Wrap Text
TELKOM SA LIMITED - VODACOM AUDITED FULL-YEAR RESULTS FOR THE YEAR ENDED MARCH
31, 2004
Telkom SA Limited
(Registration Number 1991/005476/06)
ISIN ZAE000044897
JSE and NYSE Share Code TKG
("Telkom")
Vodacom audited full-year results for the year ended March 31, 2004
COMMENTARY
Vodacom Group (Proprietary) Limited ("Vodacom"), South Africa"s largest mobile
communications group, in which Telkom has a 50.0% holding, has announced audited
full-year results for the year ended March 31, 2004. Revenue increased by 18.7%
to R23,478 million (US$3,715 million), profit from operations increased 20.9% to
R5,234 million (US$828 million) and net profit increased 36.9% to R3,032 million
(US$480 million) for the year ended March 31, 2004.
Group financial highlights:
Group revenue growth of 18.7% to R23.5 billion
Group EBITDA growth of 15.9% to R7.8 billion
Group data revenue growth of 58.9% to R1.0 billion
Profit from operations growth of 20.9% to R5.2 billion
Net profit growth of 36.9% to R3.0 billion
Shareholder distributions of R2.1 billion
Operating highlights
Group total customers up 29.7% to 11.2 million
Group capex as a % of revenue reduced by 4.9% points to 12.3%
Group customers per employee improved by 23.9% to 2,433
Acquired 51% of Smartphone SP (Proprietary) Limited in March 2004
Vodacom Mozambique launched in December 2003
South Africa
Customers
The South African customer base continued to grow this year, showing the market
is larger than previously forecast. Total customers increased by 23.5% to 9.7
million (2003: 7.9 million), with the majority of the growth coming from the
prepaid market. The number of prepaid customers increased by 24.3% to 8.3
million, while the number of contract customers increased by 20.2% to 1.4
million, fuelled to a large extent by increased connection incentive levels in
the market. The strong growth in customers was a direct result of the
remarkable number of gross new connections achieved of 5.0 million, coupled with
low churn in the contract base, offset to some extent by increased churn in the
prepaid base.
ARPU
The developing market, through the prepaid service, has been driving market
penetration in 2004 and made up 92.4% (2003: 94.3%) of all gross connections.
Indications are that total ARPU has stabilized and during the period under
review decreased to R177 per month (2003: R183) due to the continued dilution of
ARPU caused by the higher proportion of new, lower ARPU prepaid connections.
Contract customer ARPU has increased by 0.8% (2003: 12.3%) to R634, while
prepaid customer ARPU remained stable (2003: decreased by 3.2%) at R90 per
customer per month.
Churn
Due to the high cost of acquisition in a highly developed contract market,
Vodacom has implemented upgrade and retention policies over the last couple of
years that ensured the decrease in contract churn to the lowest level in our
history of 10.1% in 2004 (2003: 11.9%). The developing prepaid market however is
characterized by low acquisition costs due to the flexibility required by this
market to be able to access our services as the customer has disposable income.
The high prepaid churn experienced during the year under review of 41.3% (2003:
34.0%) is a function of an increasingly competitive market, but also due to
changes to the business rules governing prepaid customers.
Traffic and minutes of use
Total traffic on the network, excluding the impact of national and international
roaming, has shown an increase of 17.3% to 12.3 billion minutes in 2004 (2003:
10.5 billion). This growth was due mainly to the 23.5% growth in the total
customer base from 7.9 million to a base of 9.7 million as at the end of March
2004. Also evident was a marked change in customer calling patterns, with mobile
to mobile traffic increasing by 30.9% while mobile to fixed traffic decreased by
6.4%.
Market share
Vodacom has retained its dominance in the South African market with an estimated
54% market share as at March 31, 2004 despite strong competition. Although we
have been highly successful in defending our market share, this competitiveness
of the market has inevitably resulted in margin squeeze.
Other African operations
This was an exciting year for our existing other African investments as we
further entrenched ourselves in all of these operations. Vodacom Tanzania
Limited ("Vodacom Tanzania") consolidated its position as market leader in that
country with a 57% market share at year-end. Vodacom Congo (RDC) s.p.r.l.
("Vodacom Congo") has significantly grown its market share since the re-launch
of the operation under the Vodacom brand in May 2002 and has increased its
market share from 9% at that time to 47% at year-end. Vodacom Lesotho
(Proprietary) Limited ("Vodacom Lesotho") has positioned itself to capitalize on
any future market growth and minimize the impact of competitive activity. After
almost two years of negotiations, Vodacom launched commercial operations in the
Republic of Mozambique on December 15, 2003. Although still in its infancy,
initial indications from this market are promising. The number of connections
experienced in the three months since launching was ahead of expectations,
enabling us to rapidly achieve a 11% market share against an established
operator, MCel. Initial ARPU levels are at R110 or $15 per month. All our
African operations, except our new Mozambican operation, were profitable at the
profit from operations level for the year.
Effective April 1, 2004 Vodacom International Limited ("VIL") entered into a
five year management agreement with VEE Networks Limited ("VEE"), (formerly
Econet Wireless Nigeria Limited), subject to the right of termination in favor
of each of the parties. In terms of the agreement, VIL would have managed VEE"s
cellular network operations in Nigeria for a fee which is based on VEE"s
turnover. VEE would have been allowed to use the Vodacom logo and brand name.
VIL also had the intention to acquire an equity stake in the business of VEE.
However, on May 31, 2004, VIL and VEE mutually agreed to terminate the
management agreement entered into on April 1, 2004. VIL will continue to
provide technical support to VEE for a period of up to six months. VIL has also
decided not to pursue an equity stake in the business of VEE.
Financial review
The Vodacom Group achieved remarkable results in an ever more competitive and
demanding environment. Revenue increased by 18.7% to R23.5 billion and net
profit after tax and minorities to R3.0 billion, an impressive achievement for
our ten-year old Group.
Operating revenue
Year ended March 31,
% of % of % of % %
Rand millions total total total change change
2002 2003 2004 2002 2003 2004 03/02 04/03
Airtime, connection 9,030 10,647 12,738 55.9 53.8 54.3 17.9 19.6
and access
Data revenue 457 654 1,039 2.8 3.3 4.4 43.1 58.9
Interconnection 4,301 5,309 5,785 26.6 26.8 24.7 23.4 9.0
Equipment sales 1,627 2,264 2,898 10.1 11.5 12.3 39.2 28.0
International airtime 301 539 659 1.9 2.7 2.8 79.1 22.3
Other sales and 435 366 359 2.7 1.9 1.5 (15.9) (1.9)
services
Total revenue 16,151 19,779 23,478 100 100 100 22.5 18.7
Airtime, connection and access
Vodacom"s airtime revenue increased 19.6% (2003: 17.9%) during the year ended
March 31, 2004, primarily due to the increase in the number of Vodacom"s
customers, and, to a lesser extent, standard tariff increases. Total customers
increased 29.7 % (2003: 26.0%) primarily due to strong prepaid customer growth
in South Africa and significant customer growth in our other African operations.
Data revenue
During the year under review, Vodacom changed its classification of revenue to
enable the separate identification of data revenue. This was done because of the
strategic importance Vodacom places on understanding and growing data revenue in
the future.
Vodacom"s data revenue increased 58.9% to R1,039 million (2003: R654 million),
mainly due to SMS traffic growth. Although the other African operations
contribute a small proportion of data revenue, the substantial increase in
Vodacom Tanzania of 28.2% for the year is encouraging. Data revenue in Vodacom
Congo and Vodacom Mozambique (VM, S.A.R.L) is still very small.
Vodacom transmitted 2.0 billion SMSs (2003: 1.5 billion) over its South African
network during the year ended March 31, 2004, up 33.3% from 2003. The number of
active MMS users on the network as at March 31, 2004 was 61,374 (2003: 1,789)
and the number of active GPRS users on the network was 100,128 (2003: 7,756).
Data revenue contributed 4.4% of total revenue for the year ended March 31, 2004
(2003: 3.3%).
Interconnection
Vodacom"s interconnection revenue increased 9.0% (2003: 23.4%) during the year
to R5.8 billion (2003: R5.3 billion) primarily due to an increase in the number
of calls terminating on Vodacom"s network as a result of the increased number of
Vodacom customers and mobile users generally in all operations during the
period. Adding to the growth in interconnection revenue was the changing call
patterns of mobile users in South Africa, with disproportionally more calls
terminating on mobile networks than on the fixed-line network. However,
significantly offsetting this and thereby inhibiting growth in interconnection
revenue was a 9.2% reduction in traffic originating from Telkom and terminating
on Vodacom"s network.
Equipment sales
Vodacom"s revenue from equipment sales, which yields relatively low margins,
increased markedly during the year, reaching its highest level ever. Equipment
sales revenue increased by 28.0% (2003: 39.2%) during the year to R2.9 billion
(2003: R2.3 billion). The growth in equipment sales was primarily due to the
growth of our Vodacom Congo operations and the significant uptake of new
handsets in South Africa because of the high level of new connections fuelled by
cheaper Rand-prices of MMS and GPRS-enabled handsets coupled with the added
functionality of the new phones, such as built-in digital cameras.
International airtime
International airtime increased 22.3% (2003: 79.1%) to R659 million in 2004
(2003: R539 million), primarily as a result of a healthy increase in
international airtime revenue in Vodacom Congo, coupled with a moderate increase
in Vodacom South Africa. International airtime comprise mainly of international
calls by Vodacom customers, roaming revenue from Vodacom"s customers making and
receiving calls while abroad and revenue from international customers roaming on
Vodacom"s networks. The increase is mainly due to a 30.5% increase in Vodacom"s
South African customers roaming internationally and a 12.5% increase in
international visitors roaming in South Africa.
Other sales and services
Other sales and services in prior years included revenue from our television
rental business, Teljoy, which was sold in March 2002 and has shown a steady
decrease from then on, as we focus on our core revenue generating business.
Operating expenses
Year ended March 31,
Rand millions % %
2002 2003 2004 03/02 04/03
Depreciation and amortization 2,070 2,374 2,533 14.7 6.7
Payments to other operators 1,378 2,217 2,990 60.9 34.9
Other direct network operating 6,992 8,643 10,063 23.6 16.4
costs1
Staff expenses 1,135 1,018 1,332 (10.3) 30.8
Marketing and advertising 542 653 702 20.5 7.5
General administration expenses 498 612 682 22.9 11.4
Integration costs, disposal of (56) - - - -
operations and impairments
Other operating income (29) (68) (58) 134.5 (14.7)
Operating expenses 12,530 15,449 18,244 23.3 18.1
Note
1. Direct network operating costs less payments to other operators.
Depreciation and amortization
Vodacom"s depreciation and amortization increased by 6.7% to R2,533 million in
the year ended March 31, 2004 (2003: R2,374 million). Our biggest capital
investments have already been made in South Africa and growth in depreciation in
South Africa is therefore slowly declining. The significant strengthening of
the Rand against the US Dollar resulted in depreciation on foreign-denominated
capital expenditure in our African operations for the year being translated at a
lower exchange rate than in the past, which resulted in relatively lower
depreciation charge for the year. In fact, the depreciation and amortization
charge in Vodacom Tanzania in Rand terms actually decreased by 6.8% from 2003 to
2004.
Payments to other operators
Vodacom"s payments to other network operators increased by 34.9% to R2,990
million in 2004 (2003: R2,217 million) increasing significantly in both the
years ended March 31, 2004 and 2003, as a result of increased outgoing traffic
and the increased amount of outgoing traffic terminating on other mobile
networks, rather than on Telkom"s fixed-line network. As the cost of terminating
calls on other mobile networks is higher than calls terminating on Telkom"s
fixed-line network, as mobile substitution increases with the increasing number
of total mobile users in South Africa, interconnection charges should also
continue to increase and continue to put pressure on profit margins.
Other direct network operating costs
Other direct network expenses include the cost to connect customers onto the
network and are incurred to support growth in revenues. Other direct network
expenses also includes cost of goods sold, commissions, customer retention
expenses, regulatory and license fees, distribution expenses and site and
maintenance costs. Despite increased competition these costs have increased in
line with the record number of customer connections and growth in revenues, by
16.4% to R10.1 billion for the year ended March 31, 2004 (2003: R8.6 billion).
Staff expenses
Staff expenses increased by 30.8% in the year ended March 31, 2004 to R1,332
million (2003: R1,018 million) primarily as a result of an increase in headcount
of 4.6% in 2004 (2003: 1.2%), as well as an average group-wide salary increase
of 8% and a higher deferred bonus incentive accrual. Total headcount in our
South African operations decreased by 1.4% (2003: increased by 1.2%) as we
continued to increase productivity. Total headcount in our other African
operations increased by a significant 51.6% (2003: 1.6%) in order to meet the
demands of the rapid expansion of these operations. Employee productivity has
shown a marked improvement in all of our operations, as measured by customers
per employee, increasing on an overall basis by 23.9% to 2,433 customers per
employee in 2004 (2003: 1,963).
Marketing and advertising
Marketing and advertising expenses increased by 7.5% in 2004 to R702 million,
(2003: R653 million) driven mainly by inflationary increases in South African
expenditure, marginal decreases in Rand terms in Vodacom Tanzania, Congo and
Lesotho coupled with the marketing expenses related to the launch of Vodacom
Mozambique.
General administration expenses
General administration expenses increased by 11.4% to R682 million (2003: R612
million). General administration expenses comprise a number of expenses
including accommodation, information technology costs, office administration,
consultants" expenses, social economic investment and insurance. Although small,
the increase is mainly as a result of the continued expansion drive into Africa,
which require expenses relating to assignees on secondments and high overhead
costs such as accommodation, insurance and consulting fees.
Capital expenditure
Capital expenditure - geographical split
Year ended March
31,
% of % of % of % %
Rand millions total total total change change
2002 2003 2004 2002 2003 2004 03/02 04/03
South Africa
excluding
holding companies 2,482 1,654 79.6 73.0 57.2 (23.7) (33.4)
3,253
Tanzania 676 323 351 16.5 9.5 12.1 (52.2) 8.7
Congo (51%) 92 516 395 2.3 15.2 13.7 460.9 (23.4)
Mozambique - - 478 - - 16.5 - -
Lesotho 26 72 7 0.6 2.1 0.2 176.9 (90.3)
Holding companies 38 6 6 1.0 0.2 0.3 (84.2) -
Capital expenditure
for
the year 3,399 2,891 100.0 100.0 100.0 (16.8) (14.9)
4,085
The total cumulative capital expenditure of the Group at March 31, 2004
increased by 13.1% to R20.7 billion (2003: R18.3 billion). The Group invested
R2.9 billion (2003: R3.4 billion) in property, plant and equipment. R2.8 billion
(2003: R3.2 billion) was for cellular network infrastructure and related IT and
billing systems.
The stronger Rand aided the Group in that most capital expenditure is imported
and foreign denominated. Although it is our policy to hedge all foreign
denominated commitments from South Africa, we do not qualify for hedge
accounting in terms of IAS 39. This means that all capital expenditure in South
Africa is recorded at the exchange rate ruling at the date of acceptance of the
equipment. Capital expenditure of our other African operations is translated at
the average exchange rate of the Rand against the US Dollar during the year of
R11.42, R9.81 and R7.17 for 2002, 2003 and 2004 respectively. Closing capital
expenditure of our other African operations are translated at the closing
exchange rate of the Rand against the US Dollar for the year, namely R11.44,
R7.97 and R6.32 in 2002, 2003 and 2004 respectively. For this reason Vodacom"s
capital expenditure in any given year cannot be evaluated without taking the
effect of the exchange rate movements against the Rand into account.
Funding
Our on balance sheet consolidated net debt position has decreased considerably
to R463 million as at March 31, 2004 (2003: R2,445 million). This reflects the
Group"s net debt position before the payment for 51% of the equity of Smartphone
SP (Proprietary) Limited of R234 million and settlement of the R1.5 billion
dividend payable at the end of May 2004 and brings the Group"s net debt to
EBITDA ratio to its lowest level ever of 6.0%. The repayment of our shareholder
loans of R920 million during the year did not impact our net debt position and
therefore did not impact our net debt/EBITDA ratio. If dividends payable were
included in net debt, our net debt position would increase to R1,963 million,
and our net debt/EBITDA ratio to 25.3%.
The improvement in net debt was principally the result of very strong cash
generation in our South African operations and a cash balance of R150 million in
Smartphone SP (Proprietary) Limited at the time of purchasing our 51% stake,
which significantly increased our consolidated cash deposits. Other changes in
interest-bearing debt were brought about primarily as a result of repayment and
re-measurement in Rand terms of Vodacom Tanzania project finance debt, a further
draw-down of South African guaranteed credit facilities in Vodacom Congo as well
as the payment of dividends in Vodacom Group. The repayment and re-measurement
of Vodacom Tanzania"s project finance arrangements resulted in a reduction of
R166 million in interest-bearing debt. The draw-down on new debt and re-
measurement of existing debt in Vodacom Congo brought about an increase of R84
million in our share of Vodacom Congo"s debt.
Vodacom Congo is only proportionately consolidated but almost 100% of the debt
has recourse to South Africa. If the net debt on Vodacom Congo"s balance sheet,
guaranteed by the Group but not included in the 51% consolidation, is included,
the consolidated net debt number increases by R753 million to R1,216 million and
to R2,716 million if dividends payable are included, increasing Vodacom"s net
debt/EBITDA ratio to 35.0%.
The Group had a positive cash flow before shareholder distributions (dividends
paid and shareholder loan interest paid) and financing activities of R3.0
billion (2003: R1.9 billion). The stronger cash flow in 2004 is mainly due to
the greater cash generation from operations, as well as a reduction in capital
expenditure.
Segment commentary
Revenue - geographical split
Year ended March 31,
% %
Rand millions change change
2002 2003 2004 03/02 04/03
South Africa (excluding 15,410 18,544 21,981 20.3 18.5
holding companies)
Tanzania 657 880 867 33.9 (1.5)
DRC (51%) 14 259 476 1,750.0 83.8
Mozambique - - 13 - -
Lesotho 70 96 119 37.1 24.0
Holding companies - - 22 - -
Revenue 16,151 19,779 23,478 22.5 18.7
Revenue
Revenue increased year on year by 18.7% (2003: 22.5%) to R23.5 billion, of which
our other African operations contributed 6.4% (2003: 6.2%). The increase in
revenues was primarily driven by strong customer growth in all of our
operations.
South Africa
South Africa was by far the biggest contributor to this growth, accounting for
93.6%, or R3.4 billion of the growth in revenues. South African ARPU contracted
by 3.3% to R177 per month, which is encouraging given the growth in customers in
South Africa of 23.5%. South African contract ARPU grew by 0.8% to R634 per
month (2003: R629) for the year ended March 31, 2004, while prepaid ARPU over
the same period remained stable at R90 (2003: R90) per month.
Other African countries
Vodacom"s revenue from its other African operations increased 21.2% (2003:
66.7%) to R1.5 billion for the year ended March 31, 2004 (2003: R1.2 billion).
The increase in revenue was driven by very strong customer growth, and was
partially offset by lower Rand-based revenues in these countries due to the
weakness of the US Dollar against the Rand. The slight decrease in revenue in
Vodacom Tanzania was primarily as a result of Rand strength and lower US Dollar
denominated tariffs, which were necessitated by a highly competitive environment
and aggressive price cuts by competitors - as high as 40% to 50% for the year.
Coupled with the stronger Rand, these factors resulted in the much lower
recorded ARPU of R128 for the year (2003: R217), a decrease of 41.0%. The
increases in the revenues of Vodacom Congo, Mozambique and Lesotho were the
result of very strong customer growth. However, the strong revenue growth in US
Dollar terms in Vodacom Congo and Vodacom Tanzania was significantly offset by
the stronger Rand. In US Dollar terms, Vodacom Tanzania"s revenue grew by 34.4%
to $121 million (2003: $90 million), Vodacom Congo"s proportional revenue grew
by 153.8% to $66 million (2003: $26 million) and Vodacom Mozambique"s revenue
was $2 million for the year ended March 31, 2004.
Profit from operations - geographical split
Year ended March 31,
% %
Rand millions change change
2002 2003 2004 03/02 04/03
South Africa (excluding holding 3,627 4,476 5,466 23.4 22.1
companies)
Tanzania 134 187 141 39.6 (24.6)
DRC (51%) (20) (117) 9 (485.0) 107.7
Mozambique - - (88) - -
Lesotho 12 4 1 (66.7) (75.0)
Holding companies (132) (220) (295) 66.7 34.1
Profit from operations 3,621 4,330 5,234 19.6 20.9
Profit from operations
Profit from operations increased by 20.9% (2003: 19.6%) to R5.2 billion for the
year ended March 31, 2004 (2003: R4.3 billion). Operating expenses increased by
18.1% (2003: 23.3%) which was lower than revenue growth of 18.7% (2003: 22.5%).
This resulted in our profit from operations margin increasing marginally to
22.3% (2003: 21.9%), despite margin squeeze resulting from the lower tariffs
charged by Vodacom Tanzania in response to the changing market conditions and
reduction in net interconnect revenue. Operating expenses in South Africa grew
by 18.0% (2003: 19.4%) versus revenue growth of 18.5% (2003: 20.3%) as we
managed to contain overheads and thereby improve our margins in South Africa.
EBITDA - geographical split Year ended March 31,
% %
Rand millions change change
2002 2003 2004 03/02 04/03
South Africa (excluding 5,567 6,423 7,536 15.4 17.3
holding companies)
Tanzania 231 334 278 44.6 (16.8)
DRC (51%) (12) (49) 97 (308.3) 298.0
Mozambique - - (71) - -
Lesotho 31 26 27 (16.1) 3.8
Holding companies (126) (30) (100) (76.2) 233.3
EBITDA 5,691 6,704 7,767 17.8 15.9
Shareholder distributions
Shareholder distributions for the 2004 financial year totalled R2,147 million.
This reflected an increase in shareholder distributions of 179.6% over the prior
year and comprised of interest of R47 million (2003: R168 million) and dividends
declared of R2,100 million (2003: R600 million). In addition, Vodacom Group
repaid all its shareholder loans totalling R920 million in June 2003. This is
the fourth year that dividends have been declared, although the first year that
an interim dividend was declared and paid. The R1,500 million final dividend
declared was paid to shareholders on May 31, 2004.
Outlook
The Vodacom Group has performed exceptionally well in a changing and more
competitive African market that required resilience of our Group. Our
performance in the South African market continues to exceed expectations and we
believe that our status as the least-cost South African cellular operator gives
us a competitive advantage to maintain our margins. The strong cash generation
from our South African operations ensured that our consolidated balance sheet
remains as strong as ever, even after paying out substantial amounts to our
shareholders and making equity investments in Mozambique and Smartphone SP
(Proprietary) Limited. We continue to be confident of our success in all of our
operations and look forward to an exciting next decade of growth, challenges and
innovation.
OPERATIONAL DATA
South African operations - key operational information
Year ended March 31,
% %
change change
2000 2001 2002 2003 2004 03/02 04/03
Customers 5,108 6,557 7,874 9,725 20.1 23.5
("000)1 3,069
Contract 963 1,037 1,090 1,181 1,420 8.3 20.2
Prepaid 4,046 5,439 6,664 8,282 22.5 24.3
2,082
Community 24 25 28 29 23 3.6 (20.7)
services
Gross 1,884 2,990 3,038 3,495 4,998 15.0 43.0
connections
("000)
Contract 261 263 199 197 377 (1.0) 91.4
Prepaid 2,725 2,836 3,295 4,617 16.2 40.1
1,617
Community 6 2 3 3 4 0.0 33.3
services
Inactives n/a8 n/a 13.9 18.2 17.6 4.3 (0.6)
(3 months -
%)
Contract n/a n/a 3.8 5.3 5.7 1.5 0.4
Prepaid n/a n/a 15.9 20.5 19.7 4.6 (0.8)
Total churn 31.8 23.3 27.2 30.4 36.6 3.2 6.2
(%)6
Contract 17.4 18.7 14.5 11.9 10.1 (2.6) (1.8)
Prepaid 40.5 24.8 30.1 34.0 41.3 3.9 7.3
Traffic 5,669 7,472 8,881 10,486 12,297 18.1 17.3
(millions
of
minutes)2
Outgoing 2,885 4,052 4,967 6,343 7,772 27.7 22.5
Incoming 3,420 3,914 4,143 4,525 5.9 9.2
2,784
ARPU (Rand 266 208 182 183 177 0.5 (3.3)
per month)4
Contract 481 493 560 629 634 12.3 0.8
Prepaid 132 98 93 90 90 (3.2) 0.0
Community n/a 1,453 1,719 1,861 2,155 8.3 15.8
service
Minutes of 158 137 111 101 96 (9.0) (5.0)
use per
month
(MOU)3
Contract 274 270 264 269 263 1.9 (2.2)
Prepaid 90 70 58 54 56 (6.9) 3.7
Community 1,593 2,859 3,354 3,162 3,061 (5.7) (3.2)
service
Number of 4,048 4,102 3,859 3,904 3,848 1.2 (1.4)
employees
Customers 758 1,245 1,699 2,017 2,527 18.7 25.3
per
employee
Market 59% 61% 61% 57% 54% (4.0) (3.0)
share7
Cumulative 7,048 10,232 14,317 16,535 18,132 15.5 9.7
capex (Rand
millions)
SA network 2,543 2,053 1,991 1,933 1,720 (2.9) (11.0)
capex per
customer
(Rand)
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom"s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. Traffic comprises total traffic registered on Vodacom"s network, including
bundled minutes, outgoing international roaming calls and calls to free
services, but excluding national roaming and incoming international roaming
calls.
3. Minutes of use per month is calculated by dividing the average monthly
minutes during the period by the average monthly total reported customer base
during the period. Minutes of use excludes calls to free services, bundled
minutes and data minutes.
4. ARPU is calculated by dividing the average monthly revenue during the period
by the average monthly total reported customer base during the period. ARPU
excludes revenues from equipment sales, other sales and services and revenues
from national and international users roaming on Vodacom"s networks.
5. Value-added service revenue from previously partially owned service providers
is included in contract and total average monthly revenue per customer from
October 1, 2001, at which time Vodacom consolidated these previously partially
owned service providers.
6. Churn is calculated by dividing the average monthly number of disconnections
during the period by the average monthly total reported customer base during the
period.
7. Market share is calculated based on Vodacom"s total reported customers and
the estimated total reported customers of MTN and CellC.
8. N/a - not available.
Vodacom Tanzania - Year ended March
key indicators 31,
% %
change change
2002 2003 2004 03/02 04/03
Customers ("000)1 229 447 684 95.2 53.0
Contract 5 5 5 0.0 0.0
Prepaid 224 440 676 96.4 53.6
Community services - 2 3 - 50.0
Gross connections 154 262 404 70.1 54.2
("000)
Churn (%) 4.8 13.3 30.0 8.5 16.7
ARPU (Rand)2 305 216 128 (29.2) (40.7)
Cumulative capex 1,142 1,058 1,145 (7.4) 8.2
(Rand millions)
Number of employees 188 224 316 19.1 41.1
Mobile penetration 1.1 2.2 3.3 1.1 1.1
(%)3
Customers per 1,215 1,997 2,165 64.4 8.4
employee
Mobile market share 56 53 57 (3.0) 4.0
(%)3
Vodacom Congo - key Year ended March
indicators (all 31,
indicators 100% of
Vodacom Congo)
% %
change change
2002 2003 2004 03/02 04/03
Customers ("000)1 21 248 670 1,081.0 170.2
Contract - 4 8 - 100.0
Prepaid 21 237 653 1,028.6 175.5
Community services - 7 9 - 28.6
Gross connections 21 260 513 1,138.1 97.3
("000)
Churn (%) - 24.2 20.2 24.2 (4.0)
ARPU (Rand)2 n/a 200 150 - (25.0)
Cumulative capex 180 944 1,432 424.4 51.7
(Rand millions)
Number of employees 235 204 334 (13.2) 63.7
Mobile penetration 0.3 1.0 2.3 0.7 1.3
(%)3
Customers per 90 1,215 2,006 1,250.0 65.1
employee
Mobile market share 9 44 47 35.0 3.0
(%)3
Vodacom Lesotho - key Year ended March
indicators 31,
% %
chang chang
e e
2002 2003 2004 03/02 04/03
Customers ("000)1 56 78 80 39.3 2.6
Contract 15 4 3 (73.3 (25.0
) )
Prepaid 41 73 76 78.0 4.1
Community services - 1 1 - -
Gross connections ("000) 45 76 51 68.9 (32.9
)
Churn (%) 70.6 65.1 44.1 (5.5)
26.5
ARPU (Rand)2 144 104 125 (27.8 20.2
)
Cumulative capex (Rand 122 194 201 59.0 3.6
millions)
Number of employees 71 74 68 4.2 (8.1)
Mobile penetration (%)3 2.6 4.3 5.1 1.7 0.8
Customers per employee 796 1,04 1,17 31.5 12.3
7 6
Mobile market share (%)3 100 80 80 (20.0 -
)
Vodacom Mozambique - key Year ended
indicators March 31,
2004
Customers ("000)1 58
Contract 1
Prepaid 57
Community services -
Gross connections ("000) 58
Churn (%) 0.3
ARPU (Rand)2 110
Cumulative capex (Rand 478
millions)
Number of employees 43
Mobile penetration (%)3 2.6
Customers per employee 1,349
Mobile market share (%)3 11
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom"s network, which have not been disconnected, including inactive
customers, as of end of the period indicated.
2. ARPU is calculated by dividing the average monthly revenue during the period
by the average monthly total reported customer base during the period.
ARPU excludes revenue from equipment sales, other sales and services and revenue
from national and international users roaming on Vodacom"s networks.
3. Penetration and market share is calculated based on Vodacom estimates.
AUDITED CONSOLIDATED INCOME STATEMENT
Amounts in accordance with IFRS, for the years ended March 31,
2002 2003 2004
Rm Rm Rm
REVENUE 16,150.7 19,778.7 23,478.0
OTHER OPERATING INCOME 29.2 68.0 57.6
DIRECT NETWORK OPERATING (8,369.8) (10,860.4) (13,052.9)
COST
DEPRECIATION (1,857.3) (2,163.0) (2,316.9)
STAFF EXPENSES (1,135.2) (1,018.6) (1,331.6)
MARKETING AND ADVERTISING (542.0) (652.5) (702.0)
EXPENSES
GENERAL ADMINISTRATION (498.2) (611.6) (682.3)
EXPENSES
AMORTIZATION OF INTANGIBLE (212.7) (210.7) (216.0)
ASSETS
INTEGRATION COSTS, 56.4 - -
DISPOSAL OF OPERATIONS AND
IMPAIRMENTS
PROFIT FROM OPERATIONS 3,621.1 4,329.9 5,233.9
INTEREST, DIVIDENDS AND 840.4 742.4 656.6
OTHER FINANCIAL INCOME
FINANCE COSTS (868.2) (1,546.3) (1,107.5)
PROFIT BEFORE TAXATION 3,593.3 3,526.0 4,783.0
TAXATION (1,190.7) (1,198.9) (1,725.0)
PROFIT AFTER TAXATION 2,402.6 2,327.1 3,058.0
MINORITY INTEREST (29.6) (112.5) (26.2)
NET PROFIT 2,373.0 2,214.6 3,031.8
AUDITED CONSOLIDATED BALANCE SHEET
Amounts in accordance with IFRS, as at March 31,
2002 2003 2004
Rm Rm Rm
ASSETS
NON CURRENT ASSETS 11,429.1 12,276.2 13,194.2
Property, plant and 9,896.6 10,675.0 10,858.6
equipment
Investment properties - - 63.8
Intangible assets 796.3 551.1 1,034.1
Investments * 238.5 345.4 222.4
Deferred taxation 497.7 704.7 1,015.3
CURRENT ASSETS 4,145.3 4,689.7 6,903.5
Inventory 306.0 238.8 288.5
Accounts receivable 2,845.9 3,158.9 3,926.5
Short-term investments 58.6 50.9 316.5
Foreign currency 215.6 34.6 1.9
derivatives
Bank and cash balances 719.2 1,206.5 2,370.1
TOTAL ASSETS 15,574.4 16,965.9 20,097.7
EQUITY AND LIABILITIES
CAPITAL AND RESERVES 5,463.8 6,837.4 7,603.1
Ordinary share capital - - -
Non-distributable reserves 106.1 (132.3) (299.2)
Retained earnings 5,357.7 6,969.7 7,902.3
MINORITY INTEREST 10.6 88.0 93.0
NON CURRENT LIABILITIES 1,894.4 2,881.6 2,568.5
Interest bearing debt 780.2 1,732.2 1,216.6
Deferred taxation 926.2 993.1 1,173.5
Provisions 188.0 156.3 178.4
CURRENT LIABILITIES 8,205.6 7,158.9 9,833.1
Accounts payable 3,223.6 3,799.0 5,326.3
Taxation payable 351.6 315.2 852.0
Shareholder loans 920.0 920.0 -
Non-interest bearing debt 4.3 4.3 4.3
Short-term interest 1,231.7 436.4 839.9
bearing debt *
Provisions 297.6 324.4 473.7
Dividends payable 600.0 600.0 1,500.0
Foreign currency - 200.6 64.5
derivatives
Bank overdraft 1,576.8 559.0 772.4
TOTAL EQUITY AND 15,574.4 16,965.9 20,097.7
LIABILITIES
COMMITMENTS AND CONTINGENT
LIABILITIES
* The Group restated its investments and short-term interest bearing debt for
the 2003 and 2002 financial years.
AUDITED CONSOLIDATED CASH FLOW STATEMENTS
Amounts in accordance with IFRS, for the years ended March 31,
2002 2003 2004
Rm Rm Rm
CASH FLOW FROM OPERATING
ACTIVITIES
Cash receipts from 15,583.1 19,349.0 22,798.3
customers
Cash paid to suppliers and (9,395.0) (12,627.9) (15,201.6)
employees
CASH GENERATED FROM 6,188.1 6,721.1 7,596.7
OPERATIONS
Finance costs paid (889.2) (721.7) (512.3)
Interest, dividends and 541.6 280.0 368.7
other financial income
received
Taxation paid (1,539.1) (1,337.4) (1,463.3)
Dividends paid - (480.0) (600.0) (1,200.0)
shareholders
Dividends paid - minority (6.3) - -
shareholders in
subsidiaries
NET CASH FLOWS FROM
OPERATING ACTIVITIES 3,815.1 4,342.0 4,789.8
CASH FLOW FROM INVESTING
ACTIVITIES
Additions to property, (4,409.1) (3,066.5) (2,813.8)
plant and equipment
Proceeds on disposal of
property, plant and 92.4 7.7 5.0
equipment
Additions to investment - - -
properties
Acquisition of intangible - (193.7) - (121.1)
assets .
0
Disposal of subsidiaries 1.7 31.5 -
Acquisition of (0.1) - 149.6
subsidiaries
Disposal of joint ventures 23.3 - -
Acquisition of joint - - -
ventures
Advance to minority - (157.9) -
shareholders
Disposal of other - 9.0 -
investments
Other investing activities (57.8) (67.0) (219.5)
NET CASH FLOWS UTILIZED IN (4,543.3) (3,243.2) (2,999.8)
INVESTING ACTIVITIES
CASH FLOW FROM FINANCING
ACTIVITIES
Shareholder loans repaid - - (920.0)
Interest bearing debt 570.6 774.1 186.9
raised
Interest bearing debt - (426.1) (55.6)
repaid
Finance lease capital - (1.6) (9.6)
repaid
Finance lease capital - 13.2 -
raised
Funding received from - 157.9 -
minority shareholders
NET CASH FLOWS (UTILIZED 570.6 517.5 (798.3)
IN) / FROM FINANCING
ACTIVITIES
NET INCREASE / (DECREASE) (157.6) 1,616.3 991.7
IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents (796.1) (857.6) 647.5
at the beginning of the
year
Effect of foreign exchange 96.1 (111.2) (41.5)
rate changes
CASH AND CASH EQUIVALENTS (857.6) 647.5 1,597.7
AT THE END OF THE YEAR
Disclaimer
This report has been prepared and published by Vodacom Group (Proprietary)
Limited.
Vodacom Group (Proprietary) Limited is a private company and as such is not
required by the Companies Act of 61 of 1973, as amended, to publish its results.
Vodacom Group (Proprietary) Limited makes no guarantee, assurance,
representation and/or warranty as to the accuracy of the information contained
in this report and will not be held liable for any reliance placed on the
information contained in this report.
The information contained in this report is subject to change without notice and
may be incomplete or condensed. In addition, this report may not contain all
material information pertaining to Vodacom Group (Proprietary) Limited and its
subsidiaries.
Without in anyway derogating from the generality of the aforegoing, it should be
noted that:
Many of the statements included in this report are forward-looking statements
that involve risks and/or uncertainties and caution must be exercised in placing
any reliance on these statements. Moreover, Vodacom Group (Proprietary) Limited
will not necessarily update any of these statements after the date of this
report either to conform them to actual results or to changes in our
expectations.
Insofar as the shareholder"s of Vodacom Group (Proprietary) Limited are listed
and offer their shares publicly for sale on recognised Stock Exchanges locally
and/or internationally, potential investors in the shares of Vodacom Group
(Proprietary) Limited"s shareholders are cautioned not to place undue reliance
on this report.
Johannesburg
7 June 2004
Date: 07/06/2004 10:30:33 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department