Econet Wireless H1 2014 Presentation.pdf

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%


45% 43% 44%

Aug-10 Aug-11 Aug-12 Aug-13

114.9 131.2 152.8 165.3


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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


4.6 4.4 4.5


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19%24% 23%


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


9.716.3 17.3


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

Documents

Econet Wireless H1 2014 Presentation.pdf