| Mon 13 Nov 2006, 7:15 | | Telkom SA Limited - Vodacom interim results |
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TKG
TKG
Telkom SA Limited - Vodacom interim results
Telkom SA Limited
(Registration Number 1991/005476/06)
ISIN ZAE000044897
JSE and NYSE Share Code TKG
("Telkom")
Vodacom interim results
Vodacom Group (Proprietary) Limited group interim results for the six months
ended September 30, 2006
Highlights
for the six months ended September 30, 2005 and 2006
Total customers increased by 34.7% to 25.8 million
* Customers increased by 28.1% in South Africa to 20.2 million
* Customers increased by 61.5% in Tanzania to 2.6 million
* Customers increased by 64.0% in Vodacom Congo (DRC) to 2.0 million
* Customers increased by 39.2% in Lesotho to 238 thousand
* Customers increased by 106.5% in Mozambique to 694 thousand
Revenue increased by 20.3% to R19.5 billion
Profit from operations increased by 17.5% to R5.0 billion
EBITDA increased by 18.2% to R6.6 billion
Net profit after taxation increased by 30.4% to R3.1 billion
Cash generated from operations increased by 10.8% to R5.5 billion
Interim dividend increased by 47.1% to R2.5 billion
Commentary
Vodacom Group (Proprietary) Limited, South Africa"s market leader in the
provision of cellular services announces interim results for the six months
ended September 30, 2006.
SOUTH AFRICA
Customers
The South African customer base increased by 28.1% to 20.2 million (September
30, 2005: 15.8 million). The increase was driven by growth in both the prepaid
and contract market. The number of prepaid customers increased by 27.7% to 17.4
million, while the number of contract customers increased by 27.9% to 2.7
million. The strong growth in total customers was a direct result of the
remarkable number of gross connections achieved of 5.3 million (September 30,
2005: 4.2 million).
ARPU
During the period under review, ARPU decreased by 15.6% to R124 (September 30,
2005: R147) per month. The continued dilution of ARPU is caused by the higher
proportion of lower ARPU connections as the lower end of the market is
penetrated. The prepaid customer ARPU decreased by 14.1% to R61 (September 30,
2005: R71) per month. Contract customer ARPU has decreased by 10.2% to R528
(September 30, 2005: R588) 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.
Churn
Contract churn is still low at 11.0%, although higher than the 9.3% contract
churn for the six months ended September 30, 2005.
The prepaid churn of 47.7% (September 30, 2005: 18.7%) is high due to the change
in the business rule regarding inactive customers (SIMs). Subsequent to a
decision made by Vodacom South Africa on June 15, 2006 to change the definition
of its active customer numbers to exclude calls forwarded to voicemail from the
definition of a revenue generating activity, Vodacom South Africa has reverted
to its original business rule of including a call forwarded to voice mail as
revenue generating activity as from September 1, 2006.
Whilst some 2.4 million SIM cards have already been disconnected in terms of the
revision to the business rule on June 15, 2006, any other SIM cards which are
only generating revenue from call forward activities will in future be
disconnected in terms of the normal disconnection rules after 215 days of
inactivity.
Traffic
Total traffic on the network, excluding the impact of national and international
roaming traffic, has shown an increase of 20.9% to 9.7 billion (September 30,
2005: 8.0 billion) minutes for the six months ended September 30, 2006. The
growth was mainly due to the 28.1% year on year growth in the customer base to
20.2 million. Also evident was continued fixed for mobile call substitution,
with mobile to mobile traffic increasing by 26.6% while mobile/fixed increased
by only 1.3%.
Operational
The South African business was rewarded with a number of top awards during the
six months ended September 30, 2006. In the recent Markinor Brand Survey,
Vodacom was awarded SA"s second favourite overall brand and retained its number
one position as South Africa"s favourite advertiser. In the Marketing Excellence
Awards 2006, Vodacom was awarded as the Leading Brand Campaign 2006.
Although South Africa is experiencing a lot of regulatory challenges, the
business is still growing and will continue to focus on customer growth and
satisfaction, as well as delivering new products and services to its customers.
Over the past six months the most noteworthy of these were a number of new Top
Up packages, Bonus Voucher, Vodafone Simply, Vodafone Passport, Share Talk 1500,
the month-to-month contract option and reverse billed SMS for the WASPs.
Regulatory
Broadcasting licence
Vodacom applied for a DVB-H test licence, which was awarded on May 16, 2006 in
542.3 MHz.
Electronic Communications Act
The Electronic Communications Act was promulgated on July 19, 2006 and replaces
the current Telecommunications Act. Vodacom South Africa is required to convert
its current licence into the different licensing categories provided under the
new Act allowing them to enjoy the right to carry all international traffic.
Customer registration
The Regulation of Interception of Communications and Provision of Communications
related Information Act was proclaimed in the Government Gazette and has been
made effective September 30, 2005 with the exception of the provision dealing
with customer registration. Customer registration will come into effect once the
legislative amendments allowing for electronic registration process are
finalised. This is anticipated to be finalised during 2007.
Mobile number portability
Mobile number portability became commercially available on November 10, 2006. In
terms of the implementation plan, all systems were ready by October 27, 2006 to
allow for a 10-day production trial period before the launch.
Market share
Despite strong competition, Vodacom South Africa has retained its leadership in
the highly competitive South African mobile communications market with an
estimated 59% (September 30, 2005: 57%) market share on September 30, 2006. The
market penetration of the cellular industry in South Africa is now an estimated
72.2% of the population.
OTHER AFRICAN OPERATIONS
Vodacom"s other African operations, which provide a world-class Global System
for Mobile communications (GSM) service to millions of customers, are all faced
with continued challenges such as competitiveness of other operators as well as
rigorous regulatory and political changes. All these operations showed excellent
growth in customers and were profitable in terms of profit from operations for
the six months ended September 30, 2006 with the exception of Vodacom
Mozambique.
Vodacom Tanzania increased its customer base by 61.5% to 2.6 million (September
30, 2005: 1.6 million) at September 30, 2006. The Tanzanian market remains
highly competitive, but with mobile penetration estimated at 12.6% of the
population, it still promises further growth potential. Vodacom Tanzania"s
market share decreased to 55% (September 30, 2005: 58%) at September 30, 2006.
Vodacom Democratic Republic of Congo (DRC) remains the market leader with an
estimated market share of 49% (September 30, 2005: 49%) at September 30, 2006.
The DRC has the lowest estimated mobile penetration of all Vodacom"s operations
at 6.6% of the population at September 30, 2006. Vodacom Congo increased its
customer base by 64.0% to 2.0 million (September 30, 2005: 1.2 million) at
September 30, 2006.
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 September 30, 2006. Vodacom Lesotho increased
its customer base by 39.2% to 238 thousand (September 30, 2005: 171 thousand) at
September 30, 2006. Mobile penetration in Lesotho is now estimated at 14.7%.
Vodacom Mozambique has managed to increase its estimated market share
significantly to 33% (September 30, 2005: 26%) despite strong competition from
the established competitor mCel, by offering competitive coverage through an
aggressive coverage roll-out programme and innovative products. Vodacom
Mozambique increased its customer base by 106.5% to 694 thousand (September 30,
2005: 336 thousand) at September 30, 2006. Mobile penetration is estimated at
10.7% at September 30, 2006.
The financial results of Vodacom"s operations are analysed in more detail in the
segmental commentary of this report.
INVESTMENT ACTIVITIES
Vodacom entered into the following acquisition transactions during the period
under review:
On August 30, 2006, the Group increased its interest in the equity of Smartphone
SP (Proprietary) Limited, and its subsidiaries from 51% to 70%.
Effective September 13, 2006 Vodacom Service Provider Company (Proprietary)
Limited acquired the entire contract customer base of approximately 160 thousand
from Smartcom (Proprietary) Limited.
An offer to increase the Group"s shareholding in Cointel VAS (Proprietary)
Limited from 51% to 70% was made and accepted. The effective date of the
transaction was October 4, 2006.
The total consideration for the above transactions will amount to approximately
R543 million and it will be paid during the quarter ended December 2006.
FINANCIAL REVIEW
REVENUE
Geographical split
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
South Africa,
including
holding companies 12,057 14,764 17,580 22.5 19.1
Tanzania 472 611 775 29.4 26.8
DRC 594 649 898 9.3 38.4
Lesotho 65 77 105 18.5 36.4
Mozambique 43 74 108 72.1 45.9
Revenue 13,231 16,175 19,466 22.3 20.3
The increase in the revenue was primarily driven by the 34.7% increase in the
Group customer base. Group ARPU decreased by 17.2% to R111 (September 30, 2005:
R134) per month mainly due to the majority of the growth in the customer base
being achieved in prepaid customers and the lower end of the contract market.
Vodacom"s other African operations contributed 9.7% (September 30, 2005: 8.7%)
to total revenue.
Revenue composition
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Airtime,
connection
and access 7,823 9,581 11,313 22.5 18.1
Data revenue 586 893 1,443 52.4 61.6
Interconnection 2,940 3,186 3,723 8.4 16.9
Equipment sales 1,318 1,910 2,312 44.9 21.0
International
airtime 436 485 555 11.2 14.4
Other sales and
services 128 120 120 (6.3) -
Revenue 13,231 16,175 19,466 22.3 20.3
Airtime, connection and access revenue increased primarily due to the increase
in the number of customers, offset by declining ARPUs in all operations.
Data revenue - geographical split
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
South Africa 542 821 1,347 51.5 64.1
Tanzania 35 50 65 42.9 30.0
DRC 4 13 19 >200.0 46.2
Lesotho 4 7 10 75.0 42.9
Mozambique 1 2 2 100.0 -
Data revenue 586 893 1,443 52.4 61.6
Data revenue increased mainly due to the popularity of SMS and data initiatives
such as 3G, HSDPA, BlackBerry, Mobile TV, Vodafone live! as well as other data
products. Vodacom South Africa transmitted 2.2 billion (September 30, 2005: 1.5
billion) SMS messages over its network during the six months ended September 30,
2006. The number of active data users on the South African network as at
September 30, 2006 was: MMS users 1,036,964 (September 30, 2005: 533,054); total
data users 2,133,336 (September 30, 2005: 969,889); 3G and HSDPA active Vodafone
Mobile Connect Cards 87,674 (September 30, 2005: 18 662), Vodafone live! users
686,967 (September 30, 2005: 102,404) and Unique Mobile TV users 23,144.
The contribution to data revenue from other African operations decreased from
8.1% to 6.7% for the six months ended September 30, 2006.
Interconnection revenue increased primarily due to the growth in off-net
incoming mobile traffic.
The growth in equipment sales was primarily due to the growth of the customer
base, cheaper handsets coupled with added functionality of new phones based on
new technologies. South African handset sale volumes increased by 22.2% to 2.2
million units.
International airtime comprises international calls by Vodacom customers,
roaming revenue from Vodacom"s customers making and receiving calls while abroad
and revenue from international customers roaming on Vodacom"s networks.
Other sales and services include revenue from Vodacom"s cell captive insurance
scheme, site sharing rental as well as other revenue from non-core operations.
PROFIT FROM OPERATIONS
Geographical split
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
South Africa 2,754 4,060 4,745 47.4 16.9
Tanzania 72 115 134 59.7 16.5
DRC 7 47 133 >200.0 183.0
Lesotho 9 26 34 188.9 30.8
Mozambique (341) (25) (138) 92.7 (>200.0)
Holding companies 33 2 57 (93.9) >200.0
Profit from
operations 2,534 4,225 4,965 66.7 17.5
Profit from
operations margin 19.2% 26.1% 25.5%
Most profit from operations margins of subsidiaries reduced slightly for the six
months ended September 30, 2006: South Africa down by 0.5% points to 27.0%,
Tanzania down by 1.5% points to 17.3%, DRC up by 7.6% points to 14.8%, Lesotho
down by 1.4% points to 32.4%, while Mozambique is not yet profitable.
Profit from operations and the Mozambique results, were negatively affected by
the R38.2 million impairment of the Mozambique assets compared to the R68.4
million reversal of the prior year.
EBITDA
Geographical split
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
South Africa 3,940 5,214 6,009 32.3 15.2
Tanzania 152 206 244 35.5 18.4
DRC 110 171 276 55.5 61.4
Lesotho 21 30 47 42.9 56.7
Mozambique (69) (61) (56) 11.6 8.2
Holding companies 35 3 58 (91.4) >200.0
EBITDA 4,189 5,563 6,578 32.8 18.2
EBITDA margin 31.7% 34.4% 33.8%
Vodacom"s EBITDA margin, adjusted for the impact of low margin cellular phone
and equipment sales, was 39.2% (September 30, 2005: 39.7%).
OPERATING EXPENSES
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Depreciation,
amortisation
and impairment 1,655 1,338 1,613 (19.2) 20.6
Payments to other
network operators 1,804 2,168 2,675 20.2 23.4
Other direct network
operating costs 5,705 6,577 8,051 15.3 22.4
Staff expenses 760 952 1,078 25.3 13.2
Marketing and
advertising expenses 393 488 578 24.2 18.4
General
administration
expenses 412 467 555 13.3 18.8
Other operating
income (33) (40) (50) 21.2 25.0
Operating expenses 10,696 11,950 14,500 11.7 21.3
Due to the competitive and economic environment in which VM, S.A.R.L. operates
in Mozambique, the Group assessed the assets for impairment in accordance with
the requirements of IAS 36: Impairment of Assets, and consequently impaired an
amount of R38.2 million (September 30, 2005: a reversal of R68.4 million).
Vodacom"s payments to other network operators increased mainly as a result of an
increase in outgoing traffic terminating on other cellular networks, rather than
on fixed-line networks.
Other direct network expenses include the cost to connect customers onto the
network which are incurred to support growth in the customer base as well as
other costs such as cost of goods sold, commissions, customer retention
expenses, regulatory and licence fees, distribution expenses and site and
maintenance costs.
Employee productivity has improved in all of Vodacom"s operations, as measured
by customers per employee, increasing by 32.9% to 4,683 customers per employee.
Marketing and advertising expenses are mainly driven by new technologies and
enhancing brand presence in all operations.
General administration expenses comprise of expenses such as accommodation,
information technology costs, office administration, consultant expenses,
outsourced call centres, social economic investment and insurance.
Other operating income comprises of income that Vodacom does not consider as
part of Vodacom"s core activities such as: risk management services, consultant
cost recoveries and franchise fees and is therefore shown separately.
INTEREST RECEIVED, DIVIDENDS RECEIVED AND FINANCE COST
The net income from interest received, dividends received and finance costs
increased to R187.2 million (September 30, 2005: net expense of R382.8 million)
mainly as a result of the revaluation of foreign assets and foreign liabilities,
and in South Africa the weaker Rand and the increased value of foreign exchange
contracts compared to the prior year resulted in a further net gain on the
revaluation of these foreign exchange contracts.
OPTION FAIR VALUE ADJUSTMENT
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 five
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 constitute 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 financial liability in terms of IAS 32: Financial
Instruments: Presentation of R183.4 million (September 30, 2005: Rnil) at
September 30, 2006.
In terms of IAS 39: Financial Instruments: Recognition and Measurement, all
subsequent changes in the fair value of the financial 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 finance 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. were incurring
losses, coupled with the political instability in the country.
EFFECTIVE TAX RATE
Vodacom"s effective tax rate decreased to 37.3% (September 30, 2005: 37.9%) in
the six months ended September 30, 2006 primarily because of the decrease in
the provision for unutilised assessed losses even though the impact of Secondary
Tax on Companies (STC) as a percentage of profit increased by 0.9% due to an
increase in STC payments of R104.8 million. The current period effective tax
rate was negatively affected by the impairment of the Mozambique assets as well
as the fair value adjustment of the Vodacom Congo (RDC) s.p.r.l. put option.
SHAREHOLDER DISTRIBUTIONS
Dividends declared in the six months ended September 30, 2006 totalled R2.5
billion and was paid to shareholders on October 4, 2006.
CAPITAL EXPENDITURE (CAPEX)
Capex additions - geographical split
Rand millions
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
South Africa 1,109 2,141 2,487 93.1 16.2
Tanzania 83 104 288 25.3 176.9
DRC 187 140 269 (25.1) 92.1
Lesotho 2 11 11 >200.0 -
Mozambique 27 77 49 185.2 (36.4)
Holding companies 5 2 38 (60.0) >200.0
Capex additions 1,413 2,475 3,142 75.2 26.9
Capex additions as
a percentage of
revenue 10.7% 15.3% 16.1%
Cumulative capex - geographical split
Six months ended 2005 2006
September 30, R billions Foreign R billions Foreign
South Africa (R billions) 22.5 - 25.8 -
Tanzania (TSH billions) 1.5 258.3 2.1 345.0
DRC (US$ millions) 1.9 302.0 2.8 362.2
Lesotho (Maloti millions) 0.2 216.8 0.2 235.6
Mozambique (MTn millions) 0.6 2,454.2 0.8 2,834.3
Holding companies
(R billions) - - 0.1 -
Cumulative capex 26.7 31.8
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 other African operations is translated at the
average exchange rate of the Rand against the operations 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.
FUNDING
Summary of net debt and maturity profile
Rand millions
September 30, 2006 2007 2008 2009 2010 2011 2012 Total
(reviewed) onward
South Africa
- Finance leases,
Rand denominated 95 134 168 114 164 98 773
Funding loans
Tanzania - outside
share-
holders, US$ - 118 - - - - 118
denominated
Tanzania - project
finance,
various denominated 163 - - - - - 163
Medium-term loan to
Vodacom International
Limited, US$ - - 1,381 - - - 1,381
denominated
DRC - preference share
liability, US$ 284 - - - - - 284
denominated
Sekhametsi Investment
Consortium, Maloti
denominated - 1 1 1 - - 3
Other short-term loans,
US$ denominated 23 - - - - - 23
Debt excluding
bank overdrafts 565 253 1,550 115 164 98 2,745
Bank overdrafts 1,128
Gross debt 3,873
Bank and cash balances (867)
Net debt 3,006
The Group"s net debt to EBITDA ratio was 45.7% (September 30, 2005: 21.8%) as at
September 30, 2006. This reflects the Group"s net debt position before
settlement of the R2.5 billion dividend paid on October 4, 2006. Vodacom"s net
debt to equity ratio improved to 37.5% (September 30, 2005: 15.6%) as at
September 30, 2006. Inclusive of the R2.5 billion interim dividend payable,
Vodacom"s net debt to equity ratio as at September 30, 2006 was 72.6% (September
30, 2005: 40.1%).
CONCLUSION
Vodacom"s strong financial performance continues to be underpinned by excellent
growth in customers, improved market share and continued growth in revenues and
profits. Vodacom South Africa, by far the largest operation in the Group, has
once again strengthened its leadership position. Our market share grew to 59% as
a result of superior network coverage, retail and wholesale distribution and
marketing of new products and services. This was achieved in spite of an
increasingly competitive mobile arena and a more rigid regulatory environment.
Our African operations continued to grow and are a social and economic force
within their own right in the countries in which we do business. The Vodacom
Group is built on successful and long-standing business partnerships, the
commitment of our employees and the loyalty of our customers. Cultivating and
recognising these contributions are an important contribution to our success.
Adv OA Mabandla
Non-executive Chairman
ADC Knott-Craig
Chief Executive Officer
Segment key operational indicators
SOUTH AFRICA
Consolidated key operational indicators (Vodacom South Africa, Smartcall,
Smartcom and Cointel)
Six months
ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Customers
(`000)1 11,346 15,773 20,201 39.0 28.1
Contract 1,651 2,092 2,675 26.7 27.9
Prepaid 9,671 13,653 17,440 41.2 27.7
Community >
services 24 28 86 16.7 200.0
Gross
connections
(`000) 2,681 4,181 5,308 55.9 27.0
Contract 302 312 320 3.3 2.6
Prepaid 2,378 3,865 4,929 62.5 27.5
Community > >
services 1 4 59 200.0 200.0
Total churn
(%)2 20.0 17.4 43.0 (2.6 pts) 25.6
pts
Contract 8.6 9.3 11.0 0.7 pts 1.7 pts
Prepaid 21.9 18.7 47.7 (3.2 pts) 29.0
pts
Total traffic
(millions
of minutes)3 6,735 8,038 9,721 19.3 20.9
Outgoing 4,326 5,329 6,537 23.2 22.7
Incoming 2,409 2,709 3,184 12.5 17.5
ARPU (Rand per
month)4 165 147 124 (10.9) (15.6)
Contract 637 588 528 (7.7) (10.2)
Prepaid 79 71 61 (10.1) (14.1)
Community
services 2,381 1,960 1,017 (17.7) (48.1)
Minutes of use
per customer
per month5 85 76 68 (10.6) (10.5)
Contract
(excluding
bundled
minutes) 234 212 192 (9.4) (9.4)
Prepaid 51 49 46 (3.9) (6.1)
Community
services 3,316 2,546 1,283 (23.2) (49.6)
Number of
employees 3,988 4,119 4,137 3.3 0.4
Customers per
employee 2,845 3,829 4,883 34.6 27.5
Mobile market
share (%)6 56 57 59 1 pt 2 pts
Mobile market
penetration
(%)7 43.1 58.0 72.2 14.9 pts 14.2
pts
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. 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.
3. Traffic comprises total traffic 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.
4. 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 contract connection revenue, revenue from equipment sales, other sales
and services and revenue from national and international users roaming on
Vodacom"s networks.
5. Minutes of use per customer 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.
6. Market share is calculated based on Vodacom"s total reported customers and
the estimated total reported customers of MTN and Cell C.
7. Market penetration is based on Vodacom estimates.
VODACOM TANZANIA
Key indicators
Six months
ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Customers
(`000) 1 952 1,606 2,593 68.7 61.5
Contract 5 6 12 20.0 100.0
Prepaid 944 1,597 2,573 69.2 61.1
Public phones 3 3 8 - 166.7
Gross
connections
(`000) 326 604 909 85.3 50.5
Churn (%) 26.1 28.7 35.2 2.6 pts 6.5 pts
ARPU (Rand) 2 91 73 53 (19.8) (27.4)
Number of
employees 342 371 482 8.5 29.9
Customers per
employee 2,785 4,330 5,379 55.5 24.2
Mobile market
share (%)3 58 58 55 - (3 pts)
VODACOM CONGO
Key indicators
Six months
ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Customers
(`000) 1 903 1,236 2,027 36.9 64.0
Contract 10 11 16 10.0 45.5
Prepaid 885 1,209 1,988 36.6 64.4
Public phones 8 16 23 100.0 43.8
Gross
connections
(`000) 305 373 724 22.3 94.1
Churn (%) 18.4 30.5 30.0 12.1 pts (0.5 pts)
ARPU (Rand) 2 111 89 83 (19.8) (6.7)
Number of
employees 426 597 513 40.1 (14.1)
Customers per
employee 2,119 2,070 3,951 (2.3) 90.9
Mobile market
share (%) 3 48 49 49 1 pt -
VODACOM LESOTHO
Key indicators
Six months
ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Customers
(`000) 1 122 171 238 40.2 39.2
Contract 4 3 3 (25.0) -
Prepaid 117 166 231 41.9 39.2
Public phones 1 2 4 100.0 100.0
Gross
connections
(`000) 32 42 55 31.3 31.0
Churn (%) 14.0 23.4 20.5 9.4 pts (2.9 pts)
ARPU (Rand) 2 91 77 76 (15.4) (1.3)
Number of
employees 62 65 63 4.8 (3.1)
Customers per
employee 1,971 2,625 3,771 33.2 43.7
Mobile market
share (%) 3 80 80 80 - -
VODACOM MOZAMBIQUE
Key indicators
Six months ended 2004 2005 2006 % change
September 30, (unaudited) (unaudited) (unaudited) 04/05 05/06
Customers (`000)
1 164 336 694 104.9 106.5
Contract 3 5 11 66.7 120.0
Prepaid 161 331 682 105.6 106.0
Public phones - - 1 n/a n/a
Gross
connections
(`000) 108 123 327 13.9 165.9
Churn (%) 2.7 34.5 41.8 31.8 pts 7.3 pts
ARPU (Rand) 2 63 41 27 (34.9) (34.1)
Number of
employees 85 148 126 74.1 (14.9)
Customers per
employee 1,934 2,271 5,507 17.4 142.5
Mobile market
share (%) 3 24 26 33 2 pts (7 pts)
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 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 contract connection revenue, revenue from equipment sales, other sales
and services and revenue from national and international users roaming on
Vodacom"s networks.
3. Market share is calculated based on Vodacom estimates.
Condensed Consolidated income statements
for the six months ended September 30, 2005 and 2006
2005 2006
(reviewed) (reviewed)
(restated)
Rm Rm
Revenue 16,175.2 19,465.6
Other operating income 39.9 49.8
Direct network operating cost (8,745.4) (10,726.1)
Depreciation (1,282.2) (1,335.2)
Staff expenses (951.7) (1,078.1)
Marketing and advertising expenses (488.0) (578.0)
Other operating expenses (466.9) (555.1)
Amortisation of intangible assets (124.2) (239.3)
Impairment of assets 68.4 (38.2)
Profit from operations 4,225.1 4,965.4
Interest, dividends and other financial income 298.7 1,092.4
Finance costs (681.5) (905.2)
Option fair value adjustment - (183.4)
Profit before taxation 3,842.3 4,969.2
Taxation (1,454.9) (1,855.7)
Net profit 2,387.4 3,113.5
Attributable to:
Equity shareholders 2,363.5 3,072.4
Minority interests 23.9 41.1
2005 2006
R R
Basic and diluted earnings per share 236,350 307,240
Condensed Consolidated balance sheets
at March 31, 2006 and September 30, 2006
March 31, Sept 30,
2006 2006
(audited) (reviewed)
(restated)
Rm Rm
ASSETS
Non-current assets 16,079.2 18,524.4
Property, plant and equipment 13,386.6 15,389.3
Intangible assets 1,954.9 2,450.5
Financial assets 92.1 114.2
Deferred taxation 297.6 219.1
Deferred cost 311.2 306.8
Lease assets 36.8 44.5
Current assets 8,688.6 8,061.8
Deferred cost 451.8 487.9
Short-term financial assets 149.3 414.7
Inventory 454.3 764.3
Trade and other receivables 4,487.1 5,528.0
Cash and cash equivalents 3,146.1 866.9
Total assets 24,767.8 26,586.2
EQUITY AND LIABILITIES
Equity 8,672.3 9,368.0
Ordinary share capital * *
Retained earnings 8,583.0 9,154.7
Non-distributable reserves (194.0) (80.6)
Minority interests 283.3 293.9
Non-current liabilities 2,236.6 3,705.3
Interest-bearing debt 819.2 2,179.2
Deferred taxation 602.3 727.5
Deferred revenue 320.3 330.9
Provisions 372.3 339.8
Operating lease liabilities 122.5 127.9
Current liabilities 13,858.9 13,512.9
Trade and other payables 5,104.7 6,519.4
Deferred revenue 1,604.5 1,806.5
Taxation payable 630.2 481.8
Non interest-bearing debt 4.3 -
Short-term interest-bearing debt 1,645.5 565.3
Short-term provisions 623.0 505.4
Dividends payable 2,800.0 2,500.0
Derivative financial liabilities 60.9 7.0
Bank borrowings 1,385.8 1,127.5
Total equity and liabilities 24,767.8 26,586.2
Amounts less than R50,000.
Attributable to equity shareholders
Share Retained Non-
capital earnings distributable
reserves
Rm Rm Rm
Balance at March 31, 2005
as previously reported * 8,057.2 (298.0)
Changes in accounting policies - 1.9 (1.9)
Balance at March 31, 2005
- restated * 8,059.1 (299.9)
Net profit for the period - 2,363.5 -
Dividends declared - (1,700.0) -
Contingency reserve - (0.6) 0.6
Acquisition of subsidiary - - -
Net gains and losses not recognised
in the income statement
Foreign currency translation reserve - - 114.6
Foreign currency translation reserve
- deferred taxation - - 0.5
Balance at September 30, 2005
- reviewed * 8,722.0 (184.2)
Balance at March 31, 2006
as previously reported * 8,567.3 (178.3)
Changes in accounting policies - 15.7 (15.7)
Balance at March 31, 2006
- restated * 8,583.0 (194.0)
Net profit for the period - 3,072.4 -
Dividends declared - (2,500.0) -
Contingency reserve - (0.7) 0.7
Acquisition of minorities - - -
Net gains and losses not recognised
in the income statement
Foreign currency translation reserve - - 122.9
Foreign currency translation reserve
- deferred taxation - - (9.0)
Capital contribution on
remeasurement
of shareholders loan to fair value - - (1.2)
Balance at September 30, 2006
- reviewed * 9,154.7 (80.6)
* Amounts less than R50,000.
Total Minority Total
interests equity
Rm Rm Rm
Balance at March 31, 2005
as previously reported 7,759.2 128.7 7,887.9
Changes in accounting policies - - -
Balance at March 31, 2005
- restated 7,759.2 128.7 7,887.9
Net profit for the period 2,363.5 23.9 2,387.4
Dividends declared (1,700.0) - (1,700.0)
Contingency reserve - - -
Acquisition of subsidiary - 46.5 46.5
Net gains and losses not recognised
in the income statement
Foreign currency translation reserve 114.6 (1.3) 113.3
Foreign currency translation reserve
- deferred taxation 0.5 - 0.5
Balance at September 30, 2005
- reviewed 8,537.8 197.8 8,735.6
Balance at March 31, 2006
as previously reported 8,389.0 283.3 8,672.3
Changes in accounting policies - - -
Balance at March 31, 2006
- restated 8,389.0 283.3 8,672.3
Net profit for the period 3,072.4 41.1 3,113.5
Dividends declared (2,500.0) (35.4) (2,535.4)
Contingency reserve - - -
Acquisition of minorities - (22.3) (22.3)
Net gains and losses not recognised
in the income statement
Foreign currency translation reserve 122.9 26.0 148.9
Foreign currency translation reserve
- deferred taxation (9.0) - (9.0)
Capital contribution on remeasurement
of
shareholders loan to fair value (1.2) 1.2 -
Balance at September 30, 2006
- reviewed 9,074.1 293.9 9,368.0
* Amounts less than R50,000.
Condensed Consolidated cash flow statements
for the six months ended September 30, 2005 and 2006
2005 2006
(reviewed) (reviewed)
Rm Rm
Cash flow from operating activities
Cash receipts from customers 15,327.2 18,589.6
Cash paid to suppliers and employees (10,405.6) (13,135.2)
Cash generated from operations 4,921.6 5,454.4
Finance costs paid (228.8) (574.5)
Interest, dividends and other financial
income received 96.9 394.0
Taxation paid (1,513.2) (1,792.0)
Dividends paid - equity shareholders (1,800.0) (2,800.0)
Dividends paid - minority shareholders - (35.4)
Net cash flows from operating activities 1,476.5 646.5
CASH FLOW FROM
INVESTING ACTIVITIES
Additions to property, plant and equipment
and intangible assets (2,229.4) (2,629.0)
Proceeds on disposal of property, plant
and equipment and intangible assets 6.8 3.1
Acquisition of subsidiaries (0.2) -
Other investing activities (8.5) (19.3)
Net cash flows utilised in investing
activities (2,231.3) (2,645.2)
CASH FLOW FROM
FINANCING ACTIVITIES
Finance lease capital repaid (21.1) (34.6)
Interest-bearing debt incurred 32.5 -
Interest-bearing debt repaid (46.4) (77.2)
Net cash flows utilised in financing
activities (35.0) (111.8)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (789.8) (2,110.5)
Cash and cash equivalents at the
beginning of the period 2,173.0 1,760.3
Effect of foreign exchange rate changes (11.7) 89.6
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD 1,371.5 (260.6)
Date: 13/11/2006 07:15:48 AM Produced by the JSE SENS Department
