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Vodafone Group PlcEMAPA Analyst & Investor Day
Arun Sarin, Chief Executive
6 December 2006
Analyst and Investor Day – EMAPA2
Disclaimer
The following presentations are being made only to, and are 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 these presentations or any of the contents.
Information in the following presentations 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 future performance of such investments.
These presentations do 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 Vodafone Group (the “Group”).
The presentations contain forward-looking statements which are subject to risks and uncertainties because they relate to future events. Some of the facts which may cause actual results and developments to differ from these forward looking statements are discussed in the last slide of the final presentation and others can be found by referring to the information contained under the heading “Forward Looking Statements” in our interim results announcement for the six months to 30 September 2006 and under the heading “Risk Factors, Trends and Outlook” in our Annual Report for the year ended 31 March 2006. The presentation slides and our Annual Report can be found on our website (www.vodafone.com).
The presentations also contain certain non-GAAP financial information. 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. Although these measures are important in the management of the business, they should not be viewed as replacements for, but rather as complementary to, the comparable GAAP measures such as turnover and reported items on the consolidated profit and loss account or the consolidated statement of cash flows.
Vodafone, Vodafone live!, Vodafone Mobile Connect, Vodafone Wireless Office and Vodafone Passport are trade marks of the Vodafone Group. Other product and company names mentioned in these presentations may be the trademarks of their respective owners.
2
Analyst and Investor Day – EMAPA3
Outline of the day
EMAPA overviewPaul Donovan, CEO EMAPA
Vodafone TurkeyAttila Vitai, CEO
Andrew Davies, CFO
Vodafone EgyptIan Gray, CEO
Martin Moorhouse, CFO
VodacomPieter Uys, COO
Leon Crouse, CFO
Vodafone RomaniaLiliana Solomon, CEO
Karsten Wildberger, CFO
Opening remarks
Arun Sarin, Chief Executive
Break-out sessions
Wrap-up Q&A
Analyst and Investor Day – EMAPA4
Delivering on our five key strategic objectives
1) Revenue stimulation and cost reduction in Europe
2) Deliver strong growth in emerging markets
3) Innovate and deliver on our customers’ total communications needs
4) Actively manage our portfolio to maximise returns
5) Align capital structure and shareholder returns policy to strategy
1
2
3
4
5
3
Analyst and Investor Day – EMAPA5
0.6%Europe
18.6%EMAPA subsidiaries and JVs
(0.1%)Other associates and investments
US 18.2%
(1.0)pp
0.4pp
2.0pp
1.6pp
Focus on regional performance H1 06/07
Proportionate mobile organic revenue growth
Proportionate mobile organic EBITDA margin
change
54.7%
11.3%
10.5%
20.1%
Contribution to proportionate
EBITDA
13.7%EMAPA 1.3pp41.9%
Analyst and Investor Day – EMAPA6
EMAPA priorities
• Deliver high performance in
controlled businesses
• Maximise shareholder returns in
Affiliates
• Leverage measurable synergy
benefits from scale and scope
• Outperform acquisition business
cases
Priorities Global mobile telecom annual revenues
Source: Merrill Lynch. Strategy Analytics
CAGR%
Emerging markets are ~60% of total expected growth over next 5 years
12.3
4.4
310
2005
434
2010E
Emerging marketsDeveloped markets
275221
159
89
£bn
4
Analyst and Investor Day – EMAPA7
Increased exposure to high growth markets
Telsim acquired in May 06
0% 100%
Oskar acquired in May 05
0% 100%
Mobifon stake increase in May 05
20% 100%
Bharti stake acquisition in Nov/Dec 05
0% 10%
Vodafone Egypt stake increase in Dec 06
50% 55%
Vodacom stake increase in Jan 06
35% 50%
Vodafone Czech Republic
Vodacom
BhartiVodafone Romania
Vodafone Turkey Vodafone Egypt
Note: Dates are as at completion of relevant acquisition
Analyst and Investor Day – EMAPA8
Portfolio management
• Consolidate presence in local/regional markets
• Preference for control
• Ability to exert significant influence in minority investments
• IRR to exceed local risk adjusted cost of capital by at least 200bp
• ROIC to exceed local risk adjusted cost of capital within 3–5 years
Mobile strategic and financial criteria
5
Analyst and Investor Day – EMAPA9
Investing in future growth
High performing organisations
Country specific business models
Key messages
Two way value transfer between emerging markets and Vodafone Group
Analyst and Investor DayEMAPA Region
Paul Donovan, EMAPA CEO
6 December 2006
6
Analyst and Investor Day – EMAPA11
Contents
1. Introduction to EMAPA
2. Executing our strategy in emerging markets
3. How are we doing?
4. Today’s presentations
Analyst and Investor Day – EMAPA12
Priorities Areas of emphasis
The EMAPA strategy
• Deliver high performance in controlled businesses
• Maximise shareholder returns from affiliates
• Leverage measurable synergy benefits from scale and scope
• Outperform acquisitions business cases
• Performance management
• Strategic alignment
• Facilitation of best practice
• Leadership capability
Our purpose is to optimise the return from the EMAPA footprint
7
Analyst and Investor Day – EMAPA13
The EMAPA region – overview
6.0%
13.7%
18.6% 18.2%
0%
5%
10%
15%
20%
Group mobile EMAPA EMAPAsubs/JVs
US
Eastern Europe• Vodafone Romania• Vodafone Turkey• Vodafone Czech Republic• Vodafone Hungary• Polkomtel (Poland)
Middle East, Africa and Asia• Vodafone Egypt• Vodacom (South Africa)• Safaricom (Kenya)• Bharti (India)
Pacific• Vodafone Australia• Vodafone New Zealand• Vodafone Fiji
Associates• Verizon Wireless (US)• SFR (France)• Swisscom Mobile (Switzerland)
Investments• China Mobile (PRC)
Subs/JVs10.2%
Europe/ Other62.5%
Associates27.3%
Adjusted Group operating profitProportionate revenue growth H1 FY06/07
Subsidiaries & Joint Ventures
Associates & Investments
EMAPA 37.5%
Source: Company data
Analyst and Investor Day – EMAPA14
Opportunity for future growth in mobile
(1) Company data and published competitor results, (2) IMF, (3) Egyptian Government estimates, (4) Based on revenue market shareSource: 2005 CIA Factbook Statistics
15.029Fiji
36.1116Czech Republic
12.392New Zealand
24.170(1)Romania
32.788Australia
14.972(1)South Africa
23.494Poland
Associates23.276USA
21.278France
12.496Switzerland
Investments110.233China
23
11
95
67(1)
21(1)
Market penetration (%)
5.8
8.4
4.1
7.4(2)
6.0(3)
GDP growth (%)
1
1
3
2
1
Position in market (4)
Kenya
JVs India
Turkey
Egypt
Hungary
Subsidiaries
8
Analyst and Investor Day – EMAPA15
Underdeveloped fixed line and broadband
Source: ICT statistics
DSL penetration % of populationFixed line penetration % of population
Significant variances between developed and developing markets
66 65
5245
13
0
10
20
30
40
50
60
70
80
US Europe Pacific EasternEurope
ME,Africa &
Asia
(%)
12
65
21
0
2
4
6
8
10
12
14
US Europe Pacific EasternEurope
ME,Africa &
Asia
(%)
Analyst and Investor Day – EMAPA16
Common themes for emerging markets
• Competitive landscape still evolving– political and regulatory uncertainties
• Development of telecoms aligned with economic growth– weak fixed line infrastructure
• Unequal distribution of wealth– close alignment of customer economics
with cost structure
• Predominantly 2G markets – selective application of 3G for capacity
and data
• Broadly unsubsidised markets– SIM and handsets sold separately– margins comparable with more mature
markets
• Leveraging Group benefits where appropriate
Mobile issuesMacro issues
9
Analyst and Investor Day – EMAPA17
Contents
1. Introduction to EMAPA
2. Executing our strategy in emerging markets
3. How are we doing?
4. Today’s presentations
Analyst and Investor Day – EMAPA18
Executing our strategy
• Invest to accelerate penetration and usage
• Manage costs to sustain margins
• Rapid introduction of best practice– emerging markets– Vodafone Group
• Driving local scale efficiencies
• Future sources of growth– total communications – payments/cash management– wireless broadband
• Driving regional scale efficiencies
• Act as low cost outsource partner for developed markets
• Inclusion in broader Group initiatives
Today Tomorrow
+
10
Analyst and Investor Day – EMAPA19
Emerging Markets Board
Senior representation from companies linked to Vodafone in emerging markets
Drive benefits from bringing together the whole of Vodafone’s community of emerging market operations
• SUBSIDIARIES– Romania– Egypt– Turkey
• AFFILIATES– Bharti – China Mobile– Vodacom – Safaricom
• PARTNERS– Telecom Malaysia– Mobiltel– America Movil
Analyst and Investor Day – EMAPA20
Core emerging markets initiatives
Focus on ultra low cost devicesHandsets
Lowering the cost of network roll-out and managementNetwork cost reduction
Solutions for low cost, safe value transferCredit & money transfer
Propositions for migrant workers Developing specific propositions for migrant workers
A number of initiatives have been launched
Regulatory and Public Policy best practiceRegulation
Vodafone can leverage the collective knowledge and experience ofbusinesses serving 3.4bn people in emerging markets
11
Analyst and Investor Day – EMAPA21
Benefits from being part of Vodafone
Procurement benefits in network infrastructure and other areas ranging between 5–10% Supply chain savings
1.2m connections in H1 FY06/07 through account negotiation at Group level(1)Multinational companies
Roaming
Handsets 11% savings in handset purchases in FY06/07 to date due to Vodafone purchasing volumes(3)
31% more outgoing minutes and 25% more visitor revenues H1 FY06/07 compared to H1 FY05/06(2)
Vodafone products Benefit from a wide range of products (Vodafone live!, Vodafone Mobile Connect datacard, HSDPA, BlackBerry® from Vodafone)
Group projects Participating in a number of Group initiatives such as AD&M, ERP
Further benefits obtainable from leveraging Group scale
Tangible value creation today with further inclusion within Group projects where appropriate over time
(1) EMAPA subsidiaries, joint ventures and affiliates, (2) EMAPA subsidiaries only, (3) EMAPA subsidiaries, joint ventures and affiliates involved in Group purchasing programmes
Analyst and Investor Day – EMAPA22
Mobile Plus in emerging markets
12
Analyst and Investor Day – EMAPA23
ChinaIndia
India and China
• 1.1bn population(1)
• 11% mobile penetration(2)
Bharti – No.1 player(3)
• Customers 27m
• Mobile revenue growth 68%
• EBITDA margin 34.8%
• 1.3bn population(1)
• 33% mobile penetration(2)
China Mobile – No.1 player(3)
• Customers 287m
• Revenue growth 19%
• EBITDA margin 56.2%
10% stake acquired(November/December 2005)
• Innovative cost model
• Emphasis on outsourcing
3.27% stake acquired(November 2000 and June 2002)
• Co-operation on standards setting
• Chinese supplier relationships
(1) CIA, (2) International Telecommunications Union, (3) Company data, H1 FY06/07
Analyst and Investor Day – EMAPA24
Contents
1. Introduction to EMAPA
2. Executing our strategy in emerging markets
3. How are we doing?
4. Today’s presentations
13
Analyst and Investor Day – EMAPA25
EMAPA results – H1 FY06/07
EMAPA continues to perform strongly principally driven by results in the subsidiaries, JVs, the US and recent acquisitions
Pacific
66 £m
EasternEurope
Middle East, Africa, Asia US Other
Associates Total
EMAPA
% of Group total 1.2%
118
2.3%
339
6.6%
1,015
19.7%
390
7.6%
1,928
37.5%
Organic growth % 26.4% 21.2% 38.4% 33.7% 0.3% 26.1%
Adjusted operating profit
Analyst and Investor Day – EMAPA26
Performance against acquisition
• HI FY06/07 reported organic statutory revenue growth of 4.1%– includes 0.6% uplift from Romania and South Africa– proforma to include Czech, Turkey and India would add a further 1%
to Group statutory revenue growth• Recent emerging markets acquisitions contributed over 30%
to proforma Group organic growth
Impact on Group growth rates
Financial criteria
Outperformance against acquisition plans
(H1 FY06/07 adjusted operating profit)
• IRR to exceed local risk adjusted cost of capital by at least 200bp
• ROIC to exceed local risk adjusted cost of capital within 3–5 years
Czech Republic Romania India
South Africa Turkey
45% 177%28%In-line46%
14
Analyst and Investor Day – EMAPA27
Contents
1. Introduction to EMAPA
2. Executing our strategy in emerging markets
3. How are we doing?
4. Today’s presentations
Analyst and Investor Day – EMAPA28
Outline of the day
EMAPA overviewPaul Donovan, CEO EMAPA
Vodafone TurkeyAttila Vitai, CEO
Andrew Davies, CFO
Vodafone EgyptIan Gray, CEO
Martin Moorhouse, CFO
VodacomPieter Uys, COO
Leon Crouse, CFO
Vodafone RomaniaLiliana Solomon, CEO
Karsten Wildberger, CFO
15
Analyst and Investor DayEMAPA Region
Attila Vitai, Chief Executive Officer, Vodafone Turkey
6 December 2006
Analyst and Investor Day – Vodafone Turkey30
Contents
1. Market environment
2. Execution plan
3. Financial overview
4. Summary
16
Analyst and Investor Day – Vodafone Turkey31
Turkey – a large and growing country
• A large population that continues to grow at 3–4 times the European average
• 3rd largest market by population in which Vodafone has a controlled operating company– expected to be larger than Germany by 2017
• A young and vibrant population– 47% of population aged under 25 compared to EU15 average of 30%(1)
68.7 69.6 70.4 71.4 72.3 73.2 74.1 75.0 75.9 76.9
64
68
72
76
80
2001 2003 2005 2007E 2009E
Population (m)
47%
53%
25 and under
Over 25
Population growthPopulation growth Population aged under 25Population aged under 25
(1) EurostatSource: National Institute for Statistics Turkey (TUIK)
1.3% CAGR 05–10
Analyst and Investor Day – Vodafone Turkey32
A growing economy
• Economy has demonstrated growth and resilience since 2001
• Financial sector has shown an improved regulatory and compliance environment
• Improved fiscal discipline by Turkish Government and Central Bank– IMF agreements– EU accession
Source: National Institute for Statistics Turkey (TUIK), Central Bank of Turkey, IMF
29.7
18.4
9.3 7.7 9.94.0 4.0
68.5
5.0
0
10
20
30
40
80
2001 2002 2003 2004 2005 2006E 2007E 2008E
(%)
CPI Governm ent target
InflationInflation GDP growthGDP growth
362
301241
183147 5.8
5.06.0
8.97.9
7.4
050
100150200250300350400
2001 2002 2003 2004 2005 2006E 2007E
(US$bn)
0
2
4
6
8
10(%)
GDP (US$ bn) GDP growth (fixed 1987 prices )
17
Analyst and Investor Day – Vodafone Turkey33
42%
58%
Fixed
Mobile
Telecommunications market structure
• Rapid mobile growth to date– duplicate SIMs suggest real penetration
54%–57%
– penetration expected to increase by >20% in the medium term
• Stagnating fixed line penetration – low by European averages – internet and DSL penetration low (c.23%
and c.4% respectively)(2)
• Fixed line operators enjoy significant tax advantages
• Mobile operators prohibited from having fixed line licences
27 27 27 27 26 26
2633
4048
6067
0
20
40
60
80
100
2001 2002 2003 2004 2005 2006
(%)
Fixed penetration Mobile penetration
Penetration growth Penetration growth
Mobile vs. fixed revenue share(1)Mobile vs. fixed revenue share(1)
(1) Estimates for H1 calendar 2006, (2) Source: Turk TelekomSource: Company Estimates
Mobile best positioned for future growth
Analyst and Investor Day – Vodafone Turkey34
Mobile market structure
• Telsim history– market share fell during uncertainty from 2001 to 2003– SDIF took control in 2004 and stabilised market share– leading up to privatisation, focus was on customer growth
• In 2004 consolidation created a 3 player market
• Significant opportunity for Vodafone– only operator with customer share higher than revenue share
Customer share by operatorCustomer share by operator Revenue share by operatorRevenue share by operator
Source: Public data where available and Company estimates; Avea pro-forma pre 2004
28 24 19 19 22 24
71 70 71 69 64 62
1414121061
0
20
40
60
80
100
2001 2002 2003 2004 2005 Sep-06
Telsim/Vodafone Turkey Turkcell Avea
27 22 18 17 20 22
72 72 72 71 66 64
1414121061
0
20
40
60
80
100
2001 2002 2003 2004 2005 Sep-06
(%) (%)
18
Analyst and Investor Day – Vodafone Turkey35
Market share by segment
• Youth segments comprise in excess of 50% of the consumer market
Customer share of consumer marketCustomer share of consumer market Customer share of business marketCustomer share of business market
Source: Company estimates as at September 2006
15% 25%
61%
Vodafone Turkey Turkcell Avea
5% 10%
85%
Vodafone Turkey Turkcell Avea
• Turkcell dominates business market through focus on network quality and product
Vodafone has a significant opportunityto grow share of young and high value customers
Analyst and Investor Day – Vodafone Turkey36
• No direct retail presence but exclusive dealer franchises generate approx 40% of customer volumes– Vodafone has 760 dealers compared to 850 for Turkcell and 440 for Avea
• >20,000 non-exclusive sub-dealers generate 60% of volumes
The competitive landscape
• SIM and handset acquisition by customers separate
• Very limited handset subsidies – only limited promotions targeting HVCs
• Dealer commission rates are generally low and tend to be linked to customer revenues
Distribution structure
Low handset subsidies
Customers (m)
Contract (%)
ARPU
MOU
EBITDA margin (%)
Vodafone Turkey(1) Avea(2)Turkcell(1)
30.8
18%
US$12.1
82
39.8%
12.2
10%
YTL16.5 (US$11.0)
183
22.7%
7.3
40%
US$10.5
173
N/A
(1) 30 September 2006, (2) UBS as at 30 June 2006Source: Public data where available and Company estimates
19
Analyst and Investor Day – Vodafone Turkey37
• Telecommunications Authority (“TA”) is reducing termination rates to similar levels as the rest of Europe
• ‘Glide path’ to symmetry with Turkcell agreed to approx €0.08/min by FY08/09
• Taxes on mobile sector highest in the world at 51% of total customer spend– represents 30% of revenues which flows through to EBITDA margin
• The Turkish Government has indicated that it will lower taxes for mobile services
• Up to 4 3G licenses to be issued late 2007/beginning 2008
• WiMAX/Wireless broadband to follow
• Unattractive framework for 3G so far
• TA plans to implement MNP by mid-2007 at the latest
• No consensus between operators
• Vodafone is taking a lead role in shaping the implementation
Termination Rates
Taxes
3G/WiMAX
MNP
An evolving regulatory environment
Source: Company estimates and Telecommunications Authority
Analyst and Investor Day – Vodafone Turkey38
Share of mobile market
Changing perceptions
Effective segmentation
Market evolution
Four key areas to drive growth
• Organic growth set to continue– real penetration around 54%–57%– macro economic growth of approximately 5% p.a.
• Incumbent has more than 60% share
• Vodafone Turkey recent net adds share at 40% and market share at 24%
• Legacy perceptions resulted in negative drag
• Early success in changing attitudes
• Vodafone brand awareness is already at high levels
• Segmented marketing to consumers
• Under-representation in business segment to be addressed
• Grow market
• Grow share
• Segmented approach
• Leverage Group capabilities
The Turkish market opportunity
Source: Company estimates, IMF and Central Bank of Turkey
20
Analyst and Investor Day – Vodafone Turkey39
Contents
1. Market environment
2. Execution plan
3. Financial overview
4. Summary
Analyst and Investor Day – Vodafone Turkey40
• 93% population coverage vs. 97% for Turkcell
• Poor network quality– busy hour congestion in excess of 12%– network unavailability in excess of 0.8%– dropped call rate of 1.25%
Status on acquisition
• Inadequate customer care quality had a significant effect on customer satisfaction
• Call abandonment rate estimated at 30%
• Existing structure gave little emphasis on customer experience or customer value
• Little focus on business customers
• No segmented propositions offered by the Telsim brand
• Turkcell currently offers products for segmented markets (e.g. youth portal, separate business brand)
Operator brand preference(1)
User Preference
Con
side
ratio
n am
ongs
t non
-use
rs
50
50
100
100
Telsim
Turkcell
Avea
60
70
80
90
Postpaid Prepaid
CDI scores(2)
Poor network coverage & quality
Customer service in crisis
Distribution out of balance
Limited product and service portfolio
(1) Millward Brown Brand Preference Results Oct 2006, (2) External customer researchSource: Company data
00
21
Analyst and Investor Day – Vodafone Turkey41
Before After
Fixing the basics
Already achieved
• Network optimisation in tourist areas and major cities– busy hour congestion improved by more than 60%– network unavailability improved by 25%– dropped call rate improved by 30%
• Commenced rebalancing of prepaid tariffs
• Customer service stabilised
Source: Company data
Analyst and Investor Day – Vodafone Turkey42
Innovative approach to network investment
• Total investment(1) now expected to be c.$200m; includes c.$100m of further investment in transmission capex identified post acquisition to lower leased line operating costs
• Three-year contract awarded for core network that is scalable, future-proof and easy to manage
• Provides 3G-ready infrastructure that streamlines existing operations and provides a basis for fast rollout of future products
Radio Access
Core and Transmission
• Total investment(1) now expected to be c.$500m (incl. $100m spent pre-completion)
• 30% increase in base stations from December 2005 to January 2007 to reach c.6,500
• Innovative Total Cost of Ownership (“TCO”) based contract awarded for expansion post January 2007
– contract based on total opex and capex spend over an eight year period
– best of breed approach including erlang-based approach used by Bharti
– KPIs will achieve parity with Vodafone’s technology requirements
– intention to increase number of BTS to c.9,000
Network investment(1) now expected to be c.$700mcompared to $900m previously
(1) Within three years from December 2005Source: Company data
22
Analyst and Investor Day – Vodafone Turkey43
• Existing billing platforms are functional and scalable
• Significant investments in CRM capacity and capability, and data warehousing
Building a robust IT environment
• Revised approach to call centre operations, including more Intelligent Voice Recognition (IVR)
• Reutilising existing call centre operations with only small expansion required
Billing and IT Platforms
Call centre operations
• Investment in data centre resiliency and building a second site to ensure business continuity
• Long term strategy to integrate with Group TechnologyData Centres
IT investment(1) now expected to be c.$150m compared to $300m previously
Capex investment now expected to be about 1/3 lower than original plan: c.$850m compared to $1.2bn
(1) Within three years from December 2005Source: Company data
Analyst and Investor Day – Vodafone Turkey44
Consumer focus – a segmented approach
The focus is on growing share of youth segments, whilst increasing ARPU by leveraging success of friends and family tariffs
• Provide segment specific value-for-money tariffs• Leveraging learning from friends and family tariffs• Rebalancing prepaid and contract tariffs
Value not price
• Introduce Vodafone brand as a challenger and premium youth brand• Short period of dual-branding, quickly followed by a complete brand swap
Challenger brand
• Access to customised infotainment servicesVodafone live! to drive value added services
Broader handset choice • Provide greater range of handsets including Vodafone-branded terminals through exclusive distributors while mitigating tax impacts
Consumer proposition
23
Analyst and Investor Day – Vodafone Turkey45
Business focus – leveraging Group capabilities
Well positioned as a challenger brand
Network coverage and performance parity of 2G network with other Vodafone operating companies to be complete within 2 yearsImproved network
Expanded shop network along with direct sales team for SME and telesales for SoHo
Rebuilding sales capability
Support new tariffs with flagship Vodafone products, such as: BlackBerry from Vodafone/Push Email, Vodafone Mobile Connect datacard
BlackBerry® from Vodafone/data card
Group leverage for MNCs
Target with direct sales force, flexible tariff structures and roaming discounts, leveraging existing Group relationships
Business proposition
Analyst and Investor Day – Vodafone Turkey46
Vodafone Turkey – a core member of the EMAPA team
Senior team with experience across diverse cultures and boundaries
Combining global scale with local knowledge and innovation
Providing Vodafone branded devices through exclusive distributors
Network & IT design based on Vodafone technology standards
Leveraging benefits from Vodafone
Vodafone live! based youth portal leveraging local capability
Leverage existing Group products and relationships
Shared platforms & processes for IT, Finance, HR, Supply Chain
Management
Procurement
Technology
Handsets
Content
Business propositions
Service centres
24
Analyst and Investor Day – Vodafone Turkey47
Contents
1. Market environment
2. Execution plan
3. Financial overview
4. Summary
Analyst and Investor DayEMAPA Region
Andrew Davies, CFO, Vodafone Turkey
6 December 2006
25
Analyst and Investor Day – Vodafone Turkey49
EBITDAEBITDAARPUARPU
RevenueRevenueCustomersCustomers
Telsim – historic financial performance
Source: Pro-forma unaudited Telsim information for illustrative purposes; not prepared under Vodafone accounting policies
0
2
4
6
8
10
Dec 01 Dec 02 Dec 03 Dec 04 Dec 05
(m)
739965 936 971
1,407
0
400
800
1,200
1,600
CY 2001 CY 2002 CY 2003 CY 2004 CY 2005
(YTL m)
165186 175 167 175
0
40
80
120
160
200(YTL)
60
134
78
119
215
0
50
100
150
200
250(YTL m)
4.8 5.5 5.16.5
9.6
CY 2001 CY 2002 CY 2003 CY 2004 CY 2005CY 2001 CY 2002 CY 2003 CY 2004 CY 2005
Analyst and Investor Day – Vodafone Turkey50
Recent performance highlights strong growth
• 36% growth in total customers
• 44% growth in prepaid
• 8% decline in contract
• Churn broadly stable at 32%
• Growth primarily driven by customer increase
• 2% growth in blended ARPU:– 12% growth in prepaid ARPU (driven by SMS
price increases)– 8% growth in contract ARPU (driven by voice
usage uplifts)
(1) YTD based on 24 May 2006 to 30 September 2006Source: Company data. Unaudited financial information for Telsim prior to 24 May 2006 is presented in accordance with Turkish GAAP adjusted for certain items to closer align the accounting treatments with those required by IFRS. This adjusted information may differ in certain respects from IFRS and accounting policies applied by Vodafone Group Plc.
Service revenue(1)Service revenue(1)CustomersCustomers
+ 39%+ 36%9.0
12.2
02468
101214
Sep-05 Sep-06
(m)
570
792
0
300
600
900
YTD 05/06 YTD 06/07
YTL (m)
26
Analyst and Investor Day – Vodafone Turkey51
EBITDA analysis
EBITDA(1)EBITDA(1) • +4.4pp increase in EBITDA margin YoY to 22.7% in period to 30 Sept 06– ARPU uplift– strong visitor traffic mix from increased
number of roamers – cost control as costs grew 9% less than
revenue growth
• Margins for FY 06/07 expected to be high teens – seasonally lower margins due to less
visitor roaming and weaker minute volumes
– costs are expected to rise in H2
(1) YTD based on 24 May 2006 to 30 September 2006Source: Company data. Unaudited financial information for Telsim prior to 24 May 2006 please see additional disclosures on slide 50
+ 73%
105
182
0
40
80
120
160
200
YTD 05/06 YTD 06/07
YTL (m)
Analyst and Investor Day – Vodafone Turkey52
19.0%20.4%
10.6%16.0%
26.5%
24.0%
9.7%12.6%
10.5%9.7%
0%
20%
40%
60%
80%
100%
YTD 05/06 YTD 06/07
Interconnect costs Operating expenses
Other direct costs Acquisition and retention costs
Cost structure
• Non-tax costs decreased by 5.0% as % of revenue year-on-year– low interconnect costs from high on-net
traffic– operating expenses fell from:
– scale efficiencies from employee efficiency– lower technology opex growth
• Indirect taxes increased by 0.6% as % of revenue year-on-year– Driven by revenue based taxes– Acquisition & retention costs are indirect
taxes YTD
• In H2 expect higher costs from:– brand relaunch– higher number of base stations– higher employee costs
Costs as % of revenue(1)Costs as % of revenue(1)
(1) YTD based on 24 May 2006 to 30 September 2006Source: Company data. Unaudited financial information for Telsim prior to 24 May 2006 please see additional disclosures on slide 50
Decreased 5.0% from 52.2% to
47.2%
Increased 0.6% from 29.5% to
30.1%
Indirect taxes
Non-tax costs
27
Analyst and Investor Day – Vodafone Turkey53
• Blended tax rate is 51% of customer spend
• We are engaging with the Turkish Government to reduce this burden
Basis of tax Tax as % of customer spend
18% of invoiced amount
25% of invoiced amount
VAT
Proportional SCT(1)
12.5%
17.5%
24 YTL per acquisition Fixed SCT(1) 4.2%
10 YTL per acquisition Wireless licence fee 1.8%
10 YTL p.a. per customerWireless usage fee 4.5%
15% of revenues Treasury share 10.5%
Indirect tax analysis
Source: Company Data; (1) Special Communications Tax
P&L impact as % of revenue
N/A
N/A
6.0%
2.6%
6.5%
15.0%
TOTAL 51.0% 30.1%
Cus
tom
er
bill
Indi
rect
ta
xes
Analyst and Investor Day – Vodafone Turkey54
CommentaryCommentaryOperating free cash flow (YTD)(1)Operating free cash flow (YTD)(1)
Cash flow ahead of expectations
• Strong cash flow generation
• 175m YTL of “one-off” working capital benefit generated by end of June 2006
• YTD Capex intensity of 12% will increase to over 30% for the full year
• VAT on transaction of c.YTL600m (US$0.4bn) expected to be paid in H2 FY06/07
• Excluding VAT on transaction, FY06/07 operating FCF expected to be slightly positive
• Beyond FY06/07, operating FCF expected to be positive as operating cashflows more than offset capex
804 622
182
285 103
364
-100
100
300
500
700
900
Rev
enue
Ope
ratin
gex
pens
es
EBIT
DA
Wok
ing
capi
tal
Cap
ex
Ope
ratin
g fre
eca
sh fl
ow
YTL (m)
(1) YTD based on 24 May 2006 to 30 September 2006Source: Company data.
28
Analyst and Investor Day – Vodafone Turkey55
Vodafone Turkey – performing ahead of expectations
• 5 year revenue CAGR of 20% in US$
• EBITDA margin
– high single digits for FY06/07
– possible to reach mid 20% in medium term
• Capex requirement of $1.2bn leading to short term
negative cash flow
• Further $1bn of investment
• Earnings per share dilution in short to medium term
• 5 year revenue CAGR of 20% in US$
• EBITDA margin
– high teens for FY06/07
– possible to reach high 20% in medium term
• Capex requirement of $0.85bn(1) will be funded out
of operational cash flows
• No funding requirement
• Earnings per share now accretive one year earlier
Updated plan – Dec 06Updated plan – Dec 06Acquisition Plan – Dec 05Acquisition Plan – Dec 05
(1) Of $0.85bn, $0.1bn was paid prior to completion
Good early progress with focused execution plan for next 2–3 years
Analyst and Investor Day – Vodafone Turkey56
Contents
1. Market environment
2. Execution plan
3. Financial overview
4. Summary
29
Analyst and Investor Day – Vodafone Turkey57
Vodafone Turkey – winning through a targeted strategy
Deliver exceptional revenue and revenue market share growth
Invest in network and IT infrastructure, and
people
1Build the best
telecoms brand
2Focus on higher value
youth and business segments
3
No.1 for customer satisfaction
Analyst and Investor DayEMAPA Region
Liliana Solomon, Chief Executive Officer, Vodafone Romania
6 December 2006
30
Analyst and Investor Day – Vodafone Romania59
Contents
1. Market environment
2. Vodafone Romania performance
3. Strategic objectives
4. Summary
Analyst and Investor Day – Vodafone Romania60
Romania is a large, growing economy
• Similar size land mass to the UK
• 22m inhabitants
• Urban/rural population: 53%/47%
• Average monthly income per household of $325– urban: $405– rural: $250
• EU accession in January 2007– $6.2bn foreign direct investment in 2006– GDP growth of more than 6% pa expected
• Five years growth time lag compared with other Eastern European markets
Country facts High growth and lower inflation
Source: INS, Ziarul Financiar, public data
0
1
2
3
4
5
6
7
8
9
2002 2003 2004 2005 2006E 2007E 2008E0
4
8
12
16
20
Inflationrate (%)
Real GDPgrowth (%)
31
Analyst and Investor Day – Vodafone Romania61
The Romanian telecom market is worth US$3.9bn
Romanian telecom market Opportunities and challenges
• Multiple mobile SIMs: ~1.2– real penetration around 60%
• Low fixed line penetration of 20%– mobile can win disproportionate share
• Low penetration of PCs (12%) and internet access (5%) – significant data opportunity
• High cable TV penetration of 40%– RCS/RDS recently entered market
Source: Company data; IDC, EITO, ANRC
0
1,000
2,000
3,000
4,000
5,000
6,000
2006 2010E
(US$)000s
Mobile voice Fixed voice Total data (incl access)
Mobile SIM penetration
CAGR
9.8%
0.2%
19%
70% 110%
6%
25%
69%
8%
19%
73%
8%
Analyst and Investor Day – Vodafone Romania62
Mobile – a five player market
Source: Company data, H1 FY06/07
• CaTV/DTH
• Cable Link (triple play): 70 cities
• Won 3G licence
• CDMA 2000: 87% pop
• EVDO in 43 cities
• Won 3G licence
• GSM: 90% pop
• Lost 3G licence
• GSM: 97% pop
• EDGE: 41 cities
• 3G in 4 cities
• GSM: 96% pop
• 3G in 23 cities
• HSDPA 12% pop
Technology
• Market leader in business
• Strong in Bucharest and South
66% / 34%
45.7%
45.4%
Vodafone
• Good regionalpresence
• Strong in young segment
68% / 32%
47.9%
47.6%
Orange
• Prepaid focus
• Aggressive promotions
• Acquired indirect retailer (Germanos)
83% / 17%
2.0%
4.3%
Cosmote
n/a0% / 100%Prepaid/ contract ratio
n/a4.4%Service revenue share
• High investment needed to fulfil regulatory requirements
• Business focus with convergent products
• Price aggressive
Market positioning
n/a2.7%Customer share
RCS/RDSZapp
32
Analyst and Investor Day – Vodafone Romania63
Outbound mobile price levels and usage
Outbound MOU and average price per outbound min (US$ cent)
Romania has a relatively low price level and MOU
16Monthly blended ARPU in US$
Source: Company data for Vodafone Romania and Europe region; H1 FY06/07
0.13
0.23
88
75
0.00
0.05
0.10
0.15
0.20
0.25
Romania Western Europe
(US$cents)
65
70
75
80
85
90
(Mins)
Price per minute MOU
37
Analyst and Investor Day – Vodafone Romania64
• First regulation of mobile termination rates in September 2006 from €7.7 cents to €7.2 cents
• Termination rates likely to be in line with EU average rates longer term
Regulatory environment
• 2 additional UMTS licences have been awarded to RCS/RDS and Zapp increasing the number of 3G operators to 4
• Mobile WiMAX licences are being considered by authorities
Mobiletermination
rates
Spectrum/ licences
Other• MVNOs not present in market
• Mobile number portability will become mandatory by end of 2007/early 2008
33
Analyst and Investor Day – Vodafone Romania65
Contents
1. Market environment
2. Vodafone Romania performance
3. Strategic objectives
4. Summary
Analyst and Investor Day – Vodafone Romania66
1,960
2,2432,406
1,600
1,800
2,0002,200
2,400
2,600
H1 FY05/06 H2 FY05/06 H1 FY06/07
Contract (000s)
Very strong customer growth
Market share of net additionsCustomer base
Source: Company and public data
44.8% 38.7%
47.3%35.9%
15.9%7.9% 9.5%
0%
20%
40%
60%
80%
100%
H1 FY05/06 H1 FY06/07
Contract
3,5694,141
4,749
2,000
3,000
4,000
5,000
H1 FY05/06 H2 FY05/06 H1 FY06/07
Prepaid (000s) +33%
29.5%52.0%
70.5% 20.1%
28.0%
0%
20%
40%
60%
80%
100%
H1 FY05/06 H1 FY06/07
Prepaid
Vodafone Romania took a leading 48.5% share of net adds in H1 FY06/07
+23%
Vodafone
Orange
Cosmote
Zapp
34
Analyst and Investor Day – Vodafone Romania67
MOU growth offsetting price declines
• Contract ARPU stable despite increasing competition
• MOU increase and higher share of business were able to offset price decrease
• Prepaid ARPU growth due to increasing MOU and higher activity of customers
Prepaid ARPUContract ARPU
Blended ARPU increased by 2% pa due to improved prepaid
Source: Company data
30.628.2
30.2
15
20
25
30
35
H1 FY05/06 H2 FY05/06 H1 FY06/07
(US$)
6.7 6.57.0
4
5
6
7
8
H1 FY05/06 H2 FY05/06 H1 FY06/07
(US$)
Analyst and Investor Day – Vodafone Romania68
482
137 12 631
0
100
200
300
400
500
600
700
H1 FY05/06 Customergrowth
ARPU growth H1 FY06/07
(US$m)
482527
631
0
100
200
300
400
500
600
700
H1 FY05/06 H2 FY05/06 H1 FY06/07
(US$m)
Service revenues are growing strongly
Service revenue
+31%
Drivers
Source: Company data
92% 8%
35
Analyst and Investor Day – Vodafone Romania69
On track to attain revenue leadership
Service revenue of Vodafone vs. Orange
Source: Company and public data
44%
45%
46%
47%
48%
49%
50%
51%
52%
53%
54%
Q3 FY04/05 Q4 FY04/05 Q1 FY05/06 Q2 FY05/06 Q3 FY05/06 Q4 FY05/06 Q1 FY06/07 Q2 FY06/07
Orange Vodafone
$24m $7m
Analyst and Investor Day – Vodafone Romania70
253 258
326
0
50
100
150
200
250
300
350
400
H1 FY05/06 H2 FY05/06 H1 FY06/07
(US$m)
EBITDA
Strong EBITDA growth and high EBITDA margin
Margin breakdown for H1 FY06/07EBITDA
(1) Based on gross acquisition and retention costs; (2) Interconnect and prepaid airtime commissions account for 70% of other direct costsSource: Company data
100 22.1
9.6
18.7
49.6
0
20
40
60
80
100
Totalrevenue
Operatingexpenses
Acquisitionand
retentioncosts
Otherdirectcosts
EBITDA
(%)
+29%
(2)
(1)
36
Analyst and Investor Day – Vodafone Romania71
Managing operating expenses
• Macroeconomic factors leading to cost increases– salaries and wages– rental expenses – in particular for cell sites– utility costs
• Cost savings through global procurement – handsets and network equipment
• Outsourcing opportunities (e.g. handset repairs, logistics)
• Company-wide benchmarking and efficiency program (e.g. relocation of call centres)
Drivers forincreasing costs
Cost reduction
Focus on efficiency despite inflationary pressures
Analyst and Investor Day – Vodafone Romania72
Contents
1. Market environment
2. Vodafone Romania performance
3. Strategic objectives
4. Summary
37
Analyst and Investor Day – Vodafone Romania73
Strategic objectives
To become the provider of choice for customers’ total communication needs
Leverage the Vodafone
brandin Romania
Deliver exceptional
growth through best distribution
Usage stimulation in core business
Continue to lead the
business market –
Mobile Plus strategy
Cost reduction
Best network and leader in innovation
Analyst and Investor Day – Vodafone Romania74
50%
60%
70%
80%
90%
100%
May 2006 Jun 2006 Jul 2006 Aug 2006 Sep 2006
Respondents (%)
Building a strong Vodafone brand
Brand preferenceBrand awareness
Source: CDI market research
“Which is your preferred mobile phone provider?”“Which of the following mobile operators do you know?”
40%
50%
60%
70%
80%
90%
100%
May 2006 Jun 2006 Jul 2006 Aug 2006 Sep 2006
Respondents (%)
Any Vodafone or Connex Vodafone Orange Cosmote
38
Analyst and Investor Day – Vodafone Romania75
Leadership in distribution
• Increase number of own shops from 35 to more than 80
• Strengthen direct sales force and telesales
• Enhance indirect dealer network with over 80% of all channels being exclusive
• Consistent CRM across all channels
• Replaced the largest, non-exclusive indirect dealer channel – Germanos (previously nearly 30% of gross additions)
• Control all major customer touch points
Channel share of gross contract additionsStrategy
Source: Company data
Indirect channels (non-exclusive)Indirect channels (exclusive)Direct channels
2536
46
48
2916
0
20
40
60
80
100
FY 05/06 H1 FY06/07
(%)
Analyst and Investor Day – Vodafone Romania76
54
150
20.0
11.5
0
40
80
120
160
200
240
3 months before 3 months after
(US$m)
0
5
10
15
20
25
MOU Monthly ARPU
Stimulate usage to compensate for price competition
• Successful prepaid to contract migration– 10% positive balance
• Loyalty points that can be redeemed against airtime
• Vodafone Passport has stimulated roaming revenues– roaming ARPU of Vodafone Passport users
increased by 25%
• Minutes and SMS bundles for contract and prepaid customers
• Contract recharge for prepaid
Stimulating usage
• Usage per customer up 8%(1)
• Blended ARPU up 2%(1)
(1) Year on year growth for H1 FY06/07; usage per customer based on network minutes in both periodsSource: Company data
Targeted prepaid to contract migration campaigns Q1 06/07
(Mins)
39
Analyst and Investor Day – Vodafone Romania77
• >30% of service revenues from business
• Strong and well trained direct sales force
• Innovation leader
• Great success through integrated communication solutions - ISS
• Future MNC opportunities through Vodafone Group
Vodafone is leading the business market
Other15.4%
Vodafone40.0%
Orange44.6%
Customer base share 2004 Customer base share 2006
Continued focus to maintain business market lead
Drivers
Source: Company data; market research
Other18.7%
Vodafone43.2%
Orange38.1%
Analyst and Investor Day – Vodafone Romania78
73%
27%
0%
20%
40%
60%
80%
100%
Business revenue FY05/06
Other business ISS
Mobile Plus strategy – a driver of future growth
• ISS is a fully integrated telecommunication solution for Business customers– mobile and fixed voice– mobile and fixed data– guaranteed service level agreements– personalised support
• ISS service revenues doubled in 2005 with solid growth expected to continue
• More than 6,000 accounts
• Churn of ISS customers much lower than non-ISS customers
• New revenue opportunities through new data products
ISS is part of the Mobile Plus strategy Integrated Service Solution (ISS)as % of business revenues
ISS growth >50% in H1 FY06/07
Source: Company data
40
Analyst and Investor Day – Vodafone Romania79
34
5652
0
10
20
30
40
50
60
H1 FY05/06 H2 FY05/06 H1 FY06/07
Growing data market in business and consumer
• 250,000 Vodafone live! customers
• Consumer data market is emerging
• Strong business market opportunity– growth in Mobile Connect data cards– BlackBerry® from Vodafone devices– HSDPA
Non-voice revenueStrategy
Romanian market offers opportunity to leapfrog fixed line-based data market
Source: Company data
(US$m)
Analyst and Investor Day – Vodafone Romania80
Capitalising on Vodafone Group
Cost savings
Best practice sharing
Global products
Brand• Global brand with great perception in Romania
• Consistent communication and campaigns
• Innovation leader (Vodafone live!, Vodafone Passport)• Best-in-class products and services • Time-to-market reduced by more than 50%
• Global knowledge base
• Leverage people skills and capabilities existing within Vodafone Group
• Global procurement
• Shared services, ERP systems
41
Analyst and Investor Day – Vodafone Romania81
Vodafone has the best Romanian mobile network
• 96% 2G pop coverage
• The only operator with 2G coverage in all Bucharest subway stations
• First to launch 3G with 30% 3G pop coverage and 3G service in 23 cities– more than 250,000 users– more than 16% voice traffic in the 3G cities– more than 70% of current Vodafone Romania data traffic
• First to launch HSDPA in October 2006
• Vodafone network is IP based
• Leading network quality KPIs amongst the Vodafone Group
Source: Company data
Analyst and Investor Day – Vodafone Romania82
Summary
• Strong growth of Vodafone Romania
• Low fixed line penetration and strong position of mobile create opportunities in mobile broadband
• Strong brand, future proof network, innovative products and strong distribution are key competitive advantages
• Continuous focus on profitability
Delivering return on investment ahead of acquisition plan
42
Analyst and Investor DayEMAPA Region
Pieter Uys, Chief Operating Officer, Vodacom Group
6 December 2006
Analyst and Investor Day – Vodacom84
Contents
1. Vodacom overview
2. South Africa
3. Other African Operations
4. Summary
43
Analyst and Investor Day – Vodacom85
Vodacom Group operational structureSub heading in black Arial Bold 20pt
Vodafone 50%
Tanzania 65%
Democratic Republic of Congo (DRC)
51%
Lesotho 88%
Mozambique 98%
Telkom 50%
90.3%
4.0%
4.6%
0.5%
0.6%
Contributionto Vodacom
Group revenue(1)
South Africa100%
Vodacom Group
(1) For H1 FY06/07
Analyst and Investor Day – Vodacom86
Group highlights for H1 FY06/07
Customers
Revenue
EBITDA
EBITDA margin
Net profit after tax
34.7%
0.6pp
20.3%
18.2%
30.4%
Source: Company data; Financial information presented in respect of Vodacom and its subsidaries has been prepared in accordance with Vodacom's application of IFRS in its local financial statements, which differs from the application of IFRS by Vodafone Group in certain respects.
25.8m
R19.5bn
R6.6bn
33.8%
R3.1bn
44
Analyst and Investor Day – Vodacom87
Significant year on year customer growth
• Strong growth in gross connections– 11.8m in FY05/06– 7.3m in H1 FY06/07
• Last five years average annual growth was 34% p.a.
• In South Africa penetration has grown from 43% to 72% over last two years– slow down expected in the future– challenge to capture rural customers
• Other African Operations have penetration less than 15% today
• Customer base 11% contract and 89% prepaid as at 30 September 06
Source: Company data
6.6 7.99.7
12.8
19.2 20.2
0.30.7
1.5
2.7
4.35.6
0
5
10
15
20
25
30
FY01/02 FY02/03 FY03/04 FY04/05 FY05/06 H1FY06/07
South Africa (m) Non-SA (m)
Analyst and Investor Day – Vodacom88
Group revenue and EBITDA
• 3 year average revenue growth of >20% p.a.– South Africa >19%– Other African Operations well over 30%
• Non-voice revenue 7.4% of total revenue in H1 FY06/07– predominantly SMS– YoY growth of 62%
• 3 year average EBITDA margin of >34% – South Africa >35%– Other African Operations >22%
• South Africa– contract handset subsidies– high transmission network costs
• Other African Operations – lower margins as markets develop
EBITDARevenue
22.927.3
19.5
34.0
17.719.5
24.6
0
10
20
30
40
FY03/04 FY04/05 FY05/06 H1 FY06/07
(Rbn)
0
10
20
30(%)
Revenue Growth
7.89.6
11.8
6.6
35.1 34.733.833.9
0
5
10
15
FY03/04 FY04/05 FY05/06 H1 FY06/07
(Rbn)
26
30
34
38
(%)
EBITDA EBITDA m argin
Source: Company data
45
Analyst and Investor Day – Vodacom89
Capital expenditure
• Significant investment in new technologies (3G/HSDPA)
• Increasing 2G and 3G capacity
• South Africa comprises approximately 80% of Vodacom Group capex in H1 FY06/07
• Other African Operations experiencing high subscriber growth (>60%)
• Aggressive coverage expansion
• Tanzania 3G roll-out to commence in current financial year
• Mozambique low revenues relative to capex
South Africa
Other African Operations
Source: Company data
12.6 12.815.1 16.1
7.711.1
14.1 14.2
0
10
20
FY03/04 FY04/05 FY05/06 H1 FY06/07
Group South Africa
Capex to revenue (%)
104.1
37.317.0 21.6 14.3
45.2
10.429.9
0
40
80
120
Tanzania DRC Lesotho Mozambique
H1 FY05/06 H1 FY06/07
Capex to revenue (%)
Analyst and Investor Day – Vodacom90
1,8002,800
6001,600 1,700
2,5001,500
68.8
87.5 87.780.3
0
2,000
4,000
FY03/04 FY04/05 FY05/06 H1 FY06/070
20
40
60
80
100
(%)
Interim dividend Final dividend Dividend payout
R (m)
Cash flow, balance sheet and returns
• Consistent growth in cash generation
• Strong balance sheet– opportunities for expansion– net debt at 30 September 2006 R3.0bn– net debt to annualised EBITDA 0.23x
• Uses of cash– investment in Other African Operations in
earlier phases of growth– dividends
• Dividend payout to net profit was80.3% in H1 FY06/07
Cash flow from operations
Dividends
Source: Company data
7.65.5
11.110.0
0
4
8
12
FY03/04 FY04/05 FY05/06 H1 FY06/07
R (bn)
Cash flow
46
Analyst and Investor Day – Vodacom91
Contents
1. Vodacom overview
2. South Africa
3. Other African Operations
4. Summary
Analyst and Investor Day – Vodacom92
Overview
• Population 47.4m
• Estimated mobile penetration 72.2%
• Estimated fixed penetration 9.9%
• GDP (2005) $540.8bn
• GDP growth rate (2005) 4.9%
• Population stable over last 3 years
• Sustained period of economic growth
• Estimated SIM penetration to exceed 100% in the future
• Estimated fixed line penetration declining
Macro economic environment Penetration
Source: Statistics South Africa; World Factbook
72
58
43
20
40
60
80
Sep 04 Sep 05 Sep 06
(%)
Mobile penetration
9.910.110.0
6
8
10
12
Sep 04 Sep 05 Sep 06
(%)
Fixed penetration
47
Analyst and Investor Day – Vodacom93
637 588528
165 147 124
6171790
200
400
600
800
Sep 04 Sep 05 Sep 06
(R)
Contract Blended Prepaid
Market leadership since launch
Mobile market shareEstimated mobile/fixed customers
Vodacom ARPU
Source: Company and public data
80.5 85.4 87.9
19.5 14.6 12.1
0
20
40
60
80
100
Sep 04 Sep 05 Sep 06
(%)
Mobile Fixed
56 57 59
34 33 33
81010
0
20
40
60
80
Sep 04 Sep 05 Sep 06
(%)
Vodacom MTN Cell C
Analyst and Investor Day – Vodacom94
Highlights for H1 FY06/07
Customers
Revenue
ARPU
EBITDA
EBITDA margin
28.1%
19.1%
Source: Company data
20.2m
R17.6bn
R124
34.2%
15.2% R6.0bn
15.6%
1.1ppt
48
Analyst and Investor Day – Vodacom95
Strategic operational direction – leading the market
• Technological leadership
• Innovative products and tariffs
– both voice and data
• Strength in the distribution channel
• Brand leadership
• Speed to market
• Intellectual property re. new data products
• Benchmarking
• Products and services
– Vodafone live!
– 1st to market with BlackBerry® from Vodafoneand HSDPA
– Vodafone Passport for international travellers
Leveraging Vodafone GroupAreas of focus
Analyst and Investor Day – Vodacom96
• Land area coverage in South Africa: c.71%• Population coverage of South Africa: c.98%
• Land area coverage in South Africa: c.1%• Population coverage of South Africa: c.21%• All 3G base stations are HSDPA enabled
2G/GPRS coverage 3G/HSDPA coverage
Vodacom technological leader
Increase scope of current data product offerings to address market sectors complementing standard HSDPA technology
Source: Company data
49
Analyst and Investor Day – Vodacom97
• Contract managed on prepaid platform
• Ideal for converting prepaid customers to contract
• Targeted at lower spending customers
• Contract: Onyx/Platinum
• Credit card for contract
• Prepaid schemes launched prior to MNP commencing– Yebo Millionaires– Vodacom Talking Points
Innovative products and tariffs – voice
• Peak traffic at 8pm
• Half rate from 5–8pm
• Applicable to contract and prepaid
• Usage increase in promotional period and afterwards
Happy hour tariffs Hybrid contracts
Innovative tariffs driving penetration
Loyalty programmes
Analyst and Investor Day – Vodacom98
Innovative products and tariffs – data
• 23k Mobile TV users
• Enter broadcasting/ multimedia market
• Access content through commercial arrangement
Vodafone live!, 3G/HSDPA Mobile TV/ DVB-H
• 687k Vodafone live! users
• 100k 3G/HSDPA customers
• Offer fast reliable and low priced wireless data product
Non-voice revenue up 62%, with new handsets and technologies(3G, HSDPA, Vodafone live!, BlackBerry from Vodafone, Mobile TV)
• Business customer needs– offering full service to
corporate customers– ISP services– WiMAX
• Personalised services and telemetry
Future offerings
Source: Company data for H1 FY06/07
542821
1,3473550
654.4
5.5
7.4
0
500
1,000
1,500
H1 FY04/05 H1 FY05/06 H1 FY06/070
2
4
6
8
Tanzania (R m)
South Africa (R m)
Non-voice as % of total revenue
50
Analyst and Investor Day – Vodacom99
Extensive distribution and support channels
• Vodaworld cellular mall –biggest contract connection centre
• >250 branded franchised store points
• >10,000 outlets
• Strong relationships with the distribution channel
• Informal channels
Distribution channels Support channels
• Dedicated data stores– IT support
• Vodacare stores– walk-in customer care centre
Analyst and Investor Day – Vodacom100
Brand leadership
Voted most popular telecommunications brand and second most recognised brand after Coca Cola
Source:2006 Markinor/Sunday Times Top Brands
51
Analyst and Investor Day – Vodacom101
Regulation and BEE
• New licence regime– splits network service and application provider
licences– facilitates MVNO access to market
• Customer registration legislation – affects informal distribution channel– verify ID of existing customer base
• Reduction in mobile termination rates– pro-actively engaged with regulator
• BEE is a business imperative in South Africa
• Self-governing system regarding business and suppliers
• Transaction planned in next 12 months
• May well be one of the largest BEE equity transactions in South Africa – capped at R7.5bn
• Vodacom to secure strategic and broad based BEE equity partners
Black Economic Empowerment (BEE)Regulation
Analyst and Investor Day – Vodacom102
Contents
1. Vodacom overview
2. South Africa
3. Other African Operations
4. Summary
52
Analyst and Investor Day – Vodacom103
Other African Operations – current situation
• No. 1 player in 3 of 4 markets
• Outperforming expectations on key metrics
– customers and EBITDA
• Tough environments to operate in– political landscape– lack of infrastructure– currency volatility– access to distribution
• Regulatory and fiscal environment uncertain
Strong platform Operating challenges Future expansion opportunities
• Low population penetration markets
• Value creation through skills transfer from Vodacom
• Limited sizeable opportunities
Analyst and Investor Day – Vodacom104
Other African Operations overview
• Population 37.4m
• Estimated mobile penetration 12.6%
• GDP (2005) $27.1bn
• GDP growth rate (2005) 6.8%
• 4 mobile players; Vodacom est. 55% share
• Population 62.7m
• Estimated mobile penetration 6.6%
• GDP (2005) $40.7bn
• GDP growth rate (2005) 7.1%
• 5 mobile players; Vodacom est. 49% share
Tanzania Democratic Republic of Congo
Customers
Revenue
EBITDA
ARPU
61.5%
27.4%
2.6m
26.8%
18.4%
R775m
R244m
R53
Customers
Revenue
EBITDA
ARPU
64.0%
6.7%
2.0m
38.4%
61.4%
R898m
R276m
R83
Source: World Factbook. Financials are Company data for H1 FY06/07
53
Analyst and Investor Day – Vodacom105
Other African Operations overview
• Population 2.0m
• Estimated mobile penetration 14.7%
• GDP (2005) $5.0bn
• GDP growth rate (2005) 1.2%
• 2 mobile players; Vodacom est. 80% share
• Population 19.7m
• Estimated mobile penetration 10.7%
• GDP (2005) $26.2bn
• GDP growth rate (2005) 7.5%
• 2 mobile players; Vodacom est. 33% share
Lesotho Mozambique
Customers
Revenue
EBITDA
ARPU
39.2%
1.3%
238,000
36.4%
56.7%
R105m
R47m
R76
Customers
Revenue
EBITDA
ARPU
106.5%
34.1%
694,000
45.9%
8.2%
R108m
(R56m)
R27
Source: World Factbook. Financials are Company data for H1 FY06/07
Analyst and Investor Day – Vodacom106
• Stay ahead of competition
• Increase capacity
• DRC satellite transmission network
Other African Operations – strategy for success
Coverage
• Increase market penetration
• Increase distribution network
• Electronic voucher distribution
• GPRS/3G/WiMAX important to corporate market
• Internet cafes are widespread
• Micro payment systems
• New technologies – need for content and data
Voice
Data
54
Analyst and Investor Day – Vodacom107
Summary – driving continued success
Customer care
Revenue growth and customer loyalty
African expansion opportunities
Data – continued investment in technology
Analyst and Investor DayEMAPA Region
Ian Gray, Chief Executive Officer, Vodafone Egypt
6 December 2006
55
Analyst and Investor Day – Vodafone Egypt109
Contents
1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary
Analyst and Investor Day – Vodafone Egypt110
Demographic facts
US$953 (US$4,400 adjusted for PPP)(1)
77.5m (1.8% p.a. growth)
GDP per capita
Population
Egypt – good macroeconomic environment
17%
28%
5%
6%
44%
397+
238 - 397
159 - 238
84 - 159
< 84
E
B
C
D
US$ per month
A
B
Income distribution
(1) 2005 estimates, (2) Estimate for 12 months to June 2006 Source: CIA World Fact book, 9th Euromoney Arab Financial Forum
Economic facts
• Economy steadily improving since July 2004
• Strong growth in tourism and Suez Canal revenues
• Increasing FDI and significant acceleration of privatisation
• Inflation rate at circa 10%; stable exchange rate
• Some uncertainty in political future
50% aged 20 or less
58% of populationLiteracy
Population distribution
~6% per annum(2)GDP growth
56
Analyst and Investor Day – Vodafone Egypt111
Mobile continues to outgrow fixed
• Fast growing mobile market– 21% penetration; 27% YoY growth(1)
– 99% population coverage (8% of land mass)– mostly prepaid; SIM only with no handset
subsidies– low blended minute rates (<5€c)– few mobile HVCs generating high ARPUs
Egyptian telecom market overview Fixed vs. mobile revenue
57 52 46 44
43 48 54 56
0
10
20
30
40
50
60
70
80
90
100
Dec 2002 Dec 2003 Dec 2004 Dec 2005
Fixed revenue Mobile revenue
(% )
Source: Company data and analyst consensus estimates, (1) 3 months to September 2006
• Slow growing fixed market– 14% penetration; 6% YoY growth(1)
• Only 2.5m PCs; 120,000 DSL connections
• Regulator influenced by politics and must approve tariffs
Analyst and Investor Day – Vodafone Egypt112
20%4%
Two player market with a recently licensed 3rd entrant
• Vodafone controlled; with Telecom Egypt as strategic partner(1)
• Launched November 1998
• Customers 7.8m(2,3)
• Twelve months revenues LE6.8bn(3)
Vodafone Egypt Mobinil Etisalat
• Joint Venture ORASCOM/ Orange
• Launched May 1998 (with early lead of 100,000 HVCs)
• Customers 8.1m(2,3)
• Twelve months revenues LE6.0bn(3)
• UAE controlled; with local partners
• Expected launch April 2007
• Paid LE16.7bn (US$2.9bn) for 2G/3G licence (3.4% of Egypt GDP)
Ownership
(1) Vodafone Egypt remaining free float 0.44%, (2) Active customers, (3) September 2006Source: Vodafone & Mobinil company data and Egyptian Government data
VodafoneGroup55%
TelecomEgypt45%
ORASCOM31%
Free Float37%
Orange32%
Etisalat66%
National Bank of Egypt20%
Egypt Post10%
CIB4%
57
Analyst and Investor Day – Vodafone Egypt113
Promising outlook with rapid mobile market growth
• Macro-economic environment– economy improving since 2004
• Mass market appeal– mobile moving to mass market
“necessity”; no longer a luxury product
• Reduced entry barriers– entry handset now less than US$20– prepaid tariff reductions – lower customer activation charges
Drivers for hitting the “S” Curve Total mobile market penetration
46
8
1316
78
11
18
21
0
4
8
12
16
20
Dec2002
Dec2003
Dec2004
Dec2005
Sep2006
0
5
10
15
20
25
Source: Company data
Mobilepenetration (%)
Reportedcustomers (m)
Analyst and Investor Day – Vodafone Egypt114
Contents
1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary
58
Analyst and Investor Day – Vodafone Egypt115
100%
5%
4%
10%
11%
70%
Activation fees and other
Inbound voice
Visitors
Data (including SMS)
Outbound voice
Revenue EBITDA
Vodafone Egypt is growing rapidly
(1) % of total revenue, (2) Active customers Source: Company data, Egyptian LE (IFRS)
Revenue components H1 FY06/07(1)
47 44 41 43
0
20
40
60
Minutes Customers Revenue EBITDA
(%)
(2)
YoY% growth H1 FY06/07
0.0
2.0
4.0
6.0
8.0
FY01/02 FY02/03 FY03/04 FY04/05 FY05/06
(LEbn)
38% CAGR
0.0
1.0
2.0
3.0
4.0
FY01/02 FY02/03 FY03/04 FY04/05 FY05/0635
55
75
95EBITDA EBITDA margin
(LEbn) (%)
44% CAGR
Analyst and Investor Day – Vodafone Egypt116
40
45
50
55
60
65
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
(%)
35404550556065
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
(%)
MobinilVodafone Egypt
Vodafone Egypt is outperforming
(1) Active customers, (2) Both operators were released from liability to pay 1800 spectrum fees in Sep 2006 – LE100m impact excl. from Mobinil EBITDA. LE92m impact incl. in Vodafone Egypt depreciation
Source: Company data
Customer share (%)(1) Revenue share (%)
EBITDA share (%)(2) EBITDA margins (%)(2)
40
45
50
55
60
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
(%)
35
40
45
50
55
60
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
(%)
59
Analyst and Investor Day – Vodafone Egypt117
0.0
2.0
4.0
6.0
8.0
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
Customers (m)
0.0
0.5
1.0
1.5
2.0
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
(LE)
Growth in prepaid with reduction in minute rate
(1) Active customers, estimated prior to October 2003 Source: Company data
Contract
Prepaid
• Low outbound minute rate: 30pt (<4€c)
• Customer growth slowing indicating maturity
• Growth accelerating from late 2004
• Tariff options increased and price per minute reduced to encourage usage
Prepaid vs. contract closing customer split(1) Outbound minute rate evolution
ContractPrepaid
Analyst and Investor Day – Vodafone Egypt118
300
400
500
600
Sep-02 Sep-03 Sep-04 Sep-05 Sep-06200
250
300
350
Minutes ARPU (LE)
0
20
40
60
Sep-02 Sep-03 Sep-04 Sep-05 Sep-060
20
40
60
Minutes ARPU (LE)
Driving usage through positive elasticity
(1) Active customers, estimated prior to October 2003 Source: Company data
Prepaid outbound MOU vs. total ARPUContract outbound MOU vs. total ARPU
Monthly MOUMonthly ARPU
Prepaid vs. contract closing customer split(1) Outbound minute rate evolution
ContractPrepaid
Monthly MOUMonthly ARPU
0.0
2.0
4.0
6.0
8.0
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
Customers (m)
0.0
0.5
1.0
1.5
2.0
Sep 2002 Sep 2003 Sep 2004 Sep 2005 Sep 2006
(LE)
60
Analyst and Investor Day – Vodafone Egypt119
New tariffs have helped deliver growth
Recharge cards before & after “Super Dardasha”Recharge cards before & after “Super Dardasha”
(1) Active customersSource: Company data
LE 50LE10 LE 100LE25
+13% by value
Before After
1.5m2.3m
0.3m
0.5m
Prepaid subscriber base split(1)
6.3 6.5 6.9 7.1 7.3
024
68
10
Jun-06 Jul-06 Aug-06 Sep-06 Oct-06
(m)
69%
Super Dardasha Others
Analyst and Investor Day – Vodafone Egypt120
0.0
1.0
2.0
3.0
4.0
Apr2006
May2006
Jun2006
Jul2006
Aug2006
Sep2006
Oct2006
0
20
40
60
80
100
Balance transfer is an Egyptian success story
• Approaching 4 million Vodafone unique balance transfer users –twice the number of debit cards
• Total of 9.2 million transactions in October 2006
• Total transaction value now close to LE100m per month
• Steady increase month over month
Source: Company data
Achievements Transactions vs. amounts
Value of transactions(LEm)
Distinct customers(m)
170% increase indistinct customers
61
Analyst and Investor Day – Vodafone Egypt121
9487
60
70
80
90
100(%)
90
79
60
70
80
90
100(%)
9082
60
70
80
90
100(%)
94 91
60
70
80
90
100(%)
Voice quality Network availability
Call continuity Sending/receiving SMS
11%
Vodafone Egypt outperforms on customer satisfaction
Source: Network Satisfaction Tracker (Logic Consulting Group). October 2006
Vodafone Egypt Mobinil
Vodafone Egypt vs. Mobinil
Analyst and Investor Day – Vodafone Egypt122
Sep 2006
75
80
85
90
95
100
May 2005
Jul2005
Sep 2005
Nov 2005
Jan 2006
Mar 2006
May 2006
Jul 2006
Cost management is critical in low ARPU environment
• Break even or better on activations
• No unprofitable tariffs
• Utilise and build on Group buying power
• Front line accountability
• Marginal cash cost per marginal customer
• Every piaster matters
100
56
(13)(10)
(4) (17)
0
20
40
60
80
100
Total revenue
Inter-connect
costs
Other direct costs
Acquisition & retention
costs
Operating expenses
EBITDA
(%)
(%)
Source: Company data
Cost principles Margin breakdown H1 FY06/07
Network utilisation
62
Analyst and Investor Day – Vodafone Egypt123
Being part of Vodafone Group offers many benefits
• Brand
• Buying power
• Market intelligence (product innovation, technical support, market trends)
• Resource
• People development
• Australian call centre
• Professional IT services
• International help desk
… and in return from Vodafone Egypt
Benefits from Vodafone Group …
Analyst and Investor Day – Vodafone Egypt124
(1) Revenue excluding sales tax, (2) Various charges including national training fund, telecom fund, NTRA fees (excl. 2G licence fees) Source: Company data
Vodafone Egypt generates healthy cash flows
Free cash flow FY05/06
100
33
22
(7)(18)
(20)
(11)
(22)
0
10
20
30
40
50
60
70
80
90
100
Revenue(1) Governmentcharges(2)
Direct costs Operatingexpenses
Capexfree cash
Corporatetax
Free cashflow
(%)
Operating
flow
63
Analyst and Investor Day – Vodafone Egypt125
Small price premium
Managing market competitiveness
Unrelenting focus and attention on six key areas
5
4
1
2
3
6
Image and quality
Values based culture
Best team
Consistency
Analyst and Investor Day – Vodafone Egypt126
Contents
1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary
64
Analyst and Investor Day – Vodafone Egypt127
Image and quality
3G and Mobile Plus strategy
Increased focus on costs against increasingly competitive market
Values based culture
Future strategy has continuity and evolution
Best team
5
4
1
2
3
6
Consistency
Analyst and Investor Day – Vodafone Egypt128
3G licence – Vodafone Egypt’s costs and benefits
• Enhance frequency and capacity in metropolitan areas
• Capitalise on existing 3G handset base (600,000 3G compatible handsets on the network)(1)
• Protect and attract local high value customers and visitors
• Execute Mobile Plus strategy including implementation of Vodafone Office solutions
• Further build brand leadership through launch of Group products and services
• Extend 2G licence to align with 3G including other benefits
Headline cost of LE3.34bn plus revenue share of 2.4% – but with many benefits
(1) November 2006
65
Analyst and Investor Day – Vodafone Egypt129
Mobile Plus strategy and Telecom Egypt partnership
• Development of Vodafone brand for total communications solutions – a Service Integration Company
• Use of Raya Telecom in domestic corporate and MNC segments for complex and bespoke solutions
• Partner with TE Data for SME and SOHO “fixed & wireless” based solutions
• Partner with TE for mass DSL to homes and combine fixed with mobile
• Partner with TE distribution for extension of Vodafone reach
• Partner with TE to deliver strong international connectivity
Analyst and Investor Day – Vodafone Egypt130
Contents
1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary
66
Analyst and Investor Day – Vodafone Egypt131
Summary
• Egypt has proven to be a great market with strong growth potential
• Vodafone Egypt has delivered strong growth and high margins
• New entrant will inevitably impact competitive environment
• 3G will provide opportunity to exploit market growth and better utilise Vodafone
Group’s products and services
• Continued focus on quality, people and costs
Vodafone Egypt’s future is built on solid foundations
Continued delivery of market leading performance
Analyst and Investor DayEMAPA Region - Summary
Paul Donovan, EMAPA CEO
6 December 2006
67
Analyst and Investor Day – EMAPA133
Key messages
Strong local management teams
Effective strategies for emerging markets
Investment aligned to growth
Value transfer to and from Group
EMAPA – high performing organisation
Analyst and Investor Day – EMAPA134
FORWARD LOOKING STATEMENTS
This presentation contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995, in particular with respect to: expected IRR and ROIC levels; expected regulatory changes and developments (including the receipt of a 3G license in Turkey); expected GDP, population and market growth in the jurisdictions in which the Group operates; expected levels of capital expenditure and operating expenditure; expected growth in market penetration; and expected revenue, mobile revenue and ARPU growth in the medium term. These forward-looking statements are made on the basis of certain assumptions which each of Vodafone and the Group businesses, as the case may be, believes to be reasonable in light of Vodafone’s operating experience in recent years. The principal assumptions on which these statements are based relate to exchange rates, customer numbers, usage and pricing, take-up of new services, termination and interconnect rates, customer acquisition and retention costs, network opening and operating costs and, availability of handsets and the availability of technology necessary to introduce new products, services and network or other enhancements. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “anticipates”, “aims”, “due”, “could”, “may”, “should”, “will”, “expects”, “believes”, “intends”, “plans”, “targets”, “goal” or “estimates”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: changes in economic or political conditions in markets served by operations of the Group that would adversely affect the level of demand for mobile services; a lower than expected impact of new or existing products, services or technologies on the Group’s future revenue, cost structure and capital expenditure outlays; the ability of the Group to harmonise mobile platforms and delays, impediments or other problems associated with the roll out and scope of new or existing products, services or technologies in new markets; changes in the regulatory framework in which the Group operates, including possible action by regulators in markets in which the Group operates or by the EU regulating rates the Group is permitted to charge; the impact of legal or other proceedings against the Group or other companies in the mobile telecommunications industry; loss of suppliers or disruption of supply chains; and the Group’s ability to satisfy working capital requirements through borrowing in capital markets, bank facilities and operations.
Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under the heading “Forward-Looking Statements” in our interim results announcement for the six months to 30 September 2006 and under the heading “Risk Factors, Trends and Outlook ─ Risk Factors” in the Group’s Annual Report for the financial year ended 31 March 2006, both of which are available on our website. All subsequent written or oral forward-looking statements attributable to Vodafone or any member of the Group or persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Neither Vodafone nor any of its affiliates intends to update these forward-looking statements.
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