FOR YEAR FOR YEAR ENDED ENDED 31 DECEMBER 2017 31 DECEMBER 2017 - - PowerPoint PPT Presentation

ANNU ANNUAL RESUL AL RESULTS TS PRESENT PRESENTATION TION FOR YEAR FOR YEAR ENDED ENDED 31 DECEMBER 2017 31 DECEMBER 2017

GOVERNANCE – POST THE RE-CAPITALIZATION

Jose Dos Santos Chief Executive Officer Robert Pasley Chief Strategy Officer Tyrone Soondarjee Chief Financial Officer Kuben Pillay Independent Chairman Laurence Nestadt Deputy Chairman Mark Levy Nominated by: Blue Label Telecoms Brett Levy Nominated by: Blue Label Telecoms Herman Kotzé Nominated by: Net1 Chris Seabrooke Joe Mthimunye Independent Director

Executive Directors Non-Executive Directors Non-Executive Directors - Shareholder Nominees

TOP MANAGEMENT STRUCTURE STRENGTHENED

Jose Dos Santos Chief Executive Officer Tyrone Soondarjee Chief Financial Officer Surie Ramasary Chief Executive: Content Dana Bakker Chief Technical Officer Douglas Craigie Stevenson Chief Operations Officer Björn Flormann Chief Executive: Wholesale Business Graham Mackinnon Chief Legal Officer Juliet Mhango Chief HR Officer Joshua Moela Managing Executive for Government Relations Sherhaad Kajee Chief Property & Procurement Officer Robert Pasley Chief Strategy Officer Michelle Beetar Chief Customer Experience Officer Nihmal Marrie Chief Digital Officer Key new appointments were made to strengthen top management team (CFO, CDO, COO, CHRO)

HIGHLIGHTS – 2017 KEY PERFORMANCE INDICATORS

+12% YOY

Service Revenue R13.2 billion

+151% YOY

EBITDA R7.8 billion

+660%

Net profit after tax R4.1 billion

+7% YOY

Revenue R15.7 billion

+29% YOY

EBITDA Margin 50%

8% of revenue

Capital Expenditure R1.2 billion

POSITIVE RESULTS

Su Summary ry of f reported fin financia ial l in information

R’bln 2017 2016 % Change Service revenue 13.1 11.7 12 Non-service revenue 2.6 2.9 11 Total revenue 15.7 14.6 7 Gross margin 8.1 7.4 10 Gross margin % 52% 51% 1 EBITDA 7.8 3.1 >100 EBITDA margin % 50% 21% 29 Net profit after tax 4.1 0.5 >100

UNPACKING OUR SUBSCRIBERS

Million 2017 2016 % Change Total active subscribers 16.3 15.3 6 MVNO subscriber base 1.5 1.4 8 Total active data subscribers 12.6 12.5 1 Data revenue (R’bln) 5.2 4.0 30 Capital expenditure (R’bln) Network Investment 1.2 2.3 47

OTHER KEY PERFORMANCE IN INDICATORS

Increase in smartphone users YOY 21 Smartphones on our network (million) 9.2 7.6 Rand 2017 2016 % Change Total ARPU 73 76 4 Prepaid 56 58 3 Contract 209 196 7

PRODUCTS & SERVICES AT A GLANCE

DATA

• Data revenue increased by

by 29% whilst data usage has increased by 90% YOY;

• Data revenue now makes up 40% of service revenue compared to 34% a year

ago; and

• The effective price of data per MB has decreased by more than 36% YOY.

VOICE

• Voice revenue decreased by 4% YOY in line with the effective price of voice

per minute decreasing by 4% YOY; and

• Voice traffic carried by other means such as WhatsApp Calling and other VoIP

services. WHOLESALE

• Wholesale revenue increased by R315 million (or 79%) to R717 million YOY

driven by the growth in the customer base; and

• Customer data usage in this area generated the bulk of the revenue growth.

FTTH

• Competitive products and pricing; and
• Exceptional organic growth aided by acquisitions going forward.

black THE FUTURE OF ENTERTAINMNET NOW.

• Market Disruptor - First to market, on demand, multi media interactive entertainment platform
• Accessible on any network across multiple devices
• Offering Movies, Series, Music, Sport, Games, Live TV and so much more (Local & International)
• Flexible pricing from as little as R5 a day – Subscribe for a week, weekend or month
• Simple payment options – first to introduce payment via Prepaid Airtime, in addition to cards and

vouchers

FIBRE TO THE HOME

• Launched C-Fibre in 2016 with open access FNOs – Vumatel, FrogFoot and Mitsol
• In 2017 we launched C-Fibre on Openserve, Metrofibre and Octotel on open access Fibre Networks
• 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.

• In Q2 2018, Cell C will launch a triple play offer that will include mobile, fibre and entertainment

through the black platform

C-Fibre 2017 2016 Base growth % Revenue growth % New connections 13 958 1 795 >100 >100

FIN FINANCIAL RES ANCIAL RESUL ULTS TS

STRENGTHENED BALANCE SHEET

R’bln Dec 2017 Dec 2016 % Change Network assets 8.6 8.7 1.1 Intangible assets 1.3 0.8 63 Trade receivables and other assets 4.9 4.2 16 Deferred tax 4.0 1.9 >100 Total assets 18.9 15.7 20 Loans and borrowings (6.8) (17.3) 61 Other liabilities provisions (6.9) (8.0) 14 Finance leases (1.5) (1.7) 12 Total liabilities (15.2) (27.5) 45 Net equity 3.8 (11.7) >100

CASH FLOW ANALYSIS

R’bln Dec 2017 Dec 2016 % Change Cash flows from operating activities 1.5 4.0 63 Cash flows from investing activities (1.5) (2.6) 42 Cash flows from financing activities (0.22) (1.9) 88 Net decrease in cash and cash equivalents (0.15) (0.5) 70 Cash and cash equivalents at the beginning of the year 0.28 0.78 64 Cash and cash equivalents at the end of the year 0.13 0.28 54

R’bln 7 months 2017 Pre-recap 5 months 2017 Post-recap Total 2017 Dec 2016 Dec % Change Total revenue 9.0 6.7 15.7 14.6 7 Once off items

• 4.1

4.1 0.21 >100 EBITDA 1.9 5.9 7.8 3.1 >100 EBIT 0.8 4.9 5.7 1.3 >100 Net Finance Costs (2.6) (1.1) (3.7) (0.8) >100 Net (loss)/profit before tax (1.9) 3.9 2.0 0.5 >100 Tax

• 2.1

2.1

• Net (loss)/profit

(1.9) 6.0 4.1 0.5 >100

2017 RESULTS PRESENTATION

REPORTED FINANCIAL KEY PERFORMANCE INDICATORS

R’m 7 months 2017 Pre-recap 5 months 2017 Post-recap Total 2017 De Dec 2016 Dec % Change Total revenue 9.0 6.7 15.7 14.6 7 Normalised EBITDA 1.9 1.7 3.6 2.8 28 Normalised EBIT 0.8 0.8 1.6 1.1 45 Net finance costs (2.6) (1.1) (3.7) (0.8) >100 Normalised net (loss)/profit before tax (1.8) (0.3) (2.1) 0.3 >100 Tax

• 2.1

2.1

• Normalised net (loss)/profit

(1.8) 1.8 (0.026) 0.3 >100

2017 RESULTS PRESENTATION

NORMALISED FINANCIAL KEY PERFORMANCE INDICATORS

IMPROVING COST BASE

R’bln 7 months 2017 Pre-recap 5 months 2017 Post-recap 2017 2016 % Change Direct expenditure 4.4 3.1 7.5 7.2 4 Operating expenditure 2.8 2.0 4.8 4.6 4 Depreciation and amortisation 1.2 0.8 2.0 1.8 11 Total expenditure 8.3 6.1 14.4 13.6 6

R’bln 2014 2015 2016 2017 Network investments 2.0 2.1 2.3 1.2

• 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

• verlays 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 recapitalization. Our total capital expenditure was:

Capital Expenditure Operational Expenditure

KEY RATIOS

OTHER KEY PERFORMANCE IN INDICATORS

2017 2016 % Var

Interest expense/ Revenue 0.14 0.16 13

Interest cover

2.5 0.8 >100

Net Debt/EBITDA

0.85 5.7 >100

Net Debt/Normalised EBITDA

1.8 6.1 >100

Net Debt/Capex

5.6 7.7 27

Please note that the recapitalisation occurred in August 2017, as a result the full impact on interest cost savings cannot been seen in 2017 financial results.

VOICE VS DATA REVENUE

4.9 4.8 4.6 5.0 4.8 1.2 2.1 3.0 4.1 5.2

• 1.0

2.0 3.0 4.0 5.0 6.0 2013 2014 2015 2016 2017

• Growth in customer base
• Increased customer spend
• Data centric product offerings
• Increased smartphone users
• Improved network quality

Voice vs Data revenue

Voice Data

SERVICE REVENUE VS EQUIPMENT REVENUE

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 2013 2014 2015 2016 2017

Service Revenue vs Equipment Revenue

Service revenue Equipment revenue

Service Revenue CAGR – 9%

R’m

IMPACT OF IFRS 15 AND IFRS 16

IFRS 15 Impact IFRS 16 Impact

Equipment revenue will be recognized at the amount received from the subscriber and not the Communications Equipment Company Proprietary Limited (“CEC”). Cell C has elected to early adopt IFRS 16 effective 1 January 2018. The subsidy provided to customers will be offset against revenue. The standard requires the recognition of an assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Admin and margin fees payable to CEC will be recognized as an interest expense. Increase in EBITDA, Net debt, depreciation and finance charges. The revaluation of the financial guarantee expense will be recognised an operational expense. Costs incurred to obtain and fulfil post-paid/hybrid contracts are capitalized as an intangible asset and amortised over the contract period whilst prepaid costs will be recognised in the period incurred.

HANDSET FINANCING AND SUBSIDIES

Subsidy is the difference between the amount billed to the customer and the amount received from CEC. Overview

• The 2017 financial results consisted of an off-balance sheet structure
• The book value of handset financing is R2.2 billion (2016: R2.5 billion)
• Handset financing consist of the following components:

R’m 2017 2016 Var.

• Var. %

Interest Charge 387 323

• 63
• 20%

Subsidy 398 377

• 21
• 6%

Provision for future losses 227 148

• 79
• 53%

DEFERRED TAX

ZAR bln 2017 2016 Estimated tax losses available for utilisation 22.4 19.9 Applied to recognise deferred tax asset (12.0) (3.9) Estimated unutilised tax losses 10.4 16.0 The available assessed losses will be utilised in future by the below, amongst others:

• Generation of future taxable profit;
• Tax efficient debt restructure.

DEBT PROFILE

Rating Overview

• We have chosen S&P as our rating agency going forward;
• On 7 August 2017 S&P released its updated ratings, post the restructure;
• Cell C currently has a long-term US$ corporate rating of B- with an outlook of Negative;
• The Cell C Senior Secured Bonds on the Irish Stock Exchange, due 2020, currently have a rating
• f B. The Recovery Rating on the Bonds is 2.

Looking forward

• Cell C’s intention to re-finance the short tem capex facilities and obtain a RCF;
• Cell C are actively managing the key rating drivers for a rating uplift.

R’bln 2017 Outstanding Principle 2016 Outstanding Principle % Change Restructured debt 6.0 17.8 66

Bonds 2.4 6.0 60 Long term debt 3.7 11.8 69

Capex facility 0.8

• 100

Gross debt 6.8 17.8 <100

Less: Cash 0.1 0.3

• Net debt

6.7 17.5 <100

Finance Leases 1.5 1.6 6

Net debt (incl. finance leases) 8.1 19.2 58 HSF/CEC (On- and Off- balance sheet) 2.2 2.4 8

OUR S OUR STRA TRAGEY GEY

>100%

CELL C – A TURNAROUND STORY UNDERPINNED BY SUSTAINABLE GROWTH

EBITDA

R’bn

* 2013 reported EBITDA 0.8 vs operational EBITDA; 2017 Normalised ; 2017 forecast

63.2% >100% >100% 15.9%

Service Revenue

R’bn

8.8 10.2 10.8 11.7 13.1

2013 2014 2015 2016 2017

5.9% 8.3% 12%

0.8 0.4 1.9 3.1 7.8

2013 2014 2015 2016 2017 Reported Normalised

2017 Innovation-driven revenue growth Price-driven revenue growth 2012-13 2015-16 Recapitalisation:

• New shareholders - equity R7.5 billion
• Debt for equity conversion - R9 billion
• Restructured debt - R6 billion
• Innovation
• Service
• Quality
• People

3.7

• 0.7

2018 & beyond

MARKET SHARE HAS INCREASED OVER THE LAST 5 YEARS

2017 Service Revenue Market share

50.7% 4.5% 32.7% 12.2%

Vodacom Telkom MTN Cell C

Cell C’s 2012 share was 9.2% Data driven growth

OUR CAPEX STORY - TARGETED NETWORK ROLLOUT AND COVERAGE STRATEGY

Population coverage: 2G 99%, 3G 96% Own build focus on large urbanised areas Reliance on Vodacom roaming for other areas Rapid LTE-A coverage expansion 51% of sites have fibre connectivity enabling smooth transition to LTE Coverage map

3G LTE

CAPEX INVESTMENT HIGHLIGHTS & TARGETS

CAPEX (excl. Intangibles and finance lease)

(Mln ZAR)

* In 2017, delays in the recapitalisation resulted in a lower than expected capex spend

18% 16% 16% 8% Capex to revenue

Efficient capex investment model Infrastructure sharing Spectrum Site planning (reduce roaming and improve quality) Site rationalisation (decommissioning)

1941 2044 2095 2271 1198 11.43% 9.3% 8.5% 8.4% 9.6% 10.6% 2012 2013 2014 2015 2016 2017* Capex Roaming %

17%

CELL C SUPPORTS THE WOAN

ECA bill Addresses market failure Empowerment opportunities Reduces cost Improves service levels

CELL C STRATEGIC PRIORITIES & INNOVATIONS

Cell C’s innovative plays

WhatsApp bundles

• Launched Q3 2015
• R1b run rate revenue

FTTx

• Launched late 2016
• R200m run rate revenue

black

• Launched late 2017
• 3/4 year play

Business plan drivers

Core revenues

(Prepaid, contract, wholesale…)

Cost efficiencies

• Roaming
• Commissions
• Network expenses
• Fibre
• Site optimisation
• Administrative
• Capital structure

Balance sheet strengthening

MVNO

Wholesale

• Launched H1 2014
• R1.5b run rate revenue

Digital transformation

• Network planning
• Distribution
• Products
• Efficiencies

Customer service excellence

(Including network quality)

Q & Q & A

THANK THANK YOU OU