Vodacom Group Limited Investment case February 2017
Disclaimer The following presentation is being made only to, and is only directed at, persons to whom such presentations may lawfully be communicated (‘relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Group. Promotional material used in this presentation that is based on pricing or service offering may no longer be applicable. This presentation contains certain non- GAAP financial information which has not been reviewed or reported on by the Group’s audi tors. The Group’s management believes these measures provide valuable additional information in understanding the performance of the Gr oup or the Group’s businesses because they provide measures used by the Group to assess performance. However, this additional inform ation presented is not uniformly defined by all companies, including those in the Group’s industry. Accordingly, it may not be comp arable with similarly titled measures and disclosures by other companies. Additionally, although these measures are important in the management of the business, they should not be viewed in isolation or as replacements for or alternatives to, but rather as complementary to, the comparable GAAP measures. This presentation also contains forward-looking statements which are subject to risks and uncertainties because they relate to future events. These forward- looking statements include, without limitation, statements in relation to the Group’s projected financial results. Some of the factors which may cause actual results to differ from these forward-looking statements are discussed on slide 23 of this presentation. Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox, Vodafone WebBook, Vodafone Smart tab, Vodafone 858 Smartphone, Vodafone Passport, Vodafone live!, Power to You, Vodacom, Vodacom M-Pesa, Vodacom Millionaires, Vodacom 4 Less and Vodacom Change the World are trademarks of Vodafone Group Plc (or have applications pending). Other product and company names mentioned herein may be trademarks of their respective owners. Vodacom Group Limited IR presentation | 17 February 2017 2
• A leading African mobile communication company providing a wide range of communication services including mobile voice, messaging, data and converged services to over 65 million 1 customers. Vodacom DRC Licenced 2002 • Vodacom is majority owned by Vodafone Plc (65%) and Vodacom Tanzania Population 71 million Licenced 1999 we are listed on the JSE Limited. Population 55 million • Market capitalisation of R225.1 billion # . • Group revenue of R80.1 billion. Vodacom Mozambique Licenced 2003 Head office in Midrand, South Africa Population 29 million Vodacom Lesotho Vodacom South Africa History – consistent track record of innovation Licenced 1995 Licenced 1993 Population 2 million Population 55 million 1996 2004 2008 2009 2011 2012 2016 Vodacom First to launch Vodacom LTE-Advanced rebrands from All information in presentation is as at 31 March 2016, unless otherwise stated. Vodacom listed Vodacom First to launch prepaid services launches a 3G launched “Green and Blue” on the JSE Business 4G in # Market capitalisation value as at 17 February 2017. in the world on IN HSDPA network to Vodafone (18 May) launches South Africa platforms in South Africa 1. As at 31 December 2016 RED Vodacom Group Limited IR presentation | 17 February 2017 3
Share information As at 5 February 2017 Institutional shareholding 1 JSE Ticker symbol VOD ADR code VDMCY PIC = 51% 4% 2% Stock exchange JSE Limited 8% South Africa Shares in issue 1 487 954 000 United States Freefloat 35% 20% United Kingdom R139 – R172 52 week low and high Rest of Europe R223.4 billion Market capitalisation 66% Rest of world Transfer agent ComputerShare FTSE/JSE Top 40 Index Indices JSE Socially Responsible Index Nedbank BGreen Exchange Traded Fund 1. As at 27 January 2017 Vodacom Group Limited IR presentation | 17 February 2017 4
Five reasons to own Vodacom shares Market leadership 1 Focus areas of growth potential 2 Scale benefits driving efficiencies 3 Experienced, diverse management team 4 Track record of delivering shareholder returns 5 Vodacom Group Limited IR presentation | 17 February 2017 5 5
#1 | Market leadership # 1 mobile operator in all markets > 18 000 base stations, >80% 3G 61.3 million customers in 1 st to launch 4G in South Africa, Lesotho and 5 countries in Sub-Saharan Africa Tanzania R14 billion enterprise revenue from 30 countries in Africa R13 billion Investment per annum to maintain our leading network quality All information is as at 31 March 2016 Vodacom Group Limited IR presentation | 17 February 2017 6
#2 | Focus areas of growth potential FY14: +33% FY14: +24% FY15: +25% FY15: +10% Data (32% of Group service revenue) International (27% of Group service revenue) FY16: +29% FY16: +17% • 27% of Group service revenue • Group: 29 million active data customers; 57% of total base • SA: 14 million active smart devices; 37% of active • Data revenue growth +32% customers • Active customers 27 million • SA: 572MB per smart device growing 23% Active customers now 44% of Group active customers o FY14: +37% FY15: +13% Enterprise (21% of Group service revenue) New services (SA) (4.2% of Group service revenue) FY16: +19% • Enterprise contributes 21% to Group service revenue • Insurance revenue +19% • SA fixed and managed services revenue +27% Expanding portfolio: life, funeral, device, cover o • Capture Internet of Things opportunity Pan African MPLS network o • Fibre to home +25 000 homes and businesses passed Fibre to the business/home o . Vodacom Group Limited IR presentation | 17 February 2017 7 7
#3 | Scale benefits driving efficiencies Focussed savings programmes – Fit 4 Growth • Reduced transmission rentals through self-provisioning • Cost optimisation through sharing, outsourcing and supply chain management • Improved return on investment in customer acquisition spend • Reduced support costs offsetting inflationary pressures Benefits from being part of the Vodafone Group • Global technology and product roadmap • Better pricing through Vodafone Procurement Company • Benefits from best practice sharing and benchmarking • Talent and skills sharing Vodacom Group Limited IR presentation | 17 February 2017 8 8
#4 | Experienced, diverse management team 4 CEO: Shameel Aziz Joosub (45) CFO: Till Streichert (41) 20 years industry experience 15 years industry experience Previously CEO of Vodafone Spain Previously CFO of Vodafone Romania IT Person of the year 2015 European and emerging market experience Executive Committee (12 members) Female Inte rn- 17% ational 25% White Bla ck 42% South 58% African Male 75% 83% Vodacom Group Limited IR presentation | 17 February 2017 9
#5 | Consistently delivering shareholder returns Relative share price performance 1 Dividend per share Cents per share 795 775 400 400 1. As at 15 February 2017. Total shareholder return 2 Telkom 35.6% 375 395 395 Millicom 34.3% FY15 FY16 FY17 Bharti 15.1% Vodacom 6.3% Interim dividend Final dividend MTN -12.8% -15.0% -5.0% 5.0% 15.0% 25.0% 35.0% 2. ZAR year to date for the 12 months ending 15 February 2017 Vodacom Group Limited IR presentation | 17 February 2017 10
Targets | Group medium-term targets Service revenue growth Low to mid single-digit EBITDA growth Mid to high single-digit Capex intensity 12% to 14% 11 Vodacom Group Limited IR presentation | 17 February 2017 Vodacom Group Limited IR presentation | 17 February 2017 11
Continuing to deliver returns Best network Diversify Deliver cost Best talent Transform --------------------- and process --------------------- revenue to society and Best value deliver growth efficiency Best practice build --------------------- stakeholder Best service trust Vodacom Group Limited IR presentation | 17 February 2017 12
Customer | Best network, Best value, Best service Best network Best value Best service • • Connectivity • Personalised pricing and offers Network customer satisfaction #1 in all • • Always in control markets but one Driving pricing transformation • • 4G coverage in SA at 58% • Rewarding loyalty Reducing communication costs • International sites +17% • • Easy access Stimulating bundle adoption • SA dropped call rate @ 0.41% • 1 st in SA with commercial mobile LTE-A Average download speeds in SA Total prepaid bundle sales in SA SA Consumer NPS 1 points differentiation Source: MyBroadband (March 2016) (Mbps) Million % +6 ppts +15 ppts 189 86 23 18 17 10 314 387 383 369 FY15 FY16 1H15 2H15 1H16 2H16 Vodacom SA Operator A Operator B Operator C Vodacom Competitor A Competitor B Total prepaid bundle sales Just 4 You 1. Net Promoter Score Vodacom Group Limited IR presentation | 17 February 2017 13
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