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Vodacom Group Limited IR presentation | 5 September 2016
Vodacom Group
Limited
September 2016
Vodacom Group Limited IR presentation | 5 September 2016
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentations may lawfully be
communicated (‘relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its
contents.
Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield
on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute
an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire
securities in any company within the Group.
Promotional material used in this presentation that is based on pricing or service offering may no longer be applicable.
This presentation contains certain non-GAAP financial information which has not been reviewed or reported on by the Group’s auditors. The
Group’s management believes these measures provide valuable additional information in understanding the performance of the Group or
the Group’s businesses because they provide measures used by the Group to assess performance. However, this additional information
presented is not uniformly defined by all companies, including those in the Group’s industry. Accordingly, it may not be comparable with
similarly titled measures and disclosures by other companies. Additionally, although these measures are important in the management of
the business, they should not be viewed in isolation or as replacements for or alternatives to, but rather as complementary to, the
comparable GAAP measures.
This presentation also contains forward-looking statements which are subject to risks and uncertainties because they relate to future events.
These forward-looking statements include, without limitation, statements in relation to the Group’s projected financial results. Some of the
factors which may cause actual results to differ from these forward-looking statements are discussed on slide 23 of this presentation.
Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox, Vodafone WebBook, Vodafone Smart tab, Vodafone 858
Smartphone, Vodafone Passport, Vodafone live!, Power to You, Vodacom, Vodacom M-Pesa, Vodacom Millionaires, Vodacom 4 Less and
Vodacom Change the World are trademarks of Vodafone Group Plc (or have applications pending). Other product and company names
mentioned herein may be trademarks of their respective owners.
2
Vodacom Group Limited IR presentation | 5 September 2016
Vodacom DRC
Licenced 2002 Population 71 million Vodacom Tanzania
Licenced 1999 Population 55 million
Vodacom Mozambique
Licenced 2003 Population 29 million
Vodacom Lesotho Licenced 1995 Population 2 million
Vodacom South Africa Licenced 1993 Population 55 million
All information in presentation is as at 31 March 2016, unless otherwise stated. #Market capitalisation value as at 5 September 2016.
A leading African mobile communication company providing
a wide range of communication services including mobile
voice, messaging, data and converged services to over
61 million customers.
Vodacom is majority owned by Vodafone Plc (65%) and we
are listed on the JSE Limited.
Market capitalisation of R231.3 billion#.
Group revenue of R80.1 billion.
Head office in Midrand, South Africa
History – consistent track record of innovation
2012 2011 2009 2008 2004 1996
First to launch
prepaid services
in the world on IN
platforms
Vodacom
launches a 3G
HSDPA network
in South Africa
Vodacom
Business
launches
Vodacom listed
on the JSE
(18 May)
Vodacom
rebrands from
“Green and Blue”
to Vodafone
RED
LTE-Advanced
launched First to launch
4G in
South Africa
2016
3
Vodacom Group Limited IR presentation | 5 September 2016
Share information
As at 5 September 2016
JSE Ticker symbol VOD
ADR code VDMCY
Stock exchange JSE Limited
Shares in issue 1 487 954 000
Freefloat 35%
52 week low and high R132 – R172
Market capitalisation R231.3 billion
Debt rating Long term scaling zaAAA (S&P)
Transfer agent ComputerShare
Indices
FTSE/JSE Top 40 Index
JSE Socially Responsible Index
Nedbank BGreen Exchange Traded Fund
66%
19%
7% 4% 4%
South Africa
United States
United Kingdom
Rest of Europe
Rest of world
Institutional shareholding
4
PIC = 49.9%
Vodacom Group Limited IR presentation | 5 September 2016 5
Five reasons to own Vodacom shares
2
3
Focus areas of growth potential
Market leadership
1
Scale benefits driving efficiencies
Experienced, diverse management team
5 Track record of delivering shareholder returns
4
5
Vodacom Group Limited IR presentation | 5 September 2016
#1 mobile operator in all markets
All information is as at 31 March 2016
#1 | Market leadership
61.3 million customers in
5 countries in Sub-Saharan Africa
R14 billion enterprise revenue from
30 countries in Africa
R13 billion investment per annum to maintain our leading network quality
> 18 000 base stations, > 80% 3G
1st
to launch 4G in South Africa, Lesotho and
Tanzania
6
Vodacom Group Limited IR presentation | 5 September 2016
Enterprise (21% of Group service revenue)
• Enterprise contributes 21% to Group service revenue
• SA fixed and managed services revenue +27%
o Pan African MPLS network
o Fibre to the business/home
7
#2 | Focus areas of growth potential
Data (32% of Group service revenue)
• Group: 29 million active data customers; 57% of total base
• SA: 14 million active smart devices; 37% of active
customers
• SA: 572MB per smart device growing 23%
International (27% of Group service revenue)
• 27% of Group service revenue
• Data revenue growth +32%
• Active customers 27 million
o Active customers now 44% of Group active customers
FY14: +37%
FY15: +13%
FY16: +19%
FY14: +24%
FY15: +10%
FY16: +17%
New services (SA) (4.2% of Group service revenue)
• Insurance revenue +19%
o Expanding portfolio: life, funeral, device, cover
• Capture Internet of Things opportunity
• Fibre to home +25 000 homes and businesses passed
7
.
FY14: +33%
FY15: +25%
FY16: +29%
Vodacom Group Limited IR presentation | 5 September 2016 8
Focussed savings programmes – Fit 4 Growth
• Reduced transmission rentals through self-provisioning
• Cost optimisation through sharing, outsourcing and supply
chain management
• Improved return on investment in customer acquisition
spend
• Reduced support costs offsetting inflationary pressures
Benefits from being part of the Vodafone Group
• Global technology and product roadmap
• Better pricing through Vodafone Procurement Company
• Benefits from best practice sharing and benchmarking
• Talent and skills sharing
#3 | Scale benefits driving efficiencies
8
Vodacom Group Limited IR presentation | 5 September 2016
4
Executive Committee (12 members)
Male
83%
Female
17%
CEO: Shameel Aziz Joosub (45)
20 years industry experience
Previously CEO of Vodafone Spain
IT Person of the year 2015
CFO: Till Streichert (41)
15 years industry experience
Previously CFO of Vodafone Romania
European and emerging market experience
#4 | Experienced, diverse management team
Black
58%
White
42% South African
75%
Intern-
ational
25%
9
Vodacom Group Limited IR presentation | 5 September 2016
395 375 395
430 400 400
FY14 FY15 FY16
Interim dividend Final dividend
Dividend per share Cents per share
825 775
795
#5 | Consistently delivering shareholder returns
Relative share price performance1
TSR ZAR YTD (for 12 months ending 5 September 2016)
-31.5%
-18.1%
-7.1%
3.8%
13.0%
-35.0% -25.0% -15.0% -5.0% 5.0% 15.0%
MTN
Millicom
Bharti
Telkom
Vodacom
10
1. As at 5 September 2016.
Vodacom Group Limited IR presentation | 5 September 2016 11
Service revenue growth
Low to mid single-digit
Mid to high single-digit
EBITDA growth
12% to 14%
Capex intensity
Targets | Group three-year targets
Vodacom Group Limited IR presentation | 5 September 2016 11
Vodacom Group Limited IR presentation | 5 September 2016
Continuing to deliver returns
12
Best network
---------------------
Best value
---------------------
Best service
Diversify
revenue to
deliver growth
Deliver cost
and process
efficiency
Best talent
---------------------
Best practice
Transform
society and
build
stakeholder
trust
Vodacom Group Limited IR presentation | 5 September 2016
• Network customer satisfaction #1 in all
markets but one
• 4G coverage in SA at 58%
• International sites +17%
• SA dropped call rate @ 0.41%
• 1st in SA with commercial mobile LTE-A
• Personalised pricing and offers
• Driving pricing transformation
• Reducing communication costs
• Stimulating bundle adoption
• Connectivity
• Always in control
• Rewarding loyalty
• Easy access
Best network Best value Best service
13
Customer | Best network, Best value, Best service
23 18 17 10
Vodacom SA Operator A Operator B Operator C
Source: MyBroadband (March 2016) (Mbps)
Average download speeds in SA
Million
Total prepaid bundle sales in SA
314 387 383 369
86 189
1H15 2H15 1H16 2H16
Total prepaid bundle sales Just 4 You
FY15 FY16
Vodacom Competitor A Competitor B
%
SA Consumer NPS points differentiation
+15 ppts +6 ppts
Vodacom Group Limited IR presentation | 5 September 2016 14
Growth | Diversifying revenue to deliver growth
14
Data contribution International contribution
Enterprise contribution
• Growth +17%
• EBITDA contribution
17.7% (FY14: 15.6%)
• M-Pesa revenue +19%
• Enterprise service
revenue +20%
• R3.2bn fixed-line & BMS
revenue
26.6% 24.6%
• Growth +28.5%
• Average usage per smart
device - 572MB
• 2G to 3G; 3G to 4G
ARPU uplift +20%
FY16
FY14
Contribution to Group service revenue
20.5%
15.1%
FY16
FY14
Contribution to Group service revenue
31.9% 21.4%
FY16
FY14
Contribution to Group service revenue
New services contribution (SA)
4.2%
3.5%
FY16
FY14
Contribution to SA service revenue
• Device insurance
policies +25%
• IoT connections +28%
• Wholesale partnership
agreements for fibre
• GDSP platform delivery
Vodacom Group Limited IR presentation | 5 September 2016
Direct expenses1
15
Operations | Fit for growth SA
• Channel efficiencies
• Sophisticated IBRO
management
• Credit management
30.5% of SR (FY15: 31.6%)
Staff expenses2
• Hire in key growth areas
• Attract and retain talent
6.6% of SR (FY15: 6.7%)
Publicity expenses
• Consolidated agency spend
• Improved production cost
efficiency
• Increased digital/social
platform spend
• Increased share of voice
2.5% of SR (FY15: 2.7%)
Other operating expenses3
• Reduced network cost per site
• Improved digitisation and App
penetration
• Leverage scale through
sharing and outsourcing
14.4% of SR (FY15: 14.1%)
15
Actively managing costs
• Sharing and outsourcing to realise scale
• Incentives – volume vs revenue
• Digitisation – self care and empowering customers
• Cost consciousness at an individual level
Number of sites
+9%
Inflation
+6%
Wage inflation
+6%
Energy inflation
+13%
Innovate
1. Excluding equipment expenses.
2. Excluding BEE charge.
3. Excluding trading foreign exchange.
Vodacom Group Limited IR presentation | 5 September 2016
People | Attracting and retaining the best talent
Enhancing diversity Developing skills Growing talent
Driving people transformation through
• 73% black and 39% female
staff
• 55% of EXCO black
• Vodacom Women in Red
Awards
• 123 graduates in 2015
Graduate programme
• International Graduate
programme in all our
markets
• International assignee
programme
• R103 million spent on skills
development
• Capability build and
succession programmes
16
Vodacom Group Limited IR presentation | 5 September 2016
Reputation | Mobile for good
17
spent by
Vodacom
Foundation on
CSI projects
TZN
subscribers:
Healthy
pregnancy
Healthy baby
free education
portal 105k
registered
learners
volunteers for
annual Change
the World
programme
call center for
victims of
gender-based
violence
schools
connected -
Universal
Service
obligations
+600k
R106m eSchool
Vodacom
20 24 hour 3 087
17
Vodacom Group Limited IR presentation | 5 September 2016
Reputation | BEE Level 2 contributor
18
weighted spend
on BEE-status
suppliers
to >51% black-
owned
suppliers
to >30% black
women-owned
suppliers
spent on
developing
SMME ICT
businesses
spent on skills
development spent on
uplifting
communities
R7.2bn R26bn R5bn
R841m R218m R112m
18
98.25 Most empowered
telco in
South Africa
Vodacom Group Limited IR presentation | 5 September 2016
Vodacom Group Limited IR presentation | 5 September 2016
Additional
information
Vodacom Group Limited IR presentation | 5 September 2016 20
Country data
South Africa Tanzania DRC Mozambique Lesotho
PopulationŦ (million) 55 55 71 29 2
GDP per capitaŦ (USD) 4 770 855 495 456 887
GDP growth estimateŦ 2016 (%) 0.7 6.5 5.0 4.8 2.0
Ownership (%) 93.75# 82.2 51 85 80
License expiry period 2029 2031 2028/2032µ 2018/2026µ 2036
Active customers (thousand) 35 112 12 060 8 486 4 817 1 359
ARPU (rand per month) 109 40 58 56 62
ARPU (local currency per month) 109 5 876 3.9 207 62
Minutes of use per month 134 158 50 109 79
Key indicators for the quarter ended 30 June 2016.
Ŧ The Economist Intelligence Unit. # 6.25% held indirectly through special purpose entities which are consolidated in terms of SIC 12: Consolidation – Special Purpose Entities as part of the broad-based black economic empowerment transaction. µ 2028/2018 relates to the 2G license and 2032/2026 relates to the 3G licence.
20
Vodacom Group Limited IR presentation | 5 September 2016
Latest results | Q1 results for the quarter ended 30 June 2016
R million Jun 2016 Jun 2015 YoY % Δ
Group
Service revenue 16 806 15 660 7.3
Revenue 19 902 18 806 5.8
Data revenue 5 786 4 846 19.4
Customers (m) 61 834 63 502 (3.3)
South Africa
Service revenue 12 426 11 762 5.6
Revenue 15 443 14 845 4.0
Data revenue 4 691 3 975 18.0
Customers (m) 35 112 33 309 5.4
International
Service revenue 4 479 3 945 13.5
Revenue 4 620 4 095 12.8
Data revenue 1 095 871 25.7
Customers (m) 26 722 30 193 (11.5)
Sustained robust service revenue growth
• Group service revenue up 7.3% (4.6%*)
• SA service revenue growth of 5.6% to R12 426 million
• SA added just under 1 million customers in the quarter
Strong demand for data services
• Group data revenue up 19.4%, 34.4% of service revenue
• SA active data customers up 6.1% to 18.8 million
• 3.1 million LTE/4G customers in South Africa
International impacted by customer registration
• Service revenue up 13.5% (2.8%*); contributed 26.7% to
Group service revenue
• M-Pesa revenue +47.5%; 10.6 million active customers
* Normalised growth adjusted at a constant currency using current year as the base.
21
Vodacom Group Limited IR presentation | 5 September 2016
Annual results for the year ending 31 March 2016
R million Mar 2016 Mar 2015 YoY % Δ
Service revenue 66 763 62 167 7.4
Revenue 80 077 74 500 7.5
EBITDA 30 345 26 905 12.8
Operating profit 21 059 19 516 9.5
Operating free cash flow 17 054 14 003 21.8
Free cash flow 9 807 7 763 26.3
Capital expenditure 12 875 13 305 (3.2)
Net debt 21 287 16 760 27.0
Headline earnings per share
(cents) 883 860 2.7
Dividend per share (cents) 795 775 2.6
EBITDA margin (%) 37.9 .36.1 1.8 ppts
Effective tax rate (%) 31.5 29.9 1.6 ppts
Net debt/EBITDA (times) 0.7 0.6 0.1 times
Capex intensity (%) 16.1 17.9 (1.8 ppts)
Improved revenue growth and margins
• Group service revenue up 7.4% (5.8%*)
• Group EBITDA up 12.8% (10.2%*)
• Headline earnings per share up 2.7%
• 400 cents final dividend per share
Strong demand for data services
• Group data revenue up 28.5%. 31.9% of service
revenue
• Group active data customers up 8.6% to 28.8 million
• 14 million active smart devices in South Africa
Excellent International performance
• Service revenue up 16.2% (9.6%*), contributed 26.6% to
Group service revenue
• M-Pesa revenue +19.3%; 9.2 million active customers
* Normalised growth adjusted for trading foreign exchange gains/losses and at a constant currency using current year as base (collectively ‘foreign exchange’).
22
Vodacom Group Limited IR presentation | 5 September 2016
Five-year financials for the year ended 31 March
R million 2016 2015 2014 2013 2012 16/15 % Δ 5-year CAGR
Service revenue 66 763 62 617 62 047 59 261 58 125 7.4 3.8
Revenue 80 077 74 500 73 219 67 781 65 700 7.5 5.1
EBITDA 30 345 26 905 27 314 25 253 22 763 12.8 7.5
Operating profit 21 059 19 235 20 394 18 897 16 617 9.5 6.1
Operating free cash flow 17 054 14 003 19 410 18 158 16 934 21.8 0.2
Free cash flow 9 807 7 763 13 185 12 136 10 921 26.3 (2.7)
Capital expenditure 12 875 13 305 10 779 9 456 8 662 (3.2) 10.4
Net debt 21 287 16 760 8 052 8 007 7 667 27.0 15.4
Headline earnings per share (cents) 883 860 896 872 709 2.7 7.0
Dividend per share (cents) 795 775 825 785 710 2.6 13.9
EBITDA margin (%) 37.9 36.1 37.3 37.3 34.6
Effective tax rate (%) 31.5 29.9 30.2 28.3 36.0
Net debt/EBITDA (times) 0.7 0.6 0.3 0.3 0.3
Capex intensity (%) 16.1 17.9 14.7 14.0 13.2
Return on capital employed (%) 48.2 50.1 62.1 62.8 63.2
23
Vodacom Group Limited IR presentation | 5 September 2016
Dividend policy and payment history
Dividend number Ex-dividend date Payment date Cents per share Policy payout (%) Actual payout (%)
Interim dividend number 1 30 Nov 2009 7 Dec 2009 110 40 50
Final dividend number 2 28 Jun 2010 5 Jul 2010 175 40 60
Interim dividend number 3 29 Nov 2010 6 Dec 2010 180 60 60
Final dividend number 4 27 Jun 2011 4 Jul 2011 280 70 79
Interim dividend number 5 28 Nov 2011 5 Dec 2011 260 70 80
Final dividend number 6 18 Jun 2012 25 Jun 2012 450 90 117
Interim dividend number 7 26 Nov 2012 3 Dec 2012 355 90 90
Final dividend number 8 24 Jun 2013 1 Jul 2013 430 90 90
Interim dividend number 9 25 Nov 2013 2 Dec 2013 395 90 90
Final dividend number 10 23 Jun 2014 30 Jun 2014 430 90 94
Interim dividend number 11 24 Nov 2014 1 Dec 2014 375 90 90
Final dividend number 12 22 Jun 2015 29 Jun 2015 400 90 90
Interim dividend number 13 30 Nov 2015 7 Dec 2015 395 90 90
Final dividend number 14 20 Jun 2016 27 Jun 2016 400 90 90
The Company intends to pay out as much of its after tax profits as will be available after retaining such sums and repaying such
borrowings owing to third parties as shall be necessary to meet the requirements reflected in the budget and business plan, t aking into
account monies required for investment opportunities. There is no fixed date on which entitlement to dividends, arises and th e date of
payment will be determined by the Board or shareholders at the time of declaration, subject to the JSE Listings Requirements.
Current dividend payout is 90% of headline earnings per share
24
Vodacom Group Limited IR presentation | 5 September 2016
Reporting dates Roadshows/conferences
Date Event Location
14 November H1 2017 results released Vodacom/
Website
Date Event Location
26-27 September RMB Big 5 conference Cape Town
10 October UBS TMT conference Johannesburg
Mid-November Interims 2017 roadshow JHB/CT/UK/USA
Investor relations | 2016 Calendar
25
Vodacom Group Limited IR presentation | 5 September 2016
Thank you
Vodacom Group Limited IR presentation | 5 September 2016
Definitions
27
Active customers Active customers are based on the total number of mobile customers using any service during the last three months. This includes
customers paying a monthly fee that entitles them to use the service even if they do not actually use the service and those customers who
are active whilst roaming.
Active data customers Number of unique users generating billable data traffic during the month. Also included are users on integrated tariff plans, or who have
access to corporate APNs, and users who have been allocated a revenue generating data bundle during the month. A user is defined as
being active if they are paying a contractual monthly fee for this service or have used the service during the reported month.
ARPU Total ARPU is calculated by dividing the average monthly service revenue by the average monthly active customers during the period.
Contribution margin Revenue less direct expenses as a percentage of revenue.
EBITDA Earnings before interest, taxation, depreciation and amortisation, impairment losses, profit/loss on disposal of investments, property, plant
and equipment, and intangible assets, profit/loss from associate and joint venture, restructuring cost and BEE income/charge.
Free cash flow Cash generated from operations less additions to property, plant and equipment and intangible assets, proceeds on disposal of property,
plant and equipment and intangible assets, tax paid, net finance charges paid and net dividends received/paid to minority shareholders.
HEPS Headline earnings per share.
International International comprises the segment information relating to the non-South African-based cellular networks in Tanzania, the Democratic
Republic of Congo, Mozambique and Lesotho as well as the operations of Vodacom International Limited and Vodacom Business Africa
Group (Pty) Limited and its subsidiaries.
MOU Minutes of use per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly active
customers during the period.
Normalised growth (*) Adjusted for trading foreign exchange gains/losses and at a constant currency (using current year as base) (collectively ‘foreign exchange’).
Operating free cash flow Cash generated from operations less additions to property, plant and equipment and intangible assets other than licence and spectrum
payments and purchases of customer bases, net of proceeds on disposal of property, plant and equipment and intangible assets, other than
license and spectrum payments and disposals of customer bases.
South Africa Vodacom (Pty) Limited, a private limited liability company duly incorporated in accordance with the laws of South Africa and its subsidiaries,
joint ventures and SPV’s.
Traffic Traffic comprises total traffic registered on Vodacom’s mobile network, including bundled minutes, promotional minutes and outgoing
international roaming calls, but excluding national roaming calls, incoming international roaming calls and calls to free services.
Vodacom Group Limited IR presentation | 5 September 2016
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http://www.vodacom.com/about-us/investors/investors-home
VodacomIR@vodacom.co.za
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