Interim Results Presentation For the period ended 30 June 2018 - PowerPoint PPT Presentation

Interim Results Presentation For the period ended 30 June 2018

Highlights – H1 2018 Key performance indicators +5 % +16 % 13 % YOY YOY of revenue Revenue EBITDA Capital Expenditure R7.8 Billion R2.4 Billion R1 Billion +11 % +31 % -33 % YOY EBITDA Margin YOY Service Revenue YOY 3% Net Loss After Tax R6.9 Billion R0.6 Billion 2

Positive results Summary of reported financial information R’m H1 2018 H1 2017 % Change 6 861 6 196 11 Service revenue 914 1 189 -23 Non-service revenue 7 775 7 385 5 Total revenue 4 311 3 854 12 Gross margin 55% 52% 3 Gross margin % 2 378 2 048 16 EBITDA 31% 28% 3 EBITDA margin % (645) (968) 33 Net profit/(loss) after tax 3

Unpacking our subscribers H1 2018 Subscriber Base Composition Other key performance indicators 0.4 0.7 1.7 0.4 Million H1 2018 H1 2017 % Change Total active subscribers 16.3 15.7 4 13.0 MVNO subscriber base 1.7 1.3 31 Total active data subscribers 12.1 12.6 4 Data revenue ( R’m ) 2 961 2 473 20 H1 2017 Subscriber Base Composition Capital expenditure ( R’m ) 0.6 1.3 1 016 494 >100 0.9 0.5 Rand H1 2018 H1 2017 % Change Total ARPU 72 70 3 12.4 Prepaid 56 56 - Contract 227 209 9 Prepaid Postpaid Hybrid Broadband Wholesale Increase in smartphone users YOY 11 Smartphones on our network (million) 9.0 8.1 4

Revenue by subscriber type Service revenue market share 12.60% 4.80% Segment (R mln) H1 2018 H1 2017 % change 50.60% Prepaid 3 657 3 363 9 32% Postpaid 906 882 3 Hybrid 721 774 7 Vodacom MTN Telkom Cell C Broadband 384 302 27 Mobile revenue 5 668 5 321 7 Service revenue growth 12.00% Other 183 162 13 10.00% 8.00% Wholesale 486 322 51 6.00% 4.00% Incoming 524 391 34 2.00% 0.00% H1 2016 H1 2017 H1 2018 Service revenue 6 861 6 196 11 Cell C Market 5

Products & services at a glance 1. DATA 3. WHOLESALE • Data revenue increased by 20% whilst • Wholesale revenue increased by data traffic has increased by 62% YOY; R164 million (or 51%) to R486 • Data revenue now makes up 52% of million YOY driven by the growth mobile revenue compared to 46% a in the customer base; and year ago; and • Customer data usage in this area • The effective price of data per MB generated the bulk of the revenue has decreased by more than 28% YOY. growth. 2. VOICE 4. FTTH • Voice revenue decreased by 6% YOY • Competitive products and pricing; in line with a decrease in voice traffic • Exceptional organic growth aided by by 10% YOY; acquisitions going forward; and • Effective price of outgoing voice per • The customer base grew from 3 733 minute increasing by 3% YOY; and in H1 2017 to 16 425 in H1 2018 . • Voice traffic carried by other means such as WhatsApp Calling and other VoIP services. 6

Revenue segmented Segment (R mln) H1 2018 H1 2017 % change Voice 2 243 2 389 6 Data 2 961 2 473 20 Other 465 458 2 Mobile revenue 5 668 5 321 7 Wholesale, FTTH 669 485 38 and other Incoming 524 391 34 Service revenue 6 861 6 196 11 Equipment 914 1 189 23 revenue Total revenue 7 775 7 385 5 7

FINANCIAL RESULTS

Strengthened balance sheet R’m June 2018 Dec 2017 % Change Network assets 12 570 11 706* 7 Intangible assets 1 380 1 341 3 Trade receivables and other 4 607 4 896 -6 assets Deferred tax 4 094 4 094 - Total assets 22 651 22 037 3 Loans and borrowings (7 956) (6 824) 17 Other liabilities provisions (5 792) (6 875) 16 Lease obligations (5 465) (5 454)* - Total liabilities (19 213) (18 276) 5 Net equity 3 438 3 760 -9 * Estimated impact on adopting IFRS 16 9

H1 2018 Results presentation Reported financial key performance indicators R’m H1 2018 H1 2017 % Change Total revenue 7 775 7 385 5 EBITDA 2 378 2 048 16 Depreciation, amortisation and (1 443) (1 370) 5 impairment EBIT 935 678 38 Net Finance Costs (1 580) (1 646) 4 Net (loss)/profit before tax (645) (968) 33 10

H1 2018 Results presentation Focus on depreciation and amortisation R’m H1 2018 H1 2017 % Change EBITDA 2 378 2 048 16 Depreciation 1 087 1 105 2 Network, equipment and 552 667 17 other Network lease 536 438 22 Amortisation and impairment 356 265 34 Total depreciation and 1 443 1 370 5 amortisation 11

H1 2018 Results presentation Reconciliation of adjusted H1 2017 results Note H1 2017 R’m Note H1 2017 IFRS 15/16 restated 1. Under IFSR 15, subsidies received from CEC are recognised net of revenue compared to finance Total revenue 1 7 707 (322) 7 385 charges in 2017; 2. Under IFRS 15, costs to fulfil and obtain a customer Gross margin 2 3 984 (130) 3 854 contract are capitalised as an intangible asset and amortised over the period of the contract. Cell C Net operational expenditure 3 (2 371) 565 (1 806) has elected to apply the practical expedient and costs incurred for prepaid contracts are recognised EBITDA 3 1 613 435 2 048 as an expense in the month incurred; 3. Under IFRS 16, leases that have a term greater Depreciation, amortisation 2 (1 007) (363) (1 370) than 12 months are recognised as a finance lease. and impairment The right of use asset is amortised over the contract EBIT 606 72 678 period and the lease liability is amortised as a finance lease interest expense; 4. Admin and margin expenses are recognised as Net Finance Costs 4 (1 619) (27) (1 646) finance expenses compared to a subscriber acquisition cost in 2017. Net (loss)/profit (1 013) 45 (968) 12

Revenue analysis Voice vs. data revenue 3.5 3.0 2.5 2.6 3.0 2.5 2.4 2.5 2.2 2.5 • Growth in customer base; 2.0 1.9 • Increased customer spend; 1.5 1.4 • Data centric product offerings; 1.0 0.9 • Increased smartphone users; and 0.5 • Improved network quality. - H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Voice Data 13

Cost containment Operational Expenditure R’m H1 2018 H1 2017 % Change Direct expenditure 3 464 3 531 2 Operating expenditure 2 031 1 907 6 Depreciation, amortisation 1 443 1 370 5 and impairment Total expenditure 6 938 6 808 2 Capital Expenditure • Capital expenditure has been strategically focused to enable us to provide mobile voice, data services and content through a combination of our own LTE-Advanced network that overlays our LTE, 3G and 2G networks. • Cell C capital expenditure has slowed in H1 2017 due to the delayed recapitalization but picked up again post recapitalisation. Our total capital expenditure was: R’m H1 2016 H1 2017 H1 2018 Capital expenditure 1 754 494 1 016 14

Analysis of debt and finance cost Debt Interest F-X Indicative interest rate R mln 2018 2017 2018 2017 2018 2017 2018 2017 Long term debt 6 418 17 914 427 591 145 32 17.8% 7.0% Short term debt 1 528 417 111 28 14.5% 13.4% Leases 5 465 5 081 447 451 16.4% 17.8% Other finance 80 81 218 - 30 n.r. n.r. Cash / interest income - 674 - 159 - 33 - 23 n.r. n.r. Net debt excl. leases 7 272 18 172 505 677 363 2 17.2% 7.1% Net debt inc. leases 12 737 23 253 952 1 128 363 2 16.9% 9.4% HSF / CEC 1 795 1 959 185 207 18.3% 18.5% BLT 2 700 309 22.9% Analysis of forex rates Period 2018 2017 1 January 12.39 13.73 30 June 13.72 13.09 Leases include operating leases recognised as a finance lease, under IFRS 16, to the value of R3 946 at June 2018 and R3 098 at June 2017. 15

Available facilities Facility Estimated value Status New ZAR facility R1.4 billion Approved post June 2018 Vendor financing R1.4 billion In progress Shareholder support R1 billion In progress 16

Breakdown on CAPEX disclosed R’m H1 2016 H1 2017 H1 2018 Network assets 1 539 277 588 IT assets 16 1 22 Other assets 38 10 31 Intangible assets 37 62 100 Leased assets 124 144 275 Network CAPEX 1 754 494 1 016 Customer Intangibles 108 211 294 Total CAPEX 1 862 705 1 310 17

Company updates

Cell C senior management changes Chief Financial Officer • Process to appoint new Chief Financial Officer is well underway • In the interim, the Finance portfolio is managed by: • Robert Pasley (Chief Strategy Officer), responsible for the capital structure of the business • Douglas Craigie Stevenson (Chief Operations Officer) responsible for operational finance Chief Procurement Officer • This role will not be replaced and the function is now reporting into the Chief Operations Officer Chief Digital Officer • The position will not be replaced and this function will fall under a different structure going forward 19

Fibre to the home • Cell C offers unlimited, unrestricted, unshaped symmetrical and asymmetrical fibre packages C-Fibre subscribers benefit from value added services that include a FREE Wi-Fi Router, FREE installation, FREE connection, personalised device set-up and 1GB LTE mobile data p/m for 12 months. • Cell C launched a triple play offer that includes mobile, fibre and entertainment through the black platform. C-Fibre H1 2018 H1 2017 % Var Customer base 16 425 3 733 340 C-Fibre H1 2018 H1 2017 % Var Revenue (R mln) 62 13 375 20