Investor’s Presentation 2008...Q108 Mobilink Ufone Zong Instaphone Telenor Warid Subcribers base (000) 31,774 17,198 2,142 271 16,702 14,395 Revenue (in million) 21,215 7,987 618
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Investor’s Presentation
2008Telenor PakistanPeter Kuncewicz – CFO of Telenor Pakistan
Pakistan’s Economic Landscape
Pakistan - A brief look at economics and politics
• Population of 165 million
• Per capita income increasing
• High inflation rate
• Prevailing political tension
• Security situation fairly stable
Key Facts
• World’s 6th most populous nation
• Population of 165 million
• Approx. 100 mn < 30 yrs
• Median age approx. 20.1 yrs
• On current trajectory, Pakistan likely to be 4th largest
country by 2050
Economic overview
• GDP : US$ 145 billion
• GDP growth : 7.0% (FY07)
� FY03-07 avg. : 7.0%
• Per-capita GNP : US$ 925
� PPP basis : US$ 2,591 2007-est
• Growth in p.capita: 13% FY07/06
� FY03-07 avg. : 12%+
Key Facts
• 6th largest EM (ex-China & India)
• 4th largest EM in Asia (ex-China & India)
*ex-China & India
11.9%4.3%Share
46Rank
EM – Asia*EM – All*Pakistan:
Key Facts
• One of only 10 economies of world with:
• GDP > US$100bn AND
• POP > 100 million
Pakistan’s LT growth
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
FY51
FY53
FY55
FY57
FY59
FY61
FY63
FY65
FY67
FY69
FY71
FY73
FY75
FY77
FY79
FY81
FY83
FY85
FY87
FY89
FY91
FY93
FY95
FY97
FY99
FY01
FY03
FY05
FY07
Pakistan’s LT growth
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
FY51
FY53
FY55
FY57
FY59
FY61
FY63
FY65
FY67
FY69
FY71
FY73
FY75
FY77
FY79
FY81
FY83
FY85
FY87
FY89
FY91
FY93
FY95
FY97
FY99
FY01
FY03
FY05
FY07
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%10 yr MA
Key Economic Indicators
2006 2007 2008 2009
Real GDP growth 6.9 6.4 3.6 4.4
Nominal GDP (US$ bn) 126.8 145.4 156.5 160.2
Consumer Price Inflation* 9.4 11.7 21.5* 7.1
Exchange Rate Rs : US$* 60.9 61.2 71.9* 67.8
GDP per head (US$) 809 886 936 941
Source: Country Report Pakistan by Economist Intellignce Unit, London
* As of July 2008
Currently…
• Pakistan’s economy in rough patch
• Facing severe headwinds/challenges
– Global commodity prices
– Weakening fiscal situation
– Policy path uncertain
• Resilience from reform paying off
• Politics a potential wild card
In Sum …
To conclude:
• Pakistan is experiencing a strong pay-off from reforms
• Robust growth & investment are leading to rising incomes − & spending
• Challenges remain …
• … but underlying longer term business opportunities remain compelling
Five criteria identified before entering Pakistan..
• High growth potential
• Forward looking telecom policy
• Investment friendly climate
• Good regulatory execution
• Acceptable political and economic situation
Initial assumptions vs actual development..
4113Capex (PKR bn)
269663ARPU (PKR)
14.62.9Telenor subs (mill)
48%11%SIM penetration
Actual 2007Initial business case 2007
200
2,000
4,700
6,300
2005 2006 2007 2008E
5
50
132
160
2005 2006 2007 2008E
3 years of building network and distribution
• 5,500 sites and 55% coverage
• Largest Edge network in Pakistan
• 125,000 scratch card agents
• 110,000 easy load top-up points
• 60,000 SIM distribution agents
Network Distribution
No of sites, EoY No of agents, EoY (thousands)
Telenor subscribers (mill)Market share
> 20
0.81.9
3.2
6.7
10.7
14.6
18.1
H105 H205 H106 H206 H107 H207 H108 H208E
3 years of tremendous growth
Ufone
Warid
Mobilink
Zong
Instaphone
Telenor
0%
10%
20%
30%
40%
50%
60%
1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08E
Market statistics Q108
Q108 Mobilink Ufone Zong Instaphone Telenor Warid
Subcribers base (000) 31,774 17,198 2,142 271 16,702 14,395
Revenue (in million) 21,215 7,987 618 65 12,099 6,542
ARPU (based on PTA closing subs) 226 160 100 72 242 158
Market ARPU Trend
-
50
100
150
200
250
300
Q207 Q307 Q407 Q108
Mobilink Ufone Zong Instaphone Telenor Warid
• Revenue figures are from PTA quarterly report
• ARPU figures are calculated using revenue and subscriber numbers as per PTA report
ARPU (PKR) Revenues (PKR bn) and EBITDA %
Stable ARPU and improving margins
191
253
287268
279262
248
H105 H205 H106 H206 H107 H207 H108
2
4
8
15
20
25
0.5 -121%
-40%
-17%
4%
16%19%
-3
2
7
12
17
22
27
H105 H205 H106 H206 H107 H207 H108 -1.33
-1.13
-0.93
-0.73
-0.53
-0.33
-0.13
0.07
0.27
"Diesel Prices" increase Jan-March, 2008
PKR 33 PKR 33PKR 39
PKR 65
Mar.07 Jan 2008 March 2008 Jun.08
"Concrete Prices" increase since March 2007
PKR 18,000PKR 21,000
PKR 23,000
PKR 27,500
March 2007 Jan.08 Mar.08 June 2008
"Processed Steel prices" increase since March 2007
PKR 40
PKR 60
PKR 90PKR 85
March 2007 Jan.08 Mar.08 June 2008
"Minimum wage" increase Jan-March, 2008
PKR 3,000 PKR 3,000 PKR 3,000
PKR 6,000
March 2007 Jan-08 Mar.08 Jun.08
Source: Ministry of Labor and Manpower Pakistan
(100% Increase)
Source: Pakistan Steel Mills
(56% Increase)
Source: Construction Industry
(100% Increase)
Source: Ministry of Petroleum (Per Litter Price)
(100% Increase)
Note; %age represents month on month increase
Some areas of price hike
Opex split
Operating expenses driven by site costs
• Fibre backbone to reduce traffic costs
• Site related costs driven by number of sites and increased energy costs
• SAC driven by subscriber growth
• General marketing costs increasing
100% 100%
Capex split 2007
Capex driven by increased traffic
• Around 50% of capex related to sites. Outlook stable
• Scale effects expected in transmission and core network
• Subscriber driven capex will increase slightly
Transmission
Core
Subscribers
Other
Sites
3G coming up
• 6 blocks of 5MHz available
• 3 operators to be allocated 3G spectrum
• Uncertainty regarding timeline and conditions
Maintaining competitive edge
• Maintain innovator position
• Leverage on brand, distribution, and quality network
• Enrich customer experience
• Operational efficiencies to secure long term profitability
• Exploit broadband opportunities
Telenor Pakistan Outlook 2010-2011
• SIM penetration above 70%
• Market share above 25%
• EBITDA in mid thirties
• Capex/sales below 25%
Summary
• Still strong growth potential
• Tough competition but solid market position
• High quality network and distribution
• 2G capex peak in 2007
• Manageable surroundings
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