Group Limited Investment case February 2017 Disclaimer The - - PowerPoint PPT Presentation

Vodacom Group Limited Investment case

February 2017

Vodacom Group Limited IR presentation | 17 February 2017

Disclaimer

The following presentation is being made only to, and is only directed at, persons to whom such presentations may lawfully be communicated (‘relevant persons’). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield

• n such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute

an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in any company within the Group. Promotional material used in this presentation that is based on pricing or service offering may no longer be applicable. This presentation contains certain non-GAAP financial information which has not been reviewed or reported on by the Group’s auditors. The Group’s management believes these measures provide valuable additional information in understanding the performance of the Group or the Group’s businesses because they provide measures used by the Group to assess performance. However, this additional information presented is not uniformly defined by all companies, including those in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, although these measures are important in the management of the business, they should not be viewed in isolation or as replacements for or alternatives to, but rather as complementary to, the comparable GAAP measures. This presentation also contains forward-looking statements which are subject to risks and uncertainties because they relate to future events. These forward-looking statements include, without limitation, statements in relation to the Group’s projected financial results. Some of the factors which may cause actual results to differ from these forward-looking statements are discussed on slide 23 of this presentation. Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone WebBox, Vodafone WebBook, Vodafone Smart tab, Vodafone 858 Smartphone, Vodafone Passport, Vodafone live!, Power to You, Vodacom, Vodacom M-Pesa, Vodacom Millionaires, Vodacom 4 Less and Vodacom Change the World are trademarks of Vodafone Group Plc (or have applications pending). Other product and company names mentioned herein may be trademarks of their respective owners.

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Vodacom Group Limited IR presentation | 17 February 2017

Vodacom DRC

Licenced 2002 Population 71 million

Vodacom Tanzania

Licenced 1999 Population 55 million

Vodacom Mozambique

Licenced 2003 Population 29 million

Vodacom Lesotho

Licenced 1995 Population 2 million

Vodacom South Africa

Licenced 1993 Population 55 million

All information in presentation is as at 31 March 2016, unless otherwise stated.

#Market capitalisation value as at 17 February 2017.

• 1. As at 31 December 2016
• A leading African mobile communication company

providing a wide range of communication services including mobile voice, messaging, data and converged services to over 65 million1 customers.

• Vodacom is majority owned by Vodafone Plc (65%) and

we are listed on the JSE Limited.

• Market capitalisation of R225.1 billion#.
• Group revenue of R80.1 billion.

Head office in Midrand, South Africa

History – consistent track record of innovation

2012 2011 2009 2008 2004 1996

First to launch prepaid services in the world on IN platforms Vodacom launches a 3G HSDPA network in South Africa Vodacom Business launches Vodacom listed

• n the JSE

(18 May) Vodacom rebrands from “Green and Blue” to Vodafone RED LTE-Advanced launched First to launch 4G in South Africa

2016 3

Vodacom Group Limited IR presentation | 17 February 2017

Share information

As at 5 February 2017

JSE Ticker symbol VOD ADR code VDMCY Stock exchange JSE Limited Shares in issue 1 487 954 000 Freefloat 35% 52 week low and high R139 – R172 Market capitalisation R223.4 billion Transfer agent ComputerShare Indices FTSE/JSE Top 40 Index JSE Socially Responsible Index Nedbank BGreen Exchange Traded Fund 66% 20% 8% 2% 4%

South Africa United States United Kingdom Rest of Europe Rest of world

Institutional shareholding1

4

PIC = 51%

• 1. As at 27 January 2017

Vodacom Group Limited IR presentation | 17 February 2017

5

Five reasons to own Vodacom shares

2 3

Focus areas of growth potential Market leadership

1

Scale benefits driving efficiencies Experienced, diverse management team

5

Track record of delivering shareholder returns

4

5

Vodacom Group Limited IR presentation | 17 February 2017

#1 mobile operator in all markets

All information is as at 31 March 2016

#1 | Market leadership 61.3 million customers in 5 countries in Sub-Saharan Africa R14 billion enterprise revenue from 30 countries in Africa R13 billion

Investment per annum to maintain our leading network quality

> 18 000 base stations, >80% 3G 1st to launch 4G in South Africa, Lesotho and

Tanzania

6

Vodacom Group Limited IR presentation | 17 February 2017

Enterprise (21% of Group service revenue)

• Enterprise contributes 21% to Group service revenue
• SA fixed and managed services revenue +27%
• Pan African MPLS network
• Fibre to the business/home

7

#2 | Focus areas of growth potential

Data (32% of Group service revenue)

• Group: 29 million active data customers; 57% of total base
• SA: 14 million active smart devices; 37% of active

customers

• SA: 572MB per smart device growing 23%

International (27% of Group service revenue)

• 27% of Group service revenue
• Data revenue growth +32%
• Active customers 27 million
• Active customers now 44% of Group active customers

FY14: +37% FY15: +13% FY16: +19% FY14: +24% FY15: +10% FY16: +17%

New services (SA) (4.2% of Group service revenue)

• Insurance revenue +19%
• Expanding portfolio: life, funeral, device, cover
• Capture Internet of Things opportunity
• Fibre to home +25 000 homes and businesses passed

7 .

FY14: +33% FY15: +25% FY16: +29%

Vodacom Group Limited IR presentation | 17 February 2017

8

Focussed savings programmes – Fit 4 Growth

• Reduced transmission rentals through self-provisioning
• Cost optimisation through sharing, outsourcing and supply

chain management

• Improved return on investment in customer acquisition

spend

• Reduced support costs offsetting inflationary pressures

Benefits from being part of the Vodafone Group

• Global technology and product roadmap
• Better pricing through Vodafone Procurement Company
• Benefits from best practice sharing and benchmarking
• Talent and skills sharing

#3 | Scale benefits driving efficiencies

8

Vodacom Group Limited IR presentation | 17 February 2017

4

Executive Committee (12 members)

Male

83%

Female

17%

CEO: Shameel Aziz Joosub (45) 20 years industry experience Previously CEO of Vodafone Spain IT Person of the year 2015 CFO: Till Streichert (41) 15 years industry experience Previously CFO of Vodafone Romania European and emerging market experience

#4 | Experienced, diverse management team

Black

58%

White

42%

South African

75%

Intern-

ational

25%

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Vodacom Group Limited IR presentation | 17 February 2017

375 395 395 400 400

FY15 FY16 FY17 Interim dividend Final dividend

Dividend per share

Cents per share

775 795

#5 | Consistently delivering shareholder returns

Relative share price performance1 Total shareholder return2

• 12.8%

6.3% 15.1% 34.3% 35.6%

• 15.0%
• 5.0%

5.0% 15.0% 25.0% 35.0%

MTN Vodacom Bharti Millicom Telkom

10

• 1. As at 15 February 2017.
• 2. ZAR year to date for the 12 months ending 15 February 2017

Vodacom Group Limited IR presentation | 17 February 2017 11

Service revenue growth

Low to mid single-digit Mid to high single-digit

EBITDA growth

12% to 14%

Capex intensity

Targets | Group medium-term targets

11 Vodacom Group Limited IR presentation | 17 February 2017

Vodacom Group Limited IR presentation | 17 February 2017

Continuing to deliver returns

12

Best network

• Best value
• Best service

Diversify revenue to deliver growth Deliver cost and process efficiency Best talent

• Best practice

Transform society and build stakeholder trust

Vodacom Group Limited IR presentation | 17 February 2017

• Network customer satisfaction #1 in all

markets but one

• 4G coverage in SA at 58%
• International sites +17%
• SA dropped call rate @ 0.41%
• 1st in SA with commercial mobile LTE-A
• Personalised pricing and offers
• Driving pricing transformation
• Reducing communication costs
• Stimulating bundle adoption
• Connectivity
• Always in control
• Rewarding loyalty
• Easy access

Best network Best value Best service

13

Customer | Best network, Best value, Best service

23 18 17 10

Vodacom SA Operator A Operator B Operator C

Source: MyBroadband (March 2016) (Mbps)

Average download speeds in SA

Million

Total prepaid bundle sales in SA

314 387 383 369 86 189 1H15 2H15 1H16 2H16

Total prepaid bundle sales Just 4 You

FY15 FY16

Vodacom Competitor A Competitor B

%

SA Consumer NPS1 points differentiation

+15 ppts +6 ppts

• 1. Net Promoter Score

Vodacom Group Limited IR presentation | 17 February 2017

14

Growth | Diversifying revenue to deliver growth

14

Data contribution International contribution Enterprise contribution

• Growth +17%
• EBITDA contribution

17.7% (FY14: 15.6%)

• M-Pesa revenue +19%
• Enterprise service

revenue +20%

• R3.2bn fixed-line & BMS

revenue

26.6%

24.6%

• Growth +28.5%
• Average usage per smart

device - 572MB

• 2G to 3G; 3G to 4G

ARPU uplift +20% FY16

FY14

Contribution to Group service revenue

20.5%

15.1%

FY16

FY14

Contribution to Group service revenue

31.9%

21.4%

FY16

FY14

Contribution to Group service revenue

New services contribution (SA) 4.2%

3.5%

FY16

FY14

Contribution to SA service revenue

• Device insurance

policies +25%

• IoT connections +28%
• Wholesale partnership

agreements for fibre

• GDSP platform delivery

Vodacom Group Limited IR presentation | 17 February 2017

Direct expenses1

15

Operations | Fit for growth SA

• Channel efficiencies
• Sophisticated IBRO

management

• Credit management

30.5% of SR4

(FY15: 31.6%) Staff expenses2

• Hire in key growth areas
• Attract and retain talent

6.6% of SR4

(FY15: 6.7%) Publicity expenses

• Consolidated agency spend
• Improved production cost

efficiency

• Increased digital/social

platform spend

• Increased share of voice

2.5% of SR4

(FY15: 2.7%) Other operating expenses3

• Reduced network cost per site
• Improved digitisation and App

penetration

• Leverage scale through

sharing and outsourcing

14.4% of SR4

(FY15: 14.1%)

15

Actively managing costs

• Sharing and outsourcing to realise scale
• Incentives – volume vs revenue
• Digitisation – self care and empowering

customers

• Cost consciousness at an individual level

Number

• f sites

+9% Inflation +6% Wage inflation +6% Energy inflation +13%

Innovate

1. Excluding equipment expenses. 2. Excluding BEE charge. 3. Excluding trading foreign exchange. 4. Service revenue

Vodacom Group Limited IR presentation | 17 February 2017

People | Attracting and retaining the best talent

Enhancing diversity Developing skills Growing talent

Driving people transformation through

• 73% black and 39% female

staff

• 55% of EXCO black
• Vodacom Women in Red

Awards

• 123 graduates in 2015

Graduate programme

• International Graduate

programme in all our markets

• International assignee

programme

• R103 million spent on skills

development

• Capability build and

succession programmes

16

Vodacom Group Limited IR presentation | 17 February 2017

Reputation | Mobile for good

17

spent by Vodacom Foundation on CSI projects TZN subscribers: Healthy pregnancy Healthy baby free education portal 105k registered learners volunteers for annual Change the World programme call center for victims of gender-based violence schools connected - Universal Service

• bligations

+600k R106m eSchool

Vodacom

20 24 hour 3 087

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Vodacom Group Limited IR presentation | 17 February 2017

Reputation | BEE Level 2 contributor

18

weighted spend

• n BEE-status

suppliers to >51% black-

• wned

suppliers to >30% black women-owned suppliers spent on developing SMME ICT businesses spent on skills development spent on uplifting communities

R7.2bn R26bn R5bn R841m R218m R112m

18

98.25

Most empowered telco in South Africa

Vodacom Group Limited IR presentation | 5 September 2016

Vodacom Group Limited IR presentation | 17 February 2017

Additional information

Vodacom Group Limited IR presentation | 17 February 2017 20

Country data

South Africa Tanzania DRC Mozambique Lesotho

PopulationŦ (million) 55 55 71 29 2 GDP per capitaŦ (USD) 4 770 855 495 456 887 GDP growth estimateŦ 2016 (%) 0.7 6.5 5.0 4.8 2.0 Ownership (%) 93.75# 82.2 51 85 80 License expiry period 2029 2031 2028/2032µ 2018/2026µ 2036 Active customers (thousand) 36 375 12 419 9 702 5 208 1 465 ARPU (rand per month) 114 40 48 41 66 ARPU (local currency per month) 114 6 279 3.4 223 66 Minutes of use per month 145 162 48 122 90

Key indicators for the quarter ended 31 December 2016.

Ŧ The Economist Intelligence Unit. # 6.25% held indirectly through special purpose entities which are consolidated in terms of SIC 12: Consolidation – Special Purpose Entities as part of the broad-based black economic empowerment transaction. µ 2028/2018 relates to the 2G license and 2032/2026 relates to the 3G licence.

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Vodacom Group Limited IR presentation | 17 February 2017

Latest | Q3 results for the quarter ended 31 December 2016

R million Dec 2016 Dec 2015 YoY % Δ Group Service revenue 17 443 17 162 1.3 Revenue 21 222 20 249 1.2 Data revenue 6 533 5 520 18.4 Customers (m) 65 169 65 233 (0.1) South Africa Service revenue 13 410 13 037 5.5 Revenue 17 142 16 003 7.1 Data revenue 5 473 4 487 22.0 Customers (m) 36 375 34 103 6.7 International Service revenue 4 206 4 246 (8.2) Revenue 4 316 4 429 (8.9) Data revenue 1 059 1 032 2.6 Customers (m) 28 794 31 130 (7.5)

Sustained service revenue growth

• Group service revenue up 1.3% (4.4%*)
• SA service revenue growth of 5.5% to R13 410 million
• SA added just under 690 thousand customers in the quarter

Strong demand for data services

• Group data revenue up 18.4%, 37.4% of service revenue
• SA active data customers up 4.9% to 19.3 million
• 4.8 million 4G customers in South Africa

International impacted by customer registration and currency

• Service revenue down 8.2% (+3.4%*); adding

876 thousand customers in the quarter

• M-Pesa revenue +12.4%; 12.0 million active customers

* Normalised growth adjusted at a constant currency using the current year as the base.

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Vodacom Group Limited IR presentation | 17 February 2017

Annual results for the year ending 31 March 2016

R million Mar 2016 Mar 2015 YoY % Δ Service revenue 66 763 62 167 7.4 Revenue 80 077 74 500 7.5 EBITDA 30 345 26 905 12.8 Operating profit 21 059 19 516 9.5 Operating free cash flow 17 054 14 003 21.8 Free cash flow 9 807 7 763 26.3 Capital expenditure 12 875 13 305 (3.2) Net debt 21 287 16 760 27.0 Headline earnings per share (cents) 883 860 2.7 Dividend per share (cents) 795 775 2.6 EBITDA margin (%) 37.9 .36.1 1.8 ppts Effective tax rate (%) 31.5 29.9 1.6 ppts Net debt/EBITDA (times) 0.7 0.6 0.1 times Capex intensity (%) 16.1 17.9 (1.8 ppts)

Improved revenue growth and margins

• Group service revenue up 7.4% (5.8%*)
• Group EBITDA up 12.8% (10.2%*)
• Headline earnings per share up 2.7%
• 400 cents final dividend per share

Strong demand for data services

• Group data revenue up 28.5%. 31.9% of service

revenue

• Group active data customers up 8.6% to 28.8 million
• 14 million active smart devices in South Africa

Excellent International performance

• Service revenue up 16.2% (9.6%*), contributed 26.6% to

Group service revenue

• M-Pesa revenue +19.3%; 9.2 million active customers

* Normalised growth adjusted for trading foreign exchange gains/losses and at a constant currency using current year as base (collectively ‘foreign exchange’).

22

Vodacom Group Limited IR presentation | 17 February 2017

Five-year financials for the year ended 31 March

R million 2016 2015 2014 2013 2012 16/15 % Δ 5-year CAGR Service revenue 66 763 62 617 62 047 59 261 58 125 7.4 3.8 Revenue 80 077 74 500 73 219 67 781 65 700 7.5 5.1 EBITDA 30 345 26 905 27 314 25 253 22 763 12.8 7.5 Operating profit 21 059 19 235 20 394 18 897 16 617 9.5 6.1 Operating free cash flow 17 054 14 003 19 410 18 158 16 934 21.8 0.2 Free cash flow 9 807 7 763 13 185 12 136 10 921 26.3 (2.7) Capital expenditure 12 875 13 305 10 779 9 456 8 662 (3.2) 10.4 Net debt 21 287 16 760 8 052 8 007 7 667 27.0 15.4 Headline earnings per share (cents) 883 860 896 872 709 2.7 7.0 Dividend per share (cents) 795 775 825 785 710 2.6 13.9 EBITDA margin (%) 37.9 36.1 37.3 37.3 34.6 Effective tax rate (%) 31.5 29.9 30.2 28.3 36.0 Net debt/EBITDA (times) 0.7 0.6 0.3 0.3 0.3 Capex intensity (%) 16.1 17.9 14.7 14.0 13.2 Return on capital employed (%) 48.2 50.1 62.1 62.8 63.2

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Vodacom Group Limited IR presentation | 17 February 2017

Dividend policy and payment history

Dividend number Ex-dividend date Payment date Cents per share Policy payout (%) Actual payout (%) Interim dividend number 1 30 Nov 2009 7 Dec 2009 110 40 50 Final dividend number 2 28 Jun 2010 5 Jul 2010 175 40 60 Interim dividend number 3 29 Nov 2010 6 Dec 2010 180 60 60 Final dividend number 4 27 Jun 2011 4 Jul 2011 280 70 79 Interim dividend number 5 28 Nov 2011 5 Dec 2011 260 70 80 Final dividend number 6 18 Jun 2012 25 Jun 2012 450 90 117 Interim dividend number 7 26 Nov 2012 3 Dec 2012 355 90 90 Final dividend number 8 24 Jun 2013 1 Jul 2013 430 90 90 Interim dividend number 9 25 Nov 2013 2 Dec 2013 395 90 90 Final dividend number 10 23 Jun 2014 30 Jun 2014 430 90 94 Interim dividend number 11 24 Nov 2014 1 Dec 2014 375 90 90 Final dividend number 12 22 Jun 2015 29 Jun 2015 400 90 90 Interim dividend number 13 30 Nov 2015 7 Dec 2015 395 90 90 Final dividend number 14 20 Jun 2016 27 Jun 2016 400 90 90 Interim dividend number 15 30 Nov 2016 5 Dec 2016 395 90 90

The Company intends to pay out as much of its after tax profits as will be available after retaining such sums and repaying such borrowings owing to third parties as shall be necessary to meet the requirements reflected in the budget and business plan, taking into account monies required for investment opportunities. There is no fixed date on which entitlement to dividends, arises and the date of payment will be determined by the Board or shareholders at the time of declaration, subject to the JSE Listings Requirements. Current dividend payout is 90% of headline earnings per share

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Vodacom Group Limited IR presentation | 17 February 2017

Reporting dates Roadshows/conferences

Date Event Location

15 May FY 2017 results released Vodacom/Website 15 June FY 2017 integrated report Website 18 July Group AGM Vodacom 20 July Q1 2018 results released Vodacom/Website 13 November H1 2018 results released Vodacom/Website

Date Event Location

14 – 15 March Merrill Lynch conference Sun City 28 March UBS Telco day Johannesburg 29 May – 8 June FY 2017 roadshow UK/Europe/USA

Calendar | FY2017 plan

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Vodacom Group Limited IR presentation | 17 February 2017

@vodacom Facebook.com/vodacom

http://www.vodacom.com VodacomIR@vodacom.co.za Shaun van Biljon (Head of Investor Relations) Revini Padayachi Sarah Chetty Faheem Moosa

Contact information

Contact us Follow us on social media Visit our website for more information

Vodacom Group Limited IR presentation | 17 February 2017

Definitions

27 Active customers Active customers are based on the total number of mobile customers using any service during the last three months. This includes customers paying a monthly fee that entitles them to use the service even if they do not actually use the service and those customers who are active whilst roaming. Active data customers Number of unique users generating billable data traffic during the month. Also included are users on integrated tariff plans, or who have access to corporate APNs, and users who have been allocated a revenue generating data bundle during the month. A user is defined as being active if they are paying a contractual monthly fee for this service or have used the service during the reported month. ARPU Total ARPU is calculated by dividing the average monthly service revenue by the average monthly active customers during the period. Contribution margin Revenue less direct expenses as a percentage of revenue. EBITDA Earnings before interest, taxation, depreciation and amortisation, impairment losses, profit/loss on disposal of investments, property, plant and equipment, and intangible assets, profit/loss from associate and joint venture, restructuring cost and BEE income/charge. Free cash flow Cash generated from operations less additions to property, plant and equipment and intangible assets, proceeds on disposal of property, plant and equipment and intangible assets, tax paid, net finance charges paid and net dividends received/paid to minority shareholders. HEPS Headline earnings per share. International International comprises the segment information relating to the non-South African-based cellular networks in Tanzania, the Democratic Republic of Congo, Mozambique and Lesotho as well as the operations of Vodacom International Limited and Vodacom Business Africa Group (Pty) Limited and its subsidiaries. MOU Minutes of use per month is calculated by dividing the average monthly minutes (traffic) during the period by the average monthly active customers during the period. Normalised growth (*) Adjusted for trading foreign exchange gains/losses and at a constant currency (using current year as base) (collectively ‘foreign exchange’). Operating free cash flow Cash generated from operations less additions to property, plant and equipment and intangible assets other than licence and spectrum payments and purchases of customer bases, net of proceeds on disposal of property, plant and equipment and intangible assets, other than license and spectrum payments and disposals of customer bases. South Africa Vodacom (Pty) Limited, a private limited liability company duly incorporated in accordance with the laws of South Africa and its subsidiaries, joint ventures and SPV’s. Traffic Traffic comprises total traffic registered on Vodacom’s mobile network, including bundled minutes, promotional minutes and outgoing international roaming calls, but excluding national roaming calls, incoming international roaming calls and calls to free services.

Vodacom Group Limited IR presentation | 17 February 2017

Thank you