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7/27/2019 Econet Wireless H1 2014 Presentation.pdf
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Tuesday 29 October 2013
ECONET WIRELESS ZIMBABWE LIMITED
UNAUDITED ABRIDGED FINANCIAL RESULTS
for the half year ended 31 August 2013
Investing for the future
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Strategic and operational overview
Douglas MboweniChief Executive Officer
Financial overview
Roy Chimanikire
Group Chief Finance Officer
Outlook
Douglas Mboweni
Chief Executive Officer
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Strategic and operational overview
Douglas Mboweni
Chief Executive Officer
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Operational Highlights
Operating Licence renewed for
another 20 years
Launch of 4G (LTE)
World class call centre technology
implemented
Launched exciting and innovative
products and services that include:
EcoCash Save
EcoFarmer
Focus on EcoCash and data to
drive revenue growth
Focus on customer centricity
Compelling customer value
propositions
Forward looking investment
strategy
Preservation of Shareholder
Value
Key Focus AreasSignificant Events
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Our Strategy for GrowthDefining our future
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100%
50% SMS/MMS
Voice
Broadband
2013 2017
0%
PercentofG
lobalRevenue
Source:Infonetics Research, 2G,3G,4G Mobile Services and Subscribers: Voice, SMS, MMS
and Boradband Biannual Market Size and forecasts, June 2013
Global Revenue TrendsFrom minutes to bytes
Market research
The contribution of voice revenues to mobile operators is
expected to decline.
Data (broadband) is expected to grow exponentially
Overlays are also expected to make a significantcontribution
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Executing our strategic goalsSustained Revenue Growth
Voice Data Overlays
Driving superior customer
experience
Uniquely tailored solutions to suitall customer segments
Continued network investment
Corporate solutions
Exciting promotions
Improving smartphone
penetration to drive data usage
through financing packages Reliable high speed internet with
the widest coverage
Robust infrastructure
unparalleled by any other
operator
Launch of LTE ahead of some
European markets
Using overlays to sustain growth
Continued development of
service offerings that create
unique points of differentiation
and customer loyalty
Leveraging the mobile network to
create relevant services in
different economic sectors such
as Financial Services and
Agriculture (e.g EcoFarmer,
EcoCash Save).
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Value share analysis Subscriber growth
Source: GSMA Inteilligence September 2013Source: Management Estimates
AngolaZambia
Tanzania
74%
86%
55%
Mozambique
43%
Zimbabwe
97%
Botswana151%
Namibia118%
South Africa135%
Lesotho63%
Swaziland67%
Penetration - Mobile
Zimbabwe Mobil e Value Share: Aug 2013
14%
12%
Telecel NetOneEconet
Market PositionLeading the pack
74%
Millions
Maintained value share andincreased revenues
Continued focus on high qualityand providing a world classservice
Strong growth in subscribersacross all key product segmentsSubscriber CAGR:
Voice - 19%
Data - 43%
EcoCash year on year subscribergrowth rate - 76%
Market penetration goalsachieved for voice servicesData and EcoCash penetrationpresent opportunities forgrowth
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Executing our strategic goalsSuccess of our Data offering
source: www.itnews.com source: www.speedtest.net
Zimbabwe in the Top 5African countrieswith the fastest
download speeds
Continued growth in the subscriber
base and volume of data delivered
Fibre connectivity remains a major
strategic advantage
Exciting data bundles launched
Competitive pricing, superior speeds
and unparalleled coverage
Customers (millions)
Feb - 13 Aug - 13Aug - 120.0
0.5
1.0
1.5
2.02.5
3.0
3.5
4.0
3.8
Y-O-Y growth of 52%
3.22.5
Econet launches thefirst 4G service in
Zimbabwe
First to launch devicefinance schemes
Over 60% growth inusage per subscriber
Data
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Executing our strategic goalsEcoCash - Exciting developments
Over $2 billionworth of transactions
since launch
Over 100 milliontransactions
processed sincelaunch
14 Banks nowintegrated to
EcoCash
Continued high demand and increase
in subscribers
Over 7,000 agents nationwide
System upgraded to cater for highervolumes and transaction capacity per
second increased by 20 times
Exponential increase in number andvalue of transactions:
Over $1.2 billion worth of transactionsin the last 6 months
Over 50 million transactions in the last6 months
Further growth expected as newfeatures are introduced
Customers (millions) Transactions (millions)
Y-O-Y growth of 76%
Aug - 12 Feb - 13 Aug - 13
1.7
2.13.0
Over 3 millionpeople have
transacted onEcoCash since
launch
0.0
0.5
1.0
1.5
2.0
2.5
3.0
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InnovationChanging the Financial Services Landscape
EcoCash Save is a unique mobile phone enabled bank
account with the following features:No application forms required
Can be opened instantly from the mobile phone
No minimum balance required
No proof of income
No bank charges
Funds earn interest
Save as little as a dollar a day
Mobile Phone penetration significantly exceeds
the percentage of the population with bankaccounts.
72% of SME business owners save mainly at home
and through informal mechanisms
Source: World Bank funded survey, May 2013
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InnovationOur future is secure
4G (LTE) Smart Bundles EcoFarmer
Leading the innovation path.
Driving a superior customer
experience
LTE launched in Victoria
Falls, Bulawayo and Harare
Up to ten times faster than
3G.
Unique and exciting
packages are available
Value for money - With the
bigger bundles customers
enjoy more data.
Providing timely weather
information to farmers
Access to agricultural
technical assistance via
mobile phones
Access to crop insurance
Networking farmingcommunities
Providing market linkages
and easy payment for
produce through EcoCash
Econet Solar
Deploying Green Kiosks
countrywide to expand the
distribution footprint for
Econets
products and services
Creating employment and
business opportunities for start-up SMEs
Driving towards a greener
future
Harnessing renewable
energy
Creating a safe environment
for the future
Empowering marginalised
communities for future
prosperity
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Customer focusDedication to service excellence
Call Center Customer Service Charter
Doubled capacity to handle SMS, emailand website enquiries
Doubled number of call centre agents
Launched Avaya Aura contact centre
management system - a first of this
technology in Africa
Customer focus reinforced throughbusiness wide training sessions
Improved experience through self-care
options such as SMS and interactive voice
response system
Customer care processes revamped in line
with global standards through: Process mapping Improved client service governance models
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Network InfrastructureThe widest voice and data network, and the best quality
More people, More places, Connected!
Launch of LTE
Continued improvement in coverage -
Geographical coverage now exceeds 80% Sufficient capacity to handle the 22% increase in
subscribers and the over 60% increase in data
usage per subscriber
Over 4 500km of fibre laid in Zimbabwe
Robust infrastructure and effective resource
planning to cater for future growth Now connected to 4 undersea cables:
SEACOM, SAT 3, EASSY and WACS
4G LTE COVERAGE
4G LTE COVERAGE
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Strong customer value propositionsDelivering value to customers
First to market with new
products
Exciting products and
services
The most extensive product
catalogue in the market
Extensive product catalogue
Providing value to
customers based on calling
patterns
Effective use of networkresources by stimulating
traffic to use idle capacity
Dynamic discounting
Exciting offers to suit
different needs and
circumstances
Value for money
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Roy Chimanikire
Group Chief Finance Officer
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8%
Group HighlightsIndustry-Leading Financial Performance
61%
20.733.4
EcoCash Revenue (US$ m) Data Revenue (US$ m)
36%
63.1 85.5
22%
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Sustained Revenue GrowthNew revenue streams driving revenue growth
Revenue (US$m) Revenue Mix
US$1.2 billion EBITDA generated since
dollarisation
Access to capital through debt structures
played a key role in delivering growth
Subscriber uptake of 577% since
dollarisation and market share
acquisition were the main drivers
7%
Voice remains a significant contributor to
revenue
Data contribution is increasing and is
expected to exceed 10% of overall
revenue
US$13 million contribution to revenue
from EcoCash
Note: August 2012 figures in brackets
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377
Revenue GrowthSustained revenue growth and stable ARPU
Revenue Growth (US$m) Data Revenue Growth (US$m)
2.6% growth in voice related revenue streams
3.2% of the growth is attributable to new lines
of business
Other revenue largely comprises device sales
and bottling company revenues
ARPU sustained at about US$ 8
Growth in data resulted from:
Improved access to data capable devices
Customer segmentation and continued
improvement in data speeds, coverage
and capacity
2.6%2.1%
3.2%2.9%
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Investment in new revenue streams resulted inadditional recruitment
New products required more marketing support
Efficiencies achieved in general administration costs
Costs in FocusCreating a stable growth platform
Key cost drivers:
Network costs
IT related costs
Marketing and sales costs
Customer service costs
Licence and USF costs
Staff costs EcoCash agent commissions
Operating Costs Analysis (US$m)Operating Cost (US$m)
Aug-12 HY Feb-13 Aug-13
187205 211
Aug-12 Aug-13
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EBITDA Margins
Maintaining our EBITDA MarginsDriving continued earnings growth
Strong EBITDA performance sustained
relative to peer group
Consistent EBITDA growth
EBITDA Analysis
CAGR 13%
Aug-12 HY Feb-13 Aug-13
45% 43% 44%
Aug-10 Aug-11 Aug-12 Aug-13
114.9 131.2 152.8 165.3
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Aug-12 HY Feb-13 Aug-13
PAT (US$m)
EarningsStable earnings
PAT increased compared to
immediately preceding half year
period
EPS increase driven by earnings growth
Basic EPS (US cents)
78 62 71
Aug-12 HY Feb-13 Aug-13
4.6 4.4 4.5
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Aug-12 HY Feb-13 Aug-13
19%24% 23%
Aug-12 HY Feb-13 Aug-13
6384 85
33% 1.2%
Capital InvestmentInvesting in the future of the business
CAPEX (US$m) CAPEX/Revenue (%)
Improved 3G footprint and geographicalcoverage
Extensive coverage driving the adoptionof Ecocash
Investment in infrastructure pillars thatsupport product innovation and animproved customer experience
Fibre backhaul improved
Capex/revenue ratio affected by Capexplanning cycles at each reporting date
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Financing Our Growth
Debt Evolution (US$m) Debt To Equity (%)
Depreciation & Amortisation (%) Net finance costs (US$m)
Aug-12 Aug-13
244 232
Aug-12 HY Feb-13 Aug-13
9.716.3 17.3
Aug-12 HY Feb-13 Aug-13
10% 11%12%
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Comparison with Regional Operators
EBITDA margin remains higher than regional operator average
Leverage ratio is below regional operator average
P/E ratio is the lower than other regional operators
Source: Bloomberg - Based on performance for last twelve months
Company Total Debt/Equity EV /EBITDA EV /Revenue P/E EBITDAMargin
Bharti Airtel 125% 7.4x 2.3x 59.3x 31%
Econet Wireless Zimbabwe 54% 3.8x 1.7x 6.7x 44%
Etisalat 12% 8.0x 2.6x 13.5x 32%
Maroc Telecom 39% 6.5x 3.5x 11.9x 54%
Millicom 144% 7.1x 2.5x 35.8x 35%
Zain 46% 6.9x 3.0x 12.4x 43%
Mobinil 353% 6.8x 2.0x n/a 30%MTN Group 35% 6.2x 2.6x 16.3x 42%
Orascom Holding 301% 3.6x 1.8x n/a 50%
Safaricom 25% 7.6x 2.9x 20.5x 39%
Sonatel 8% 5.3x 2.8x 13.6x 54%
Telecom Egypt 2% 5.3x 1.7x 8.4x 32%
Telkom SA 37% 2.3x 0.5x 31.0x 22%
Vodacom Group 68% 6.1x 2.2x 13.2x 36%
Average 89% 5.9x 2.3x 20.2x 39%
Median 43% 6.3x 2.4x 13.5x 38%
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In Conclusion...
Revenue from new overlay services becoming moresignificant.Revenue
Costs
Licence
Capex
Debt
Investing to create new revenue streams.
Operating licence fee paid.
Emphasis on service quality while keeping up to date withglobal trends. Investing in new areas of growth.
Leveraging debt to create sustainable value whilstmanaging cash commitments.
Margins Stable margins in the mainstream telecoms business.Investment in new lines of business reduced overall margin.
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Outlook
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New Licence
The licence period was
extended by 20 years
The renewal fee was set at
US$137.5 million
All operators will be required
to pay the same licence fee on
renewal of their licences Econet has fully paid for its
licence
Original Licence:
The licence was issued for 15 years
in July 1998 and was scheduled to
expire on the 9th July 2013
The licence stipulated a licence
renewal fee of US$100 million
Operating Licence Renewal20 More Years!
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Creating Sustainable ValueStakeholder Value Proposition
CapitalInvestment
Over US$ 1 billioninvested in
the economy
CapitalInvestment
Over US$ 1 billioninvested in
the economy
Cutting edgeinnovation - Productssuch as Buddie Zone,
EcoCash, EcoFarmer,Econet Solar etc.
Financial inclusion -Providing access to
financial services for themajority of the
population that waspreviously unbanked.
Over US$190 million returned to shareholders sincedollarisation through cash dividends and share buybacks.
Infrastructuredevelopment - improving
communicationstechnology, internet
connectivity.
Economic contribution-US$815 million paid in
various taxes, duties andlevies
Employment creation - estimated direct and indirectemployment by Econet is more than 20,000 jobs
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Conclusion
We will continue to invest in innovative technologies
that enrich lives and create a platform for sustainable
revenue growth and shareholder value enhancement.
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Appendices
Abridged financialstatements
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Statement of Comprehensive Income US$000s
Aug-13 Aug-12 Variance (%)Revenue 376,558 339,469 11%
EBITDA 165,254 152,796 8%
Depreciation, amortisation & impairment (45,746) (32,541) -41%
Operating profit 119,508 120,256 -1%
Net finance costs (17,269) (9,685) -78%
Share of profit/(loss) in associate 3,835 1,708 125%
Profit before tax 106,074 112,279 -6%
Income tax expense (35,506) (34,261) -4%
Profit after tax 70,568 78,017 -10%
Non-controlling interests (61) (76) 20%
Attributable profit 70,507 77,941 -10%
EBITDA Margin 44% 45% -1%PAT Margin 19% 23% -4%
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Statement Of Financial Position US$000s
Aug-13 Feb-13 Variance (%)
ASSETS
Property, plant & equipment 862,960 706,389 22%
Other non-current assets 48,098 33,563 43%
Current assets 224,086 275,158 -19%
TOTAL ASSETS 1,135,144 1,015,110 12%
EQUITY & LIABILITIES
Share capital & Share Premium 36,984 35,697 4%
Other reserves 2,441 569 329%
Retained earnings 524,544 453,139 16%
Minority Interest 3,870 3,478 11%
Total Equity 567,839 492,883 15%
Deferred taxation 118,824 85,493 39%
Long term interest-bearing liabilities 158,040 202,800 -22%
Current liabilities 290,441 233,934 24%
Total Liabilities 567,305 522,227 9%
TOTAL EQUITY & LIABILITIES 1,135,144 1,015,110 12%
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Statement Of Cash Flows US$000s
Aug-13 Aug-12 Variance (%)
Cash generated from operations 242,007 152,243 59%
Tax paid (22,987) (28,584) 20%
Net cash from operating activities 219,020 123,659 77%Acquisition of property, plant and equipment (205,286) (63,123) -225%
Other investing activities (1,467) (15,628) 91%
Cash used in investing activities (206,753) (78,751) -163%
Cash generated from financing activities (50,557) (37,576) -35%
(Decrease)/Increase in cash & cash equivalents (38,290) 7,332 -422%
Cash and cash equivalents at the beginning of year 78,230 100,793 -22%
Cash and cash equivalents at acquisition of subsidiary
Cash & cash equivalents at the end of the year 39,940 108,125 -63%
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Disclaimer
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