Vodacom Group (Pty) LtdA l t P t tiAnalyst Presentation
5 March 2009
DisclaimerThis presentation has been prepared and issued by Vodacom Group (Proprietary) Limited (“Vodacom” or the “Company”) solely for your information and for use at the presentation to research analysts to be made on or about 5 March 2009 in connection with the proposed listing (the “Listing”) of the Company on the main board of the JSE Limited (the “JSE”). By attending the meeting where this presentation is made and/or by accepting this document, you agree to be bound by the following limitations. This presentation is not a prospectus or offer document. Information regarding the Company is set out in the pre-listing statement published by the Company on 3 March 2009 in connection with the Listing. Copies of the pre-listing statement are available from the Company’s registered office. This presentation does not constitute or form part of any offer or invitation to sell or issue any shares in the Company or any other securities, nor does this presentation constitute a solicitation for any such offer, nor shall this presentation or any part of it (or the fact of its distribution) form part of or be relied on in connection with any contract or investment decision relating
Disclaimer
p y , p y p ( ) p y gthereto. This presentation does not constitute a recommendation regarding the securities of the Company.Neither this document or any part or copy of it may be taken or transmitted into or distributed in or into, directly or indirectly, the United States. Any failure to comply with these restrictions may constitute a violation of US securities laws. The distribution of this document in other jurisdictions may also be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe any such restrictions. This document is not an offer of securities for sale in the United States or elsewhere. The Company’s ordinary shares have not been and will not be registered under the United States Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the United States unless they are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. No public offer of the securities referred to herein is being made in the United States. This document is intended for distribution in member states of the European Economic Area to persons who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (“Qualified Investors”). This document must not be acted or relied upon in any member state of the European Economic Area by persons who are not Qualified Investors. Any investment or investment activity to which this communication relates is available in any member state of the European Economic Area only to, and will be engaged in only y p y y y p y , g g ywith, Qualified Investors. This document is intended for distribution in the United Kingdom only to: (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (ii) persons falling within Article 49(2)(a) to (d) of the Order or to those persons to whom it can otherwise lawfully be distributed (all such persons together being referred to as “relevant persons”). This document must not be acted upon by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. UBS Limited and its affiliates are acting exclusively for the Company and for no one else in connection with the Listing and will not be responsible to any other person for providing the protections afforded to their respective clients, or for providing advice in relation to the Listing or any other transaction or arrangement referred to in this presentation. This presentation has been prepared by, and is the sole responsibility of, the Company. This presentation speaks at the date hereof. No representation or warranty, express or implied, is or will be made by or on behalf of the Company, its advisers, UBS Limited or any of their respective directors, officers or employees, or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation
Disclap y, , y p , p y , y p y, p p p
and any reliance you place on them will be at your sole risk. In particular, certain market data has been obtained by the Company from third party sources. The Company has not independently verified such data and whilst the Company has compiled and extracted the market data, it can provide no assurances of the accuracy and completeness of such information and takes no responsibility for such data. The Company is not under any obligation to update or keep current the information contained in this presentation or to correct any inaccuracies which may become apparent, and any opinions expressed in it are subject to change without notice. None of the Company, its advisers, UBS Limited or any of the respective members, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation contains statements about Vodacom that are or may be forward looking statements. All statements, other than statements of historical facts included in this presentation, may be forward looking statements. Any statements preceded or followed by, or that include the words “forecasts”, “believes”, “expects”, “intends”, “plans”, “prediction”, “will”, “may”, “should”, “could”, “anticipates”, “estimates”, “seeks”, “continues” or similar expression or the negative thereof, are forward looking statements. Forward looking statements include, among others, statements relating to the following: future capital expenditures, acquisitions, divestitures, expenses,
aimer
p g g g g g g p p q prevenues, economic performance, financial conditions, dividend policy, losses and future prospects; business and management strategies relating to the expansion and growth of Vodacom; the effects of regulation of Vodacom’s businesses by governments in the countries in which Vodacom operates, including the SA Government; Vodacom’s expectations as to the launch and roll out dates for products, services or technologies offered by Vodacom; expectations regarding the operating environment and market conditions; revenue and growth expected from Vodacom’s total communications strategy; growth in customers and usage; the expected contribution to Vodacom’s revenue of voice services, messaging services, data services, broadband services, fixed location pricing, internet services and mobile advertising; the rate of dividend growth by Vodacom or its existing investments; possible future acquisitions, including increases in ownership in existing investments, the timely completion of pending acquisition transactions and pending offers for investments, including licence acquisitions, and the expected funding required to complete such acquisitions or investments; mobile penetration and coverage rates and Vodacom’s ability to acquire spectrum; the impact of regulatory and legal proceedings involving Vodacom and of scheduled or potential regulatory changes; overall market trends and other trend projections; the effect of the current economic crisis on Vodacom’s operations; the ability of Vodacom to continue to obtain financing on commercially reasonable terms; the effect of competition on Vodacom; the effect of expansion on Vodacom’s management, financial and technical systems; the ability of Vodacom to attract and retain key personnel; and exchange control restrictions in the jurisdictions in which Vodacom operates. By their nature, forward-looking statements are inherently predictive, speculative and, because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and other facts or factors which may cause the actual results, performance or achievements of Vodacom, or its industry, to be materially different from any results, performance or achievements expressed or implied by such forward looking statements. These forward looking statements are not guarantees of future performance and are based on numerous assumptions regarding Vodacom’s present and future business strategies and the environments in which it will operate in the future. These statements are further qualified by the risk factors set out in Part VI of the pre-listing statement published on 3 March 2009, which could cause actual results to differ materially from those in the forward-looking statements. All subsequent oral or written forward looking statements attributable to the Company or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statements above and below. Vodacom expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements contained herein or to reflect any change in their expectations with regard thereto or any change in events, conditions or circumstances on which any such forward looking statement is based.
Analyst presentation 2009
AgendaPieter UysCEO
AgendaShameel JoosubMD: South Africa
Willem SwartCO: International
Johan van der Watt CFO (Acting)
Peter GbedemahMD: Gateway
AgeWally Beelders Mike van den Bergh ndaED: Vodacom Business COO: Gateway
G S h Af iGroup overview10:30
Financial review11:15
South African operations13:00Lu
nch International
business14:30
Gateway
15:15Tea
Analyst presentation 2009
Group overview and investment case
Analyst presentation 2009
Key Vodacom investment highlightsKey Vodacom investment highlights
L di k t iti
Gro
Leading market positions
Unique platform for growth oup overview an
Unique platform for growth
E t bli h d t k d
nd investment ca
Established track record
P t t t d b V d f
aseProven management team supported by Vodafone
Attracti e balance bet een gro th and ret rnsAttractive balance between growth and returns
Analyst presentation 2009
Leading market positionsNumber one position in four of five countries, with strong challenger status in Mozambique and enhanced pan-African coverage through Gateway
Leading market positions
Market position1
93.75%
Shareholding Gro
South Africa
Tanzania # 1
93.75%
65%
# 1
oup overview an
DRC
Mozambique
# 1
# 2
51%
85%
nd investment caMozambique
Lesotho
# 2
# 188.3%
ase
Gateway2 # 1100%
Notes:1 As at 31 December 2008 per Vodacom estimates 2 Gateway is the leading pan-African carrier services and connectivity provider
Analyst presentation 2009
Platform for growth attractive existing markets and regionPlatform for growth – attractive existing markets and regionVodacom’s mobile footprint covers a population of approximately 180 million with growing, but still low, mobile penetration and limited broadband uptake
26 6 26 5
Mobile penetration Broadband penetration
Gro
For the year ended December 2008E (%)10,000
As at 30 September 2008
26.6 26.5
oup overview an
Botswana
South Africa6,000
7,000
8,000
9,000
$)
8.0 7.8
nd investment ca
Namibia
LesothoMorocco
Algeria
Egypt2 000
3,000
4,000
5,000
GD
P/c
apita
(US
6.04.7
3.2 2.8
0.04
a n e d n e m C A a n A)
ase
Zimbabwe
Mozambique
Ghana
Uganda
KenyaSudan
Tanzania
DRC
Egypt
Ethiopia
Nigeria
(1,000)
0
1,000
2,000
(20) 0 20 40 60 80 100 120 140
Mobile penetration (%)
Nor
thAm
erica
Wes
tern
Euro
pe
Wor
ld
Easte
rnEu
rope
Lata
m
APAC
MEN
A
Sout
h Af
rica
Sub-
Saha
ran
Afric
a (e
x SA
Notes:1 Size of bubble represents population 2 Green bubbles represent markets where Vodacom operates a mobile network
Source: EIU, ITU, MyBroadband (SA)Source: EIU, Mobile World
Notes:1 Eastern Europe includes Russia
Mobile penetration (%)
Analyst presentation 2009
Platform for growth total communications providerPlatform for growth – total communications providerProviding total communications is at the core of Vodacom’s strategy and we have committed significant resources to delivering converged services
Recruited skills
♦ Top talent from leading regional ICT players
♦ Leveraging the strength of Vodacom’s brand
Gro
Acquired Gateway
♦ Sub-Saharan Africa’s largest provider of satellite services
♦ Supplier of broadband and value-added telecommunications services
♦ Channel to distribute Vodacom Business services internationally
oup overview an
Organic infrastructure
investment
♦ 1,000m2 fully enabled Tier 4 data centre
♦ Self-built transmission infrastructure (fibre and microwave solutions)
♦ Earth stations and international connectivity
nd investment ca♦ Earth stations and international connectivity ase
Analyst presentation 2009
Platform for growth brand distribution and customer carePlatform for growth - brand, distribution and customer careVodacom’s leading brand is underpinned by unparalleled distribution and superior customer care
Brand
♦ Leading brand across all footprint markets
♦ South Africa’s top telecommunications and 4th best overall brand
“S b d t t ” d i E t Af i
Gro
♦ “Superbrand status” award in East Africa
♦ Unparalleled distribution network
♦ Physical and electronic voucher
oup overview an♦ Physical and electronic voucher
distribution
♦ More than 25,000 distribution points in South Africa alone
Distribution
nd investment ca
Customer care
♦ Walk-in and call centre service
♦ Vodacare centres at the core of customer service
ase
care♦ Email, SMS and web-based self-service
available
Analyst presentation 2009
Established track record innovationEstablished track record – innovation
Operational launch in S th Af i
Vodacom opens the ld’ fi t ll l
First to launch GPRS d MMS i
Launch of Vodafone Live!
Gro
1998 2002 2005
South Africa world’s first cellular shopping mall
GPRS and MMS in South Africa
Vodafone Live! And first to launch BlackberryTM
1994
oup overview an
1996 2001 2004 2006
Launch of the world’s first prepaid service on an
Launch of 4U in South Africa
First to launch3G in South Africa
First to launchHSDPA in South Africa
2008
Launch of Vodacom Business
nd investment caservice on an
IN platformSouth Africa ase
Analyst presentation 2009
Established track record profitable growth
Customers Revenue
Established track record – profitable growth
23.5 30.2
34.0
34.0 41.1
48.2
For the year ended 31 March (Millions) For the year ended 31 March (R billion)
Gro
2006 2007 2008 2006 2007 2008
20.2% CAGR 19.1% CAGR
oup overview an
EBITDA OpFCF1
For the year ended 31 March (R billion) For the year ended 31 March (R billion)
nd investment ca
11.8 14.2
16.5
6.3 8.0
9.8
ase
2006 2007 2008 2006 2007 2008
18.2% CAGR 24.7% CAGR
1. Cash generated from operations (before interest, taxation and dividends) less capex (additions and disposals to property, plant and equipment and intangible assets) and capex creditor movement
Analyst presentation 2009
10
Proven management teamProven management teamVodacom has an experienced management team with an established track record in telecommunications
Pieter Uys (46)CEO
16 years with Vodacom
Gro16 years with Vodacom oup overview
annd investment caase
Johan van der Watt (42) Shameel Joosub (37) Lungi Ndlovu (50) Bob Collymore (51) Willem Swart (47)Johan van der Watt (42) CFO (Acting)
15 years at Vodacom
Shameel Joosub (37) MD: South Africa
15 years at Vodacom
Lungi Ndlovu (50) Chief Officer of Human Resources
9 years at Vodacom
Bob Collymore (51)Chief Officer of Corporate Affairs
10 years at Vodafone
Willem Swart (47)Chief Officer of International Business
12 years at Vodacom
Analyst presentation 2009
11
Supported by VodafoneSupported by VodafoneAccess to Vodafone’s expertise, product innovation, marketing and centralised procurement supports Vodacom’s in-house strength
♦ World’s leading international mobile communications group with c. 289 million proportionate subscribers in 27 countriesThe Vodafone Group G
ro
♦ Access to Vodafone’s expertise, product innovation, marketing and centralised procurement
B fit f
oup overview an
♦ Sharing of best practices and benchmarking within Vodafone Group
♦ Vodacom is Vodafone’s exclusive investment vehicle in sub-Saharan Africa
Benefits of partnership
nd investment caase
♦ Access to Vodafone branded products and services
Analyst presentation 2009
12
Experienced and well balanced Board
Independent non-executive directors Executive directors
Experienced and well balanced Board
Government 1
Board of directors with effect from the date of the listing
Gro
ThokoMokgosi-
Mwantembe
PhutiMalabie
Tom Boardman
Pieter UysCEO
Peter MoyoChairman
oup overview an
Non-executive directors (Vodafone representatives)
nd investment ca
RichardMorten James Michael Ronald
aseShameel JoosubMD: South Africa
Richard Snow
MortenLundal
James Maclaurin
Michael Joseph
Ronald Schellekens
1. The South African Government has a right to appoint a non-executive director for as long as it holds 10% or more of the Vodacom Group issued share capitalJohan van der Watt
CFO (Acting)
Analyst presentation 2009
13
Attractive balance between growth and returnsAttractive balance between growth and returns
Dividends Dividend policy
♦ For the financial year ended 31 March 2010, Vodacom anticipates a dividend payout ratio of approximately 40% of headline earnings
R million
Gro
approximately 40% of headline earnings
♦ Dividends to be paid semi-annually with first dividend payable for H1 2010
oup overview an
♦ Dividends will be determined at the discretion of the Board having regard to operating results, financial position, cashflow requirements, investment strategy, capital requirements and
nd investment cagy p q
other factors
R2.2bnR2.2bnfinal dividend
ase
declared for H2 2009
Analyst presentation 2009
Vodacom’s strategies for growthVodacom s strategies for growthVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth
Gro
Leadership in broadband
and oup overview anGrow core Expansion
connectivity services
nd investment ca
G o co emobile
businesses
Expansion in
sub-SaharanAfrica
ase
Develop converged
ICT l tiICT solutions
Analyst presentation 2009
15
Vodacom’s strategies for growth grow core mobile businessVodacom s strategies for growth – grow core mobile businessVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth
Grooup overview
anGrow core nd investment ca
G o co emobile
businesses
ase
Analyst presentation 2009
16
How have we become market leaders?How have we become market leaders?The interaction of our six core competencies is a fundamental feature of our ability to be a leading total communications provider
Network Customer
care
Gro
STR
ATE
GIProducts
oup overview an C
RE
VIE
W
Supply chain
management
Products and
services
nd investment ca
Brand
ase
Distribution
Analyst presentation 2009
17
Growth strategies for existing mobile marketsGrowth strategies for existing mobile markets
♦ Enhance retention programmes
♦ Drive further penetration
♦ Increase market share
Retain and grow our customer base G
ro
♦ Launch affordable and innovative products and services
♦ Provide high speed broadband access solutionsDrive usage and
i
oup overview an♦ Provide high speed broadband access solutions
♦ Offer converged services for total communications solutions
♦ Use of new technologies and infrastructure
new services
nd investment ca♦ Use of new technologies and infrastructure
♦ Further extract synergies from within Vodacom Group
♦ Exploit benefits of Vodafone relationship
Target efficiencies
ase
Analyst presentation 2009
18
Vodacom’s strategies for growth broadband leadershipVodacom s strategies for growth – broadband leadershipVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth
Gro
Leadership in broadband
and oup overview an
connectivity services
nd investment caase
Analyst presentation 2009
19
Vodacom’s strategy is to lead in broadbandVodacom s strategy is to lead in broadbandBroadband uptake has historically been impacted by a variety of structural, regulatory and pricing issues which Vodacom is positioned to overcome
♦ Use of mobile technologies to deliver servicesLack of fixed-line infrastructure in
Factors inhibiting growth Vodacom’s solutions
Gro
1 ♦ VSAT solutions for rural areas
♦ Continue self-build transmission programmes
Lack of fixed-line infrastructure in Africa
♦ Expansion of Gateway services
STR
ATE
GI
oup overview an
1
Lack of international capacity and bandwidth
♦ Expansion of Gateway services
♦ Development of a continent-wide MPLS network
♦ Involvement in new submarine cable projects
C R
EV
IEW
nd investment ca
2
Access and affordability
♦ Low cost 3G handsets
♦ Bundled laptop and data packages
♦ Launch of affordable data products
ase
3♦ Launch of affordable data products
Analyst presentation 2009
20
Mobile can fill the African fixed line voidMobile can fill the African fixed-line void
Evolution of mobile technology
High speed 2GGSM 2.5G
GPRS2.5G
EDGE 3.5GHSDPA
LTE“4G”
3GW-CDMA
Gro
GA
TELow speed WiMAX802 16e
HSDPA
Flash-OFDM
obili
ty
oup overview an EW
AYPedestrian
Nomadic
Indoor BluetoothWi-Fi
802.11bWi-Fi
802.11g
802.16d
802.16e
evel
s of
mo
nd investment ca
Fixed Dial-Up CablexDSL
FibreBWA
802.16/a
Le
ase
10kbps 100kbps 1Mbps 10Mbps 100Mbps
Narrowband Broadband
Analyst presentation 2009
21
New international capacity will boost bandwidthNew international capacity will boost bandwidth
Prospective African submarine cables Vodacom’s approach
♦ Series of new international submarine
Prospective African submarine cables
Gro
Vodacom’s approach
GA
TE
cables expected to come onstream during next 2 to 3 years
♦ Vodacom is investing in Undersea Cable Systems
oup overview an EW
AY
Systems
♦ Vodacom is working in collaboration with a number of other operators to cost effectively enhance capacity
nd investment ca
♦ Vodacom is developing in-country links to connect directly to international landing points
ase
Analyst presentation 2009
22
Affordable solutions should drive uptakeAffordable solutions should drive uptake
South African broadband pricing evolution Lower cost devices increase addressable market
Gro52%72%
R
R 50 00
R 60.00
3,599
STR
ATE
GI
oup overview an
52% reduction
72% reduction
R 40.00
R 50.00
2,099
C R
EV
IEW
nd investment ca
R 20.00
R 30.00
999 999
ase
R 0.00
R 10.00
3 3 4 4 4 5 5 6 6 7 7 7 8 8
3G
handset
2004 3G
handset
current
3G data
card
2004
3G data
card
current
Source: Vodacom Source: Vodacom examples
Apr
-03
Sep
-03
Feb-
04
Jul-0
4D
ec-0
4
May
-05
Oct
-05
Mar
-06
Aug
-06
Jan-
07
Jun-
07
Nov
-07
Apr
-08
Sep
-08
Average Price (per MB) ARPU
Analyst presentation 2009
23
Vodacom’s strategies for growth converged ICT solutionsVodacom s strategies for growth – converged ICT solutionsVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth
Grooup overview
annd investment caase
Develop converged
ICT solutionsICT solutions
Analyst presentation 2009
24
Delivering new converged corporate solutionsDelivering new converged corporate solutionsVodacom Business has developed a suite of converged solutions to ensure growth in the ICT market segments as well as retention of corporate customers in an increasingly competitive market place
Access services
Gro
Managed network services
oup overview an
Managed hosting services
nd investment ca
Converged application services
ase
Analyst presentation 2009
25
Delivering new converged consumer solutionsDelivering new converged consumer solutionsNew converged services provide an additional customer retention tool and can support ARPU growth
Online services
Media & entertainment Gro
Advertising
Financial
oup overview annd investm
ent caase
Analyst presentation 2009
26
Vodacom’s strategies for growth sub Saharan AfricaVodacom s strategies for growth – sub-Saharan AfricaVodacom aims to be a total communications provider in sub-Saharan Africa and deliver continued profitable growth
Grooup overview
anExpansion nd investment ca
Expansion in
sub-SaharanAfrica
ase
Analyst presentation 2009
27
Africa remains an exciting telecommunications marketAfrica remains an exciting telecommunications marketOne of the fastest growing markets with unique attractions for further mobile growth and growing upside from data services given the low internet and broadband penetration levels
♦ Mobile penetration of 20–49%
♦ Highest rate of customer growth,
♦ Mobile penetration <20%
♦ Markets awaiting liberalisation or ff /
♦ Mobile penetration of >50%
♦ Slowing customer growth but
Developing NascentAdvanced
Gro
STR
ATE
GI
g g ,with ARPUs pressured by declining usage of incremental subs
affected by political and/or economic instability
♦ Customer growth limited by structural shortcomings
g ggrowing ARPU
oup overview an C
RE
VIE
Wnd investm
ent caase
Analyst presentation 2009
28
Gateway provides new market entry pointsGateway provides new market entry points
A l i i l
Gro
Accelerates international expansion
STR
ATE
GI
oup overview an
Provides platform for further expansion
C R
EV
IEW
nd investment ca
Strengthens the total communications strategy
ase
Potential synergiesy g
Analyst presentation 2009
29
Key investment highlightsKey investment highlights
♦ Leading MNO in four of five countries of operation♦ Largest pan-African carrier service providerLeading market positions ♦ Largest pan African carrier service provider♦ South Africa’s largest broadband provider
♦ Further growth from existing mobile operationsN t k d t h l i t t f b db d
Gro
Leading market positions
Unique platform for ♦ Network and technology investment for broadband♦ Resources in place for total communications strategy
♦ Historically first to market
oup overview an
Unique platform for growth
♦ History of sustained revenue growth and strong cash flow generation ♦ Discipline in cost control and capital allocation
♦ Combination of founding employees and experienced executives
nd investment ca
Established track record
Proven management♦ Leveraging the benefits of the Vodafone Group♦ Supported by a strong and well balanced Board
♦ Robust business model
ase
Proven management team supported by
Vodafone
Att ti b l ♦ Robust business model♦ Between 2006 and 2008, 18% and 25% CAGR in EBITDA and OpFCF♦ Continued growth allied with sustainable cash returns to shareholders
Attractive balance between growth and
returns
Analyst presentation 2009
30
Q&AGroup overview and investment casep
Analyst presentation 2009