put option gives rise to a ?nancial liability in
terms of IAS 32: Financial Instruments: Presentation of R249.3 million
(2006: Rnil) at March 31, 2007. In terms of IAS 39: Financial Instruments:
Recognition and Measurement, all subsequent changes in the fair value of the
?nancial liability should be recognised as income or expense within the
consolidated income statement. The increase in the value of the option had
to be expensed through the income statement as a ?nance charge. The initial
recognition of the option was at a value of Rnil due to the fact that
Vodacom Congo (RDC) s.p.r.l. was incurring losses, coupled with the
political instability in the country.
TAXATION
The taxation expense increased by 24.4% to R3.8 billion (2006: R3.1 billion)
for the year ended March 31, 2007, mainly due to a signi?cant increase in
secondary taxation on companies ("STC") paid on higher dividends as well as
higher South African normal taxation paid on higher pro?ts. Vodacom`s
effective tax rate decreased to 36.9% (2006: 37.5%) primarily due to the
utilisation of Vodacom Congo`s capital expenditure allowances. STC increased
Vodacom`s effective tax rate by 6.7% (2006: 6.9%).
GROUP SHAREHOLDER DISTRIBUTIONS
Dividends declared for the 2007 ?nancial year totalled R5.4 billion (2006:
R4.5 billion), an increase of 20.0%. The ?nal dividend of R2.9 billion was
paid on April 4, 2007.
CAPITAL EXPENDITURE
Capital expenditure additions
Geographical split
Rand millions
Year ended March 31, 2005 2006 2007
South Africa 2,777 4,384 4,993
Tanzania 234 318 957
DRC 335 273 506
Lesotho 10 26 25
Mozambique 115 121 85
Holding companies 23 16 182
Capital expenditure for the year 3,494 5,138 6,748
Capital expenditure additions (including
software) as a % of revenue (%) 12.8 15.1 16.4
CAPITAL EXPENDITURE
Capital expenditure additions
Geographical split
% of total % change
Year ended March 31, 2005 2006 2007 05/06 06/07
South Africa 79.5 85.3 73.9 57.9 13.9
Tanzania 6.7 6.2 14.2 35.9 >200
DRC 9.6 5.3 7.5 (18.5) 85.3
Lesotho 0.3 0.5 0.4 160.0 (3.8)
Mozambique 3.3 2.4 1.3 5.2 (29.8)
Holding companies 0.6 0.3 2.7 (30.4) >200
Capital expenditure
for the year 100.0 100.0 100.0 47.1 31.3
Capital expenditure
Additions (including
software) as a % of
revenue (%) - - - 2.3 1.3
Cumulative capital expenditure
Geographical split
2006 2007
Year ended March 31, R billions Foreign R billions Foreign
South Africa (R billions) 24.1 - 27.3 -
Tanzania (TSH billions) 1.5 297.6 2.7 456.7
DRC (US$ millions) 2.0 323.1 2.9 391.3
Lesotho (Maloti millions) 0.2 225.0 0.2 184.1
Mozambique (MT billions) 0.6 2.6 0.8 3.0
Holding companies
(R billions) 0.1 - 0.2 -
Cumulative capital
Expenditure 28.5 - 34.1 -
The Group invested R6.7 billion (2006: R5.1 billion) in property, plant and
equipment (R6.1 billion) and computer software (R0.6 billion) for 2007, of
which R5.2 billion (2006: R4.2 billion) was for cellular network
infrastructure (excluding software).
Property, plant and equipment (including software), sold and scrapped,
amounted to R1,956.9 million (2006: R689.7 million).
Foreign currency translation differences increased cumulative capital
expenditure by R793.0 million (2006: decrease of R418.0 million).
It is Vodacom`s policy to hedge all foreign denominated commitments of South
African operations. However, Vodacom does not qualify for hedge accounting
in terms of IAS 39 and therefore, all capital expenditure in South Africa is
recorded at the exchange rate ruling at the date of acceptance of the
equipment. Capital expenditure of Vodacom`s non-South African operations is
translated at the average exchange rate of the Rand against the operation`s
reporting currency for the period, while closing capital expenditure is
translated at the closing exchange rate of the Rand against the reporting
currency. For this reason, Vodacom`s capital expenditure in any given year
cannot be properly evaluated without taking the exchange rate movements
against the Rand into account, which are shown under the section "Financial
instruments and risk management".
FINANCIAL STRUCTURE AND FUNDING
Summary of net debt and maturity profile
Rand millions
Repayment of 2007 debt
Year ended
March 31, 2007 2008 2009 2010 2011 2012 2013
onwards
Finance leases
South Africa 729 114 194 99 162 83 77
Funding loans
Vodacom Tanzania
Shareholder and
project ?nance
loans 212 95 117 - - - -
Vodacom Congo
preference share
liability 270 270 - - - - -
Vodacom International
term loan 1,312 - - 1,312 - - -
Other 33 23 1 - - - 9
Debt excluding
bank
overdrafts 2,556 502 312 1,411 162 83 86
Bank
overdrafts 879 879 - - - - -
Gross debt 3,435 1,381 312 1,411 162 83 86
Bank and cash
balances (771) (771) - - - - -
Net debt 2,664 610 312 1,411 162 83 86
Vodacom`s net debt position increased to R2.7 billion (2006: R709 million)
as at March 31, 2007.
The Group`s net debt to EBITDA ratio was 18.7% (2006: 6.0%) while Vodacom`s
net debt to equity ratio increased to 27.6% (2006: 8.2%). However, the ?nal
dividend of R2.9 billion payable to the Group`s shareholders should be taken
into account when evaluating the net debt to equity ratio, due to these
dividends being paid very soon after year-end. In addition, in terms of
covenant calculations, certain intangible assets are excluded from the
calculation. If the shareholders for dividends and the secondary taxation on
companies ("STC") thereon are included in, and certain intangible assets as
well as minority interest are excluded from the calculation, the adjusted
net debt to equity ratio at March 31, 2007, increased to 72.8% (2006:
50.5%).
Funding sources
Vodacom`s ongoing objective is to fund all its non-South African operations
by means of project ?nance, structured such that there is no recourse to our
South African operations. Strong South African cash ?ows would therefore be
utilised principally to pay dividends and make new growth enhancing
investments. The Group utilises its own funds and supported funding
structures, subject to South African Reserve Bank approval to fund offshore
investments in the initial stages of the investment, until the project is
able to support project funding. Non-recourse funding for non-South African
operations is not always suitable to an explosive high customer growth
environment due to the capital expenditure requirements thereof.
While Vodacom has project funding in place for its Tanzania investment at
this stage, Vodacom Congo and Vodacom Mozambique are still substantially
dependent on funding and guarantees from South Africa. These operations are
funded by a mix of market priced direct loans as well as security to
facilitate their own credit lines.
In South Africa, debt consisted primarily of ?nance lease liabilities and
short term money market borrowings at variable interest rates.
Financial instruments and risk management
Subject to central bank regulations in the various countries as well as
local market condition restrictions, Vodacom actively manages foreign
currency risk, interest rate risk, credit risk and liquidity risk on an
ongoing basis.
Foreign exchange rates
Rand exchange rate % change
Year ended March 31, 2005 2006 2007 05/06 06/07
US Dollar ("US$")
Average 6.24 6.40 7.05 2.6 10.2
Closing 6.27 6.19 7.29 (1.3) 17.8
Tanzanian Shilling ("TSH")
Average 175.01 180.72 182.02 3.3 0.7
Closing 176.68 198.03 170.83 12.1 (13.7)
Mozambique Metical ("MT")
Average 3.42 3.89 3.73 13.7 (4.1)
Closing 3.12 4.37 3.63 40.1 (16.9)
CASH FLOW
Vodacom had a positive free cash ?ow before shareholder distributions and
?nancing activities of R3.7 billion (2006: R3.2 billion), an increase of
13.8% when compared to the previous year. The cash generated from operations
of R13.9 billion had a positive variance of R2.8 billion (2006: positive
variance of R1.1 billion) compared to the previous year.
CONCLUSION
Vodacom realises that people make this industry what it is. I would like to
thank all of Vodacom`s employees for their contribution in making this
company the successful market leader it is. Our customers and business
partners also deserve a word of thanks for their continued support and
commitment.
Vodacom remains committed to make mobile services and products as affordable
as possible so that even more people can share in the magic we call Vodacom.
Oyama Mabandla
Non-executive Chairman
Alan Knott-Craig
Chief Executive Officer
SEGMENT KEY OPERATIONAL INDICATORS
SOUTH AFRICA
Year ended March 31, % change
2005 2006 2007 05/06 06/07
Customers
(thousands)1 12,838 19,162 23,004 49.3 20.1
Contract 1,872 2,362 3,013 26.2 27.6
Prepaid 10,941 16,770 19,896 53.3 18.6
Community services 25 30 95 20.0 >200
Gross connections
(thousands)2 6,180 9,140 10,859 47.9 18.8
Contract 434 506 666 16.6 31.6
Prepaid 5,742 8,618 10,124 50.1 17.5
Community services 4 16 69 >200 >200
Inactives
(3 months - %) 7.9 8.7 10.7 0.8pts 2.0pts
Contract 1.5 2.4 3.1 0.9pts 0.7pts
Prepaid 9.0 9.6 11.8 0.6pts 2.2pts
Total churn (%)3 27.1 17.7 33.8 (9.4pts) 16.1pts
Contract 9.1 10.0 9.7 0.9pts (0.3pts)
Prepaid 30.3 18.8 37.5 (11.5pts) 18.7pts
Traf?c (millions of
minutes)4 14,218 17,066 20,383 20.0 19.4
Outgoing 9,231 11,354 13,638 23.0 20.1
Incoming 4,987 5,712 6,745 14.5 18.1
ARPU (Rand per
month)5 163 139 125 (14.7) (10.1)
Contract 624 572 517 (8.3) (9.6)
Prepaid 78 69 63 (11.5) (8.7)
Community services 2,321 1,796 902 (22.6) (49.8)
Minutes of use
per month6 84 74 69 (11.9) (6.8)
Contract 226 206 188 (8.8) (8.7)
Prepaid 52 49 47 (5.8) (4.1)
Community services 3,185 2,327 1,151 (26.9) (50.5)
Gross capex spend
(Rand millions)7 2,777 4,384 4,993 57.9 13.9
Capex as a %
of revenue (%) 11.1 14.1 13.5 3.0pts (0.6pts)
Cumulative capex
(Rand millions)7 20,358 24,095 27,310 18.4 13.3
Capex per
customer (Rand) 1,515 1,257 1,187 (17.0) (5.6)
Number of
employees8 3,954 4,148 4,388 4.9 5.8
Customers per
employee 3,247 4,619 5,242 42.3 13.5
Estimated mobile
penetration (%)9 49 71 84 22pts 13pts
Estimated mobile
market share (%)9 56 58 58 2pts -
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. The 2005 and 2006 gross connections have been restated due to a change in
the Group`s reporting policy. Conversions between categories have now been
excluded from gross connections. The following are the connections including
conversions for 2005 and 2006 respectively, based on the old policy:
Contract: 610; 702, Prepaid: 5,566; 8,422.
3. Churn is calculated by dividing the average monthly number of
disconnections during the period by the average monthly total reported
customer base during the period.
4. Traf?c comprises total traf?c registered on Vodacom`s network, including
bundled minutes, outgoing international roaming calls and calls to free
services, but excluding national roaming and incoming international roaming
calls.
5. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenues from equipment sales, other sales and
services and revenues from national and international users roaming on
Vodacom`s networks.
6. Minutes of use per month is calculated by dividing the average monthly
minutes during the period by the average monthly total reported customer
base during the period. Minutes of use exclude calls to free services,
bundled minutes and data minutes.
7. Including computer software.
8. Temporary employees previously included in 2005 and 2006 are now being
excluded from the number of employees.
9. Estimated mobile penetration and market share is calculated based on
Vodacom`s total reported customers and the estimated total reported
customers of MTN and Cell C.
SEGMENT KEY OPERATIONAL INDICATORS (CONTINUED)
VODACOM TANZANIA
Year ended March 31, % change
2005 2006 2007 05/06 06/07
Customers
(thousands)1 1,201 2,091 3,247 74,1 55,3
Contract 5 7 14 40.0 100.0
Prepaid 1,193 2,081 3,223 74.4 54.9
Community services 3 3 10 - >200
Gross connections
(thousands) 746 1,353 2,092 81.4 54.6
Churn (%) 29.6 28.5 35.6 (1.1pts) 7.1pts
ARPU (Rand)2 81 67 52 (17.3) (22.4)
Gross capex spend
(Rand millions) 234 318 957 35.9 >200
Capex as a %
of revenue (%) 24.4 24.3 55.3 (0.1pts) 31.0pts
Cumulative capex
(Rand millions) 1,359 1,503 2,674 10.6 77.9
Number of employees3 340 438 527 28.8 20.3
Customers per employee 3,532 4,774 6,161 35.2 29.1
Estimated mobile
penetration (%)4 5 9 16 4pts 7pts
Estimated mobile
market share (%)4 59 58 55 (1pt) (3pts)
VODACOM CONGO
Year ended March 31, % change
2005 2006 2007 05/06 06/07
Customers
(thousands)1 1,032 1,571 2,632 52,2 67,5
Contract 10 14 17 40.0 21.4
Prepaid 1,010 1,538 2,587 52.3 68.2
Community services 12 19 28 58.3 47.4
Gross connections
(thousands) 565 892 1,688 57.9 89.2
Churn (%) 23.1 28.1 30.4 5.0pts 2.3pts
ARPU (Rand)2 98 86 77 (12.2) (10.5)
Gross capex spend
(Rand millions) 335 273 506 (18.5) 85.3
Capex as a %
of revenue (%) 31.2 20.5 26.4 (10.7pts) 5.9pts
Cumulative capex
(Rand millions) 1,759 2,000 2,852 13.7 42.6
Number of employees3 527 479 627 (9.1) 30.9
Customers per employee 1,958 3,279 4,198 67.5 28.0
Estimated mobile
penetration (%)4 4 6 9 2pts 3pts
Estimated mobile
market share (%)4 47 48 47 1pt (1pt)
SEGMENT KEY OPERATIONAL INDICATORS
VODACOM LESOTHO
Year ended March 31, % change
2005 2006 2007 05/06 06/07
Customers
(thousands)1 147 206 279 40,1 35,4
Contract 4 3 3 (25.0) -
Prepaid 142 200 272 40.8 36.0
Community services 1 3 4 200.0 33.3
Gross connections
(thousands) 70 98 119 40.0 21.4
Churn (%) 17.3 22.3 19.0 5.0pts (3.3pts)
ARPU (Rand)2 92 78 75 (15.2) (3.8)
Gross capex spend
(Rand millions) 10 26 25 160.0 (3.8)
Capex as a %
of revenue (%) 7.3 15.2 11.0 7.9pts (4.2pts)
Cumulative capex
(Rand millions) 211 225 184 6.6 (18.2)
Number of employees3 63 67 60 6.3 (10.4)
Customers per employee 2,333 3,071 4,644 31.6 51.2
Estimated mobile
penetration (%)4 7 13 17 6pts 4pts
Estimated mobile
market share (%)4 80 80 80 - -
VODACOM MOZAMBIQUE
Year ended March 31, % change
2005 2006 2007 05/06 06/07
Customers
(thousands)1 265 490 988 84,9 101,6
Contract 4 8 15 100.0 87.5
Prepaid 261 482 973 84.7 101.9
Gross connections
(thousands) 225 342 797 52.0 133.0
Churn (%) 11.3 32.2 41.7 20.9pts 9.5pts
ARPU (Rand)2 52 36 28 (30.8) (22.2)
Gross capex spend
(Rand millions) 115 121 85 5.2 (29.8)
Capex as a %
of revenue (%) 109.7 76.8 31.7 (32.9pts) (45.1pts)
Cumulative capex
(Rand millions) 696 605 816 (13.1) 34.9
Number of employees3 109 170 129 56.0 (24.1)
Customers per employee 2,431 2,885 7,659 18.7 165.5
Estimated mobile
penetration (%)4 4 8 14 4pts 6pts
Estimated mobile
market share (%)4 33 30 35 (3pts) 5pts
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network which have not been disconnected, including inactive
customers, as of end of the period indicated.
2. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenue from equipment sales, other sales and services
and revenue from national and international users roaming on Vodacom`s
networks.
3. Headcount includes secondees. Temporary employees previously included in
2005 and 2006 are now being excluded from the number of employees.
4. Estimated mobile penetration and market share is calculated based on
Vodacom estimates.
CONSOLIDATED INCOME STATEMENTS
for the three years ended March 31, 2007
2005 2006 2007
Restated Restated
Rm Rm Rm
Revenue 27,315.3 34,042.5 41,146.4
Other operating income 63.8 125.1 119.8
Direct network operating
cost (14,617.8) (18,297.2) (22,439.8)
Depreciation (2,413.6) (2,651.6) (2,901.8)
Staff expenses (1,652.9) (2,042.1) (2,372.5)
Marketing and advertising
expenses (767.3) (976.9) (1,146.4)
Other operating expenses (751.3) (1,042.7) (1,063.6)
Amortisation of intangible
assets (429.6) (344.2) (459.4)
Impairment of assets (268.4) 52.8 (22.9)
Profit from operations 6,478.2 8,865.7 10,859.8
Interest, dividends and
other financial income 622.9 611.7 1,336.2
Finance costs (599.6) (1,250.9) (1,800.0)
Profit before taxation 6,501.5 8,226.5 10,396.0
Taxation (2,613.3) (3,083.7) (3,836.0)
Net profit 3,888.2 5,142.8 6,560.0
Attributable to:
Equity shareholders 3,857.4 5,026.1 6,342.4
Minority interests 30.8 116.7 217.6
2005 2006 2007
R R R
Basic and diluted earnings
per share 385,740 502,610 634,240
Dividend per share 340,000 450,000 540,000
CONSOLIDATED BALANCE SHEETS
as at March 31, 2007
2005 2006 2007
Restated Restated
Rm Rm Rm
ASSETS
Non-current assets 13,888.4 16,079.2 20,844.3
Property, plant and
equipment 11,576.9 13,386.6 17,073.2
Intangible assets 1,644.3 1,954.9 2,700.3
Financial assets 93.3 92.1 209.5
Deferred taxation 308.1 297.6 386.1
Deferred cost 236.9 311.2 396.4
Lease assets 28.9 36.8 78.8
Current asset 8,706.4 8,688.6 7,625.9
Deferred cost 428.3 451.8 574.8
Short-term financial assets 187.1 149.3 207.5
Inventory 479.5 454.3 364.3
Trade and other receivables 3,621.4 4,487.1 5,707.9
Cash and cash equivalents 3,990.1 3,146.1 771.4
Total assets 22,594.8 24,767.8 28,470.2
EQUITY AND LIABILITIES
Equity
Ordinary share capital * * *
Retained earnings 8,059.1 8,583.0 9,523.2
Non-distributable reserves (299.9) (194.0) (97.4)
Equity attributable to equity
holders of the parent 7,759.2 8,389.0 9,425.8
Minority interests 128.7 283.3 221.2
Total equity 7,887.9 8,672.3 9,647.0
Non-current liabilities 3,233.1 2,236.6 3,812.1
Interest bearing debt 2,213.5 819.2 2,051.4
Non-interest bearing debt - - 3.0
Deferred taxation 472.1 602.3 757.3
Deferred revenue 240.7 320.3 412.3
Provisions 184.4 372.3 377.5
Other non-current liabilities 122.4 122.5 210.6
Current liabilities 11,473.8 13,858.9 15,011.1
Trade and other payables 4,830.8 5,104.7 6,874.4
Deferred revenue 1,411.4 1,604.5 1,904.8
Taxation payable 632.6 630.2 1,112.7
Non-interest bearing debt 4.3 4.3 -
Short-term interest
bearing debt 381.6 1,645.5 501.0
Short-term provisions 595.0 623.0 741.8
Dividends payable 1,800.0 2,800.0 2,990.0
Derivative financial
liabilities 1.0 60.9 7.2
Bank borrowings 1,817.1 1,385.8 879.2
Total equity and
liabilities 22,594.8 24,767.8 28,470.2
*Share capital R100
CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
for the three years ended March 31, 2007
Attributable to equity shareholders
Share Retained Non-
Capital earnings distributable
reserves
Rm Rm Rm
Balance at March 31, 2004 * 7,836.1 (324.9)
Net profit for the year - 3,857.4 -
Dividends declared - (3,400.0) -
Contingency reserve - (1.0) 1.0
Acquired reserves from
the minorities of Vodacom
Congo (RDC) s.p.r.l. - (233.4) 82.1
Business combinations and
other acquisitions - - -
Revaluation of available-
for-sale investments - - 0.2
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve - - (58.3)
Balance at March 31, 2005
- restated * 8,059.1 (299.9)
Net profit for the year - 5,026.1 -
Dividends declared - (4,500.0) -
Contingency reserve - (2.2) 2.2
Business combinations and
other acquisitions - - -
Minority shares of VM,
S.A.R.L. - - -
Revaluation of available-
for-sale investments - - (0.2)
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve - - 103.9
Balance at March 31, 2006
- restated * 8,583.0 (194.0)
Net profit for the year - 6,342.4 -
Dividends declared - (5,400.0) -
Contingency reserve - (2.2) 2.2
Business combinations and
other acquisitions - - -
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve - - 94.4
Balance at March 31, 2007 * 9,523.2 (97.4)
*Share capital R100
CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY (CONTINUED)
for the three years ended March 31, 2007
Total Minority Total
Interests equity
Rm Rm Rm
Balance at March 31, 2004 7,511.2 93.0 7,604.2
Net profit for the year 3,857.4 30.8 3,888.2
Dividends declared (3,400.0) (3.8) (3,403.8)
Contingency reserve - - -
Acquired reserves from
the minorities of Vodacom
Congo (RDC) s.p.r.l. (151.3) - (151.3)
Business combinations and
other acquisitions - 10.1 10.1
Revaluation of available-
for-sale investments 0.2 0.1 0.3
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve (58.3) (1.5) (59.8)
Balance at March 31, 2005
- restated 7,759.2 128.7 7,887.9
Net profit for the year 5,026.1 116.7 5,142.8
Dividends declared (4,500.0) (0.9) (4,500.9)
Contingency reserve - - -
Business combinations and
other acquisitions - 46.5 46.5
Minority shares of VM,
S.A.R.L. - 8.0 8.0
Revaluation of available-
for-sale investments (0.2) (0.1) (0.3)
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve 103.9 (15.6) 88.3
Balance at March 31, 2006
- restated 8,389.0 283.3 8,672,3
Net profit for the year 6,342.4 217.6 6,560.0
Dividends declared (5,400.0) (170.8) (5,570.8)
Contingency reserve - - -
Business combinations and
other acquisitions - (136.4) (136.4)
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve 94.4 27.5 121.9
Balance at March 31, 2007 9,425.8 221.2 9,647.0
CONSOLIDATED CASH FLOW STATEMENTS
for the three years ended March 31, 2007
2005 2006 2007
Restated Restated
Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 27,078.8 33,132.7 40,380.0
Cash paid to suppliers and
employees (17,066.8) (22,042.4) (26,513.9)
Cash generated from operations 10,012.0 11,090.3 13,866.1
Finance costs paid (259.2) (446.4) (1,358.8)
Interest, dividends and other
financial income received 246.8 338.6 1,035.1
Taxation paid (2,744.4) (2,980.3) (3,303.3)
Dividends paid -
equity shareholders (3,100.0) (3,500.0) (5,300.0)
Dividends paid -
minority shareholders (5.2) (0.9) (80.8)
Net cash flows from
operating activities 4,150.0 4,501.3 4,858.3
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment and intangible assets (3,253.4) (4,788.4) (5,955.3)
Proceeds on disposal of
property, plant and equipment
and intangible assets 20.1 31.2 98.3
Business combinations and
acquisitions (289.8) (0.1) (591.2)
Acquired cash from Vodacom
Congo (RDC) s.p.r.l. 12.9 - -
Other investing activities 136.0 (33.5) (135.7)
Net cash flows utilized in
investing activities (3,374.2) (4,790.8) (6,583.9)
CASH FLOW FROM FINANCING ACTIVITIES
Non-interest bearing debt
Incurred - - 3.0
Interest bearing debt incurred 1,165.3 32.3 6.0
Interest bearing debt repaid (1,332.3) (89.7) (141.3)
Finance lease capital repaid (28.1) (50.2) (67.7)
Net cash flows utilized in
financing activities (195.1) (107.6) (200.0)
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS 580.7 (397.1) (1,925.6)
Cash and cash equivalents at
the beginning of the year 1,597.7 2,173.0 1,760.3
Effect of foreign exchange
rate changes (5.4) (15.6) 57.5
(BANK BORROWINGS)/CASH AND CASH
EQUIVALENTS AT THE END OF THE YEAR 2,173.0 1,760.3 (107.8)
Highlights 2007
Total customers increased by 28.2% to 30.2 million
Customers increased by 20.1% to 23.0 million in South Africa
Customers increased by 55.3% to 3.2 million in Tanzania
Customers increased by 67.5% to 2.6 million in the Democratic
Republic of Congo
Customers increased by 35.4% to 279 thousand in Lesotho
Customers increased by 101.6% to 988 thousand in Mozambique
Revenue increased by 20.9% to R41.1 billion
Profit from operations increased by 22.5% to R10.9 billion
EBITDA increased by 20.5% to R14.2 billion
Net profit after taxation increased by 27.6% to R6.6 billion
Cash generated from operations increased by 25.0% to R13.9 billion
Dividends declared to Group shareholders increased by 20.0% to R5.4 billion
DISCLAIMER
This presentation has been prepared and published by Vodacom Group
(Proprietary) Limited.
Vodacom Group (Proprietary) Limited is a private company and as such is not
required by the Companies Act 61 of 1973, as amended, to publish its
results.
Vodacom Group (Proprietary) Limited makes no guarantee, assurance,
representation and/or warranty as to the accuracy of the information
contained in this presentation and will not be held liable for any reliance
placed on the information contained in this presentation.
The information contained in this presentation is subject to change without
notice and may be incomplete or condensed. In addition, this presentation
may not contain all material information pertaining to Vodacom Group
(Proprietary) Limited and its subsidiaries.
Without in any way derogating from the generality of the foregoing, it
should be noted that:
Many of the statements included in this presentation are forward-looking
statements that involve risks and/or uncertainties and caution must be
exercised in placing any reliance on these statements. Moreover, Vodacom
Group (Proprietary) Limited will not necessarily update any of these
statements after the date of this presentation either to conform them to
actual results or to changes in its expectations.
Insofar as the shareholders Vodacom Group (Proprietary) Limited are
listed and offer their shares publicly for sale on recognized stock
exchanges locally and/or internationally, potential investors in the shares
of Vodacom Group (Proprietary) Limited`s shareholders are cautioned not to
place undue reliance on this presentation.
Date: 13/06/2007 07:07:01 Produced by the JSE SENS Department.
