Econet Wireless Zimbabwe HY2014 analysts' presentation

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Econet Wireless Zimbabwe HY2014 analysts' presentation

  1. 1. Investing for the future ECONET WIRELESS ZIMBABWE LIMITED UNAUDITED ABRIDGED FINANCIAL RESULTS for the half year ended 31 August 2013 Tuesday 29 October 2013
  2. 2. Strategic and operational overview Douglas Mboweni Chief Executive Officer Financial overview Roy Chimanikire Group Chief Finance Officer Outlook Douglas Mboweni Chief Executive Officer
  3. 3. Strategic and operational overview Douglas Mboweni Chief Executive Officer
  4. 4. Operational Highlights Significant Events • 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: • EcoFarmer • Focus on EcoCash and data to drive revenue growth • Focus on customer centricity • Compelling customer value propositions • Forward looking investment strategy EcoCash Save • Key Focus Areas • Preservation of Shareholder Value
  5. 5. Our Strategy for Growth Defining our future
  6. 6. Global Revenue Trends From minutes to bytes Market research Percent of Global Revenue 100% Broadband SMS/MMS 50% Voice 0% 2013 2017 Source: Infonetics Research, 2G,3G,4G Mobile Services and Subscribers: Voice, SMS, MMS and Boradband Biannual Market Size and forecasts, June 2013 • 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 significant contribution
  7. 7. Executing our strategic goals Sustained Revenue Growth Voice • Driving superior customer experience • Uniquely tailored solutions to suit all customer segments • Continued network investment • Corporate solutions • Exciting promotions Data • Improving smartphone penetration to drive data usage through financing packages • Reliable high speed internet with the widest coverage • Robust infrastructure Overlays • 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 unparalleled by any other different economic sectors such operator as Financial Services and • Launch of LTE ahead of some European markets Agriculture (e.g EcoFarmer, EcoCash Save).
  8. 8. Market Position Leading the pack Value share analysis Subscriber growth Penetration - Mobile Tanzania 55% Zimbabwe Mobile Value Share: Aug 2013 Econet Telecel NetOne Millions 74% Angola Zambia 86% 14% 97% Zimbabwe Namibia 118% 12% 43% Mozambique Botswana 151% Swaziland 67% 74% South Africa 135% Source: GSMA Inteilligence September 2013 Source: Management Estimates Maintained value share and increased revenues Continued focus on high quality and providing a world class service Lesotho 63% Strong growth in subscribers across all key product segments Subscriber CAGR: Voice Data - 19% 43% EcoCash year on year subscriber growth rate - 76% Market penetration goals achieved for voice services Data and EcoCash penetration present opportunities for growth
  9. 9. Executing our strategic goals Success of our Data offering Data Econet launches the first 4G service in Zimbabwe First to launch device finance schemes source: www.itnews.com Over 60% growth in usage per subscriber source: www.speedtest.net Customers (millions) • Continued growth in the subscriber Y-O-Y growth of 52% 4.0 base and volume of data delivered • Fibre connectivity remains a major 3.5 3.8 3.0 2.5 2.0 Zimbabwe in the Top 5 African countries with the fastest download speeds 3.2 strategic advantage • Exciting data bundles launched 2.5 • Competitive pricing, superior speeds 1.5 and unparalleled coverage 1.0 0.5 0.0 Aug - 12 Feb - 13 Aug - 13
  10. 10. Executing our strategic goals EcoCash - Exciting developments Over 100 million transactions processed since launch Over $2 billion worth of transactions since launch Customers (millions) Over 3 million people have transacted on EcoCash since launch 14 Banks now integrated to EcoCash Transactions (millions) Y-O-Y growth of 76% 3.0 2.5 3.0 2.0 2.1 1.5 1.0 1.7 0.5 0.0 Aug - 12 Feb - 13 Aug - 13 • Continued high demand and increase in subscribers • Over 7,000 agents nationwide • System upgraded to cater for higher volumes and transaction capacity per second increased by 20 times • Exponential increase in number and value of transactions: • Over $1.2 billion worth of transactions in the last 6 months • Over 50 million transactions in the last 6 months • Further growth expected as new features are introduced
  11. 11. Innovation Changing the Financial Services Landscape • Mobile Phone penetration significantly exceeds the percentage of the population with bank accounts. • 72% of SME business owners save mainly at home and through informal mechanisms Source: World Bank funded survey, May 2013 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
  12. 12. Innovation Our future is secure 4G (LTE) • Leading the innovation path. • Driving a superior customer experience • LTE launched in Victoria Falls, Bulawayo and Harare • Up to ten times faster than 3G. Smart Bundles • Unique and exciting packages are available • Value for money - With the bigger bundles customers enjoy more data. EcoFarmer • Providing timely weather information to farmers • Access to agricultural technical assistance via mobile phones • Access to crop insurance • Networking farming communities • Providing market linkages and easy payment for produce through EcoCash Econet Solar • Deploying Green Kiosks countrywide to expand the distribution footprint for Econet’s 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
  13. 13. Customer focus Dedication to service excellence Call Center • Doubled capacity to handle SMS, email and website enquiries • Doubled number of call centre agents • Launched Avaya Aura contact centre management system - a first of this technology in Africa Customer Service Charter • Customer focus reinforced through business 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
  14. 14. Network Infrastructure The widest voice and data network, and the best quality More people, More places, Connected! 4G LTE COVERAGE 4G LTE COVERAGE • Launch of LTE • Over 4 500km of fibre laid in Zimbabwe • Continued improvement in coverage - • Robust infrastructure and effective resource Geographical coverage now exceeds 80% planning to cater for future growth • Sufficient capacity to handle the 22% increase in • Now connected to 4 undersea cables: subscribers and the over 60% increase in data • SEACOM, SAT 3, EASSY and WACS usage per subscriber
  15. 15. Strong customer value propositions Delivering value to customers Extensive product catalogue • First to market with new products • Exciting products and services • The most extensive product catalogue in the market Dynamic discounting • Providing value to Value for money • Exciting offers to suit customers based on calling different needs and patterns circumstances • Effective use of network resources by stimulating traffic to use idle capacity
  16. 16. Roy Chimanikire Group Chief Finance Officer
  17. 17. Group Highlights Industry-Leading Financial Performance 22% EcoCash Revenue (US$ m) 8% Data Revenue (US$ m) 20.7 61% 33.4 63.1 36% 85.5
  18. 18. Sustained Revenue Growth New revenue streams driving revenue growth Revenue (US$m) Revenue Mix 7% Note: August 2012 figures in brackets • 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 • Voice remains a significant contributor to revenue • Data contribution is increasing and is expected to exceed 10% of overall revenue • US$13 million contribution to revenue from EcoCash
  19. 19. Revenue Growth Sustained revenue growth and stable ARPU Revenue Growth (US$m) 2.6% 2.1% 3.2% Data Revenue Growth (US$m) 2.9% 377 • Growth in data resulted from: • 2.6% growth in voice related revenue streams • 3.2% of the growth is attributable to new lines • Improved access to data capable devices of business • Customer segmentation and continued • improvement in data speeds, coverage and bottling company revenues • Other revenue largely comprises device sales and capacity ARPU sustained at about US$ 8
  20. 20. Costs in Focus Creating a stable growth platform Operating Cost (US$m) 187 205 211 Aug-12 HY Feb-13 Operating Costs Analysis (US$m) Aug-13 Aug-12 Key cost drivers: • • • • • • • Network costs IT related costs Marketing and sales costs Customer service costs Licence and USF costs Staff costs EcoCash agent commissions Aug-13 • Investment in new revenue streams resulted in additional recruitment • New products required more marketing support • Efficiencies achieved in general administration costs
  21. 21. Maintaining our EBITDA Margins Driving continued earnings growth EBITDA Margins EBITDA Analysis CAGR 13% 45% 43% 44% 114.9 Aug-12 HY Feb-13 Aug-13 • Strong EBITDA performance sustained relative to peer group 131.2 Aug-10 Aug-11 152.8 165.3 Aug-12 Aug-13 • Consistent EBITDA growth
  22. 22. Earnings Stable earnings PAT (US$m) 78 Aug-12 62 HY Feb-13 Basic EPS (US cents) 71 Aug-13 • PAT increased compared to immediately preceding half year period • EPS increase driven by earnings growth
  23. 23. Capital Investment Investing in the future of the business CAPEX (US$m) 1.2% 33% 63 Aug-12 CAPEX/Revenue (%) 84 HY Feb-13 85 Aug-13 • Improved 3G footprint and geographical coverage • Extensive coverage driving the adoption of Ecocash • Investment in infrastructure pillars that support product innovation and an improved customer experience • Fibre backhaul improved 19% Aug-12 24% HY Feb-13 23% Aug-13 • Capex/revenue ratio affected by Capex planning cycles at each reporting date
  24. 24. Financing Our Growth Debt Evolution (US$m) 244 232 Aug-12 Debt To Equity (%) Aug-13 Depreciation & Amortisation (%) 10% 11% Aug-12 HY Feb-13 Net finance costs (US$m) 12% 9.7 Aug-13 Aug-12 16.3 17.3 HY Feb-13 Aug-13
  25. 25. Comparison with Regional Operators Company Total Debt/ Equity EV / EBITDA EV / Revenue P/E EBITDA Margin 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% 144% 7.1x 2.5x 35.8x 35% 46% 6.9x 3.0x 12.4x 43% 353% 6.8x 2.0x n/a 30% 35% 6.2x 2.6x 16.3x 42% 301% 3.6x 1.8x n/a 50% 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% Bharti Airtel Millicom Zain Mobinil MTN Group Orascom Holding Safaricom Source: Bloomberg - Based on performance for last twelve months • EBITDA margin remains higher than regional operator average • Leverage ratio is below regional operator average • P/E ratio is lower than other regional operators
  26. 26. In Conclusion... Revenue Costs Revenue from new overlay services becoming more significant. Investing to create new revenue streams. Margins Stable margins in the mainstream telecoms business. Investment in new lines of business reduced overall margin. Licence Operating licence fee paid. Capex Debt Emphasis on service quality while keeping up to date with global trends. Investing in new areas of growth. Leveraging debt to create sustainable value whilst managing cash commitments.
  27. 27. Outlook
  28. 28. Operating Licence Renewal 20 More Years! 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 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
  29. 29. Stakeholder Value Proposition Creating Sustainable Value Employment creation - estimated direct and indirect employment by Econet is more than 20,000 jobs Cutting edge innovation - Products such as Buddie Zone, EcoCash, EcoFarmer, Econet Solar etc. Economic contribution -US$815 million paid in various taxes, duties and levies Financial inclusion Providing access to financial services for the majority of the population that was previously unbanked. Capital Investment Over US$ 1 billion invested in the economy Infrastructure development - improving communications technology, internet connectivity. Over US$190 million returned to shareholders since dollarisation through cash dividends and share buybacks.
  30. 30. Conclusion We will continue to invest in innovative technologies that enrich lives and create a platform for sustainable revenue growth and shareholder value enhancement.
  31. 31. Appendices Abridged financial statements
  32. 32. Statement of Comprehensive Income US$000’s 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% 3,835 1,708 125% Profit before tax 106,074 112,279 -6% Income tax expense (35,506) (34,261) -4% 70,568 78,017 -10% (61) (76) 20% 70,507 77,941 -10% EBITDA Margin 44% 45% -1% PAT Margin 19% 23% -4% Share of profit/(loss) in associate Profit after tax Non-controlling interests Attributable profit
  33. 33. Statement Of Financial Position US$000’s Aug-13 Feb-13 Variance (%) 862,960 48,098 224,086 1,135,144 706,389 33,563 275,158 1,015,110 22% 43% -19% 12% 36,984 2,441 524,544 35,697 569 453,139 4% 329% 16% 3,870 3,478 11% 567,839 492,883 15% Long term interest-bearing liabilities 118,824 158,040 85,493 202,800 39% -22% Current liabilities 290,441 233,934 24% 567,305 522,227 9% 1,135,144 1,015,110 12% ASSETS Property, plant & equipment Other non-current assets Current assets TOTAL ASSETS EQUITY & LIABILITIES Share capital & Share Premium Other reserves Retained earnings Minority Interest Total Equity Deferred taxation Total Liabilities TOTAL EQUITY & LIABILITIES
  34. 34. Statement Of Cash Flows US$000’s 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% (205,286) (63,123) -225% (1,467) (15,628) 91% (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% 78,230 100,793 -22% 39,940 108,125 -63% Acquisition of property, plant and equipment Other investing activities Cash used in investing activities Cash and cash equivalents at the beginning of year Cash and cash equivalents at acquisition of subsidiary Cash & cash equivalents at the end of the year
  35. 35. Disclaimer

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