MTN South Africa Investor Presentation

MTN South Africa

May 2015

2

Agenda

MTN South Africa Investor Presentation

Time Tuesday 26 May 2015 MTN participants

08h30 Coffee

09h00 MTN South Africa overview Ahmad Farroukh

10h00 Marketing Larry Annetts

11h00 Tea break

11h30 Technology Eben Albertyn

12h30 Lunch

13h30 Enterprise Business Alpheus Mangale

14h30 Financial review Sandile Ntsele

15h30 Looking ahead and closing remarks Ahmad Farroukh

Overview

MTN South Africa

Ahmad Farroukh

Agenda

01

Key highlights

02

Operating context

01 Key highlights

6

Turnaround evidenced in 2H14 continued

South Africa

Subscriber growth

− Recorded muted subscriber growth for Q1 2015 to

28.0 million

• Post-paid subscribers 5.4 million

• Pre-paid subscribers 22.6 million

− Data subscribers up 18.1% YoY to 17.2m

Revenue

− Total minutes declined 6.1% QoQ

− Data revenue now accounts for 27.7% of total

revenue, up 21.8% YoY

− Blended ARPU decreased by 4.8% to R87

5 477 5 419 5 402

21 224 22 574 22 555

26 701 27 993 27 958

Q3 14 Q4 14 Q1 15

Total subscribers ‘000

Prepaid

Postpaid

* Not adjusted for BTS recovery

20 430 19 157 19 157

21 855 21 325 19 765

42 285 40 482 38 922

Dec 12 Dec 13* Dec 14

Revenue ZAR (million)

H2

H1

Launched Jun 1994 Market share 33.9% Population 54.0m Market size 2016 : 96m Penetration 154% Shareholding 100%

7

Increased focus on data

South Africa

Overall costs flat YoY

− Increased focus on reducing distribution costs

− Implementation of network managed services

− Transmission costs decreased due to increased

self provisioning

Focus on network quality and roll out of 3G

and LTE

− Data traffic up 62.6% YoY, total voice traffic increased

by more than 100% YoY

− 170 2G, 715 3G and 719 LTE sites added by 31

March 2015

− Significant increase of capex in 2015 is focused on

voice and data capacity and network quality

13 407 12 775 12 775

14 445 13 640 13 638

27 852 26 415 26 413

Dec 12 Dec 13* Dec 14

Expenses ZAR (million)

H2

H1

1 980 2 151 2 000

4 515 3 684 3 676

6 495 5 835 5 676

Dec 12 Dec 13 Dec 14

Capex ZAR (million)

H2

H1

34.1% 34.7% 32.1% EBITDA margin

02 Operating context

9

MTN SA top management structure

Ahmad Farroukh

Chief Executive Officer

MTN SA

Eddie Moyce

Chief Customer

Experience Officer

Alpheus Mangale

Chief Enterprise

Business Officer

Eben Albertyn

Chief Technology Officer

Neil Tomkinson

Chief Information Officer

Shaibu Haruna

Acting Chief Consumer

Sales & Distribution Officer

Sandile Ntsele

Chief Financial Officer

Graham de Vries

Chief Corporate

Services Officer

Larry Annetts

Chief Marketing Officer

Ike Dube

GM: Business Risk

Management

Themba Nyati

Chief Human

Resources Officer

10

Operating environment

OTT impacts

• Whatsapp launches voice calling

• Vidi bundles ADSL with VOD

• Free WiFi continue to dominate

Municipality agenda

• Samsung wins the shipment race

• FTTH continue on agenda of

operators

• DSTV and Telkom bundles

Competition

• C Cell free Whatsapp extends

Promo

• C Cell shifts focus to include high-

end business market – Investment

R2.2 BN in network

• Vodacom deals with Dropbox

• Vodacom and Cell C increase

prices for post-paid

Macro overview

• Declining tariffs impacts

profitability

• Load shedding

• Possible sale of Telkom or VC

by the government

• MTR impacts felt by operators

Regulatory

• Cell C objects to Vodacom

acquisition

• Cell C turns to the courts against

ICASA’s MTR regulation

• Porting delay’s being investigated

OTT

Operators Regulatory

Macro

MTN SA

competitive

reality

11

Regulatory issues

Frequency

Rapid

deployment

Mobile

termination

rates

• MTN actively engaging with the Authorities, on operators requirements for additional spectrum

• In the interim MTN is re-farming as much existing spectrum as possible, without impacting existing service

• MTN has noted the following dates within the recently released assignment plans by ICASA

- 2.6GHz this assignment plan comes into effect immediately, and MTN expects an ITA shortly

- 800Mhz this assignment plan comes into effect 1 July 2015

- 700Mhz this assignment plan comes into effect 1 January 2016

• Infrastructure deployment is hampered by the lack of rapid deployment regulations

• It can take up to 2 years to obtain all the necessary approvals to build a site and several months to

obtain way leaves

• Without necessary regulations rollout is slow and uncoordinated

• The Cell C review of the current MTR regulations (September regulations) are continuing in

High Court

- Cell C seeks to have the September regulations set aside or corrected

- Cell C seeks to reinstate the March regulations which had greater levels of asymmetry and were

declared unlawful after court action by MTN

12

Continued

Regulatory issues

M&A activity

Universal

service

obligations

• MTN/Telkom awaits regulatory approval on its merger filing notification with the Competition

Tribunal

• MTN believes it has demonstrated that the proposed transaction

- Is pro-competitive in that it will enhance the efficiency and competitiveness:

- Will increase capacity, improve coverage and improve the call and data service quality available to each

party

- Will preserve the parties’ independent networks, retail and wholesale operations

• MTN is expected to roll out schools connectivity to 1 500 schools between now and 2018 as part

of its 3G licence obligations

• This is a significant investment consisting of 24 tablets provided for learners at each school plus

accessories

• Internet access will be provided at a 50% discount (i.e. E-rate) to schools for educational purposes

13

MTN SA Foundation

Programme clusters are based on 3 principles Partnership | Empowerment | Sustainability

Education programme Community programme Special projects

To contribute to enhancing

learning and teaching in SA

through • Educator ICT training and up-

skilling

• Learner ICT support

• School Connectivity

• Curriculum Digitisation

• R138m spend (2010-2014)

To contribute to socio-

economic development of

disadvantaged communities

in SA through • Tele-medicine and E-health

training

• Health screening & wellness

initiatives support

• Enterprise development

• Strategic Arts Partnerships in

communities

• R99m spend (2010-2014)

Raise the profile of MTN SA

as a caring corporate citizen

through • 21 days Y’ello Care

• 16 Days of Activism

• SANAA

• Heritage Day Celebrations

• Ad-hoc strategic projects

• R96m spend (2010-2014)

Marketing

MTN South Africa

Larry Annetts

Agenda

01

Sector overview

02

2015 focus areas

03

Looking ahead

01 Sector overview

17

DEFEND Telco 1.0 COMPETE Telco 1.5 WIN Telco 2.0

Battles on the telco S-curve

An evolving telco sector

(CASH COW)

Extend the curve as voice & messaging

flee to OTT

1.Out-sell competitors in 2G

2.Develop a low-cost consumer business

model (Brand/MVNO)

3.Accelerate into enterprise based on

messaging

(SHOOTING STAR)

Smart network capex

1.Combine 3G & WiFi to deliver MBB

access portfolio

2.Only compete in ‘can win’ battles

3.Develop compelling content + bundles

4.Agile OTT strategy to spread risk &

retain agility

(STAR)

Build presence ahead of the curve

1.Develop digital content & partnerships

2.Focus on local content

3.Leverage MTN global capability to be #1

4.Out-innovate the competition and shift

the focus from access (Telco 1.5) to

digital services (Telco 2.0)

Gro

wth

DEFEND, COMPETE and WIN

Time

Enterprise/business:

an untapped

opportunity

Churn increases by

competition, MNP &

multi-SIM

OTT attacking voice

and text revenues

Make core business

more efficient Intensifying

competition

Coverage, capacity

and QoS

Increasing demand for

mobile data with low-

cost $25 smartphones

Digital & adjacent

business opportunity

18

Vodacom • Launched free to use e-school platform in partnership with Dept of Education

• Introduced prepaid banking cards to M-Pesa customers enabling cashless

payment of goods and services

• Introduced a low-end LTE-capable smartphone in February 2015, retailing

at R1 500

• Upgrading of billing system enabling advanced segmented products,

promotions and new service offerings

CellC • Free Whatsapp promotion for MegaBonus promo

• Launched 3 voice bundles EasyChat tariff plan for prepaid customers

• Increased prices of prepaid, postpaid, data and other services

• 0ut-of-bundle data rate from 15c to 99c pMB and data bundle rates

• Revealed intention to focus on higher end business market – investment

budget of R2.2 billion

Telkom • Targeting SME market segment through value-added ICT functionality

• Considering the inclusion of mobile money service as part of its consumer

offering

Competitive landscape

33.6 33.0 33.9 35.2 34.4

42.6 42.4 41.4 39.4 39.1

21.4 22.2 22.2 22.7 23.7

2.4 2.4 2.5 2.7 2.8

1Q14 2Q14 3Q14 4Q14 1Q15

MTN VC CellC Telkom mobile

Focus on quality of customer based on tenure models and value bands…

driving value share

Market share (%)

19

Drivers of customer satisfaction

During Q1 2015, MTN’s ‘network coverage’ had a negative effect for 2m of its customers, or 14% of its customer base

Vodacom had 1.2m customers (or 8% of its dissatisfied customers) who cited ‘network coverage’ as a having a negative effect on

their satisfaction

4.1m

13.0m

10.7m

3.8m

11.9m

10.3m

4.5m

13.3m

12.2m

4.4m

13.3m

12.1m

Negative effect Positive effect

53k

185k

225k

60k

343k

245k

53k

140k

244k

533k

1.2m

2.0m 75%

83%

77%

73%

75%

71%

86%

84%

85%

86%

84%

83%

14%

8%

10%

2%

1%

1%

2%

1%

1%

2%

1%

1%

Network coverage

Service experience

Pricing

Recharging of airtime

02

2015 focus areas

21

Six battles to fight in 2015 to improve customer satisfaction

− Simplify current propositions to improve traction − Ensure sufficient and appropriate propositions for market segments

− Keep users active (with MTN SIM live) − Develop loyalty and activity accelerators to improve retention

− Use big-data already available to improve targeting − Implement BI suite

− Marketing ecosystem in place for Telco 1.5 and 2.0 − Push MTN Play, SDP and Mobile Add Services

− Taking leadership role in LTE that will facilitate market leadership in data − Improved overall network performance

Enhance value

propositions

Reduce churn

Segmentation

Prepare for

digital era

Improved

network

− Fix distribution and compensation model − Focus on regional and informal footprint − Work on a load model rather than usage based communications model

Distribution

22

Postpaid network revenue, tracking well against budget

Postpaid

Key challenges

− Fix distribution handsets and stock that leaves

warehouse

− Upgradable base proving to be a challenge

− Improved credit vetting to decrease bad debt exposure

− Get our handset mix right

23

Prepaid

Continued below the line promotions

Focus on quality and driving the right behaviours

Continued focus on managing 30-90 day base proactively

24

Customer acquisition & churn

Reducing churn

43% S1

50% S2

3% S3

MTN H+ 12:00

17% 65%

LOW VALUE MID VALUE HIGH VALUE

18%

19% 81%

SINGLE-SIM MULTI-SIM

BLACK

92% WHITE

1% INDIAN

0% COLOURE

D

7%

43% 32%

METRO URBAN RURAL

24%

59%

REVERED UNCONVINC

ED

35%

VULNERAB

LE

5%

0% S5

5%

S4

MTN H+ 12:00

22% 50%

LOW VALUE MID VALUE HIGH VALUE

28%

7% 93%

SINGLE-SIM MULTI-SIM

BLACK

81% WHITE

3% INDIAN

1% COLOURE

D

16%

30% 18%

52%

METRO URBAN RURAL

5%

AVAILABL

E UNDECIDED

35%

INACCESSI

BLE

60%

30% S1

52% S2

10% S3

7%

S5

1% S4

MTN ACQUISITION

MTN CHURN

7%

10%

12%

12%

28%

To Have The SameNetwork As Family

/ Friends

Other

Better Promotions/ Specials

New Phone / NewContract / New

SIM Card

Cellphone / SIMCard Lost Or Stolen

4%

6%

6%

10%

60%

SIM Card /Cellphone Is

Blocked

Poor NetworkCoverage

Personal Reasons

Cellphone / SIMCard Broken /

Damaged / Faulty

Cellphone / SIMCard Lost or Stolen

25

34%

49%

38%

37%

41%

44%

45%

36%

30%

40%

43%

38%

38%

45%

30%

15%

19%

19%

18%

18%

9%

MTN Vodacom CellC

137

181

274

315

386

614

669

Contract/prepaid

New phone

Price

Separatework/business calls

On-net benefits

Two phones/dual-SIM

Network coverage

‘000

Multi-SIM usage

Key reasons for churn

The primary reason for Multi-SIM usage during this quarter became ‘Network Coverage’, as cited by 30% of all Multi-SIM

users,both MTN and Vodacom had the same proportion of customer additions who cited this reason

‘Two Phones/Dual-SIM Phone’ remained a prominent reason, and was cited by 28% of Multi-SIM users and this was followed by

‘On-Net Benefits’ (at 16%)

30%

28%

17%

14%

12%

8%

6%

26

2011 2012 2013 2014 2015

Using big data to improve results – prepaid

Improving segmentation

+3% +4%

+16%

Recharge performance up 4% YoY and 16% higher than the

low of 2011

2015 best performing recharge

Recharge performance up 4% on a daily basis

Q1 2014 Q1 2015

+4%

YoY recharge performance Daily recharge performance

27

Using big data to improve usage and value share

Improving segmentation

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Blended effective rate

(Cents per minute)

+32% Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Blended ARPU

(Per month) -1%

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Prepaid ARPU

(Per month) -1%

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Minutes of use

(Per month)

-14%

20 940 19 664 20 185 21 777 22 574 22 555

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Prepaid base: Closing

(Thousands) 0%

28

Tariff rebalancing

Jan 15 Plan 1 Plan 2 Plan 3 Plan 4 15-Dec

1. Continue to manage costs and remain competitive

2. Continue to measure and monitor prices against inflationary and economic conditions

3. Continue to manage and implement a pricing structure that will compensate for MTR reduction

Effective rate guidance for 2015

35 5 5

5 5

55

29

Data revenue Q1 2015 performance diagnosis

19 546 22 612 25 044 28 278 28 004 33 359

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Thousands

+71%

Data Bundles : continue to grow increased by 43% over last quarter and 71% since Oct 2014

Continued focus on in and out

of bundle optimisation

October 2014 April 2015

InBundle 73%

OutBundle 27%

InBundle 80%

OutBundle 20%

30

14 079 14 482 15 371 16 570 17 155 17 200

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Jan 14 Apr 14 Jul 14 Oct 14 Dec 14 Mar 14

Growing data usage from a stable customer base

Taking stock data

Prepaid ERM MB

(Cents per minute)

-25%

Prepaid Data ARPU over base

+27%

MB of use

(Per month) +15%

90 day active data user base

(Thousands)

0%

+9% +22% +12%

31

11.8 17.9 5.6 8.2

30.7

38.6 42.7

37.0 29.8

50.9

49.6 39.4

57.4 62.0

18.5

Total Vodacom MTN Cell C Heita

2 x G

3 x G

4 x G

Others

South African panel market | Smart and mobile phones

Device mix

Focus getting our device mix right

Migration from 2G – 3G – LTE further enables data growth

Fix disproportionate mix in relation to our competitors

19 9 7 1 0 Ths.

100.0 47.3 39.1 7.0 0.8 Horiz %

11.3 8.1 18.6 -15.6 2.3 ±%PY

20.4 28.2

7.2 12.0

58.0

38.1

39.7

37.9 20.5

39.7 41.4 32.1

54.9 67.5

2.3

Total Vodacom MTN Cell C Heita

2 x G

3 x G

4 x G

Others

5 3 1 0 0 Ths.

100.0 56.0 29.9 8.8 1.4 Horiz %

6.7 46.4 -29.5 71.1 52.1 ±%PY

Sales Ths. Units

(Jan 14 – Dec 14)

Sales Ths. Units

(Jan 15 – Mar 15)

Tota

l

mark

et %

32

Jan Feb Mar Apr End Dec

LTE performance strategically important

Our data usage performance

2G 3G LTE

2G 3G LTE

LTE Subscriber – active 30day base –

grew by 92% over the last 4 month –

tracking to 1.1m

+75%

Ageing of avg base per technology

6 933 127 7 607 228

469 926

1 095 651 873 464

25 399 3

0 d

ay

90

da

y

Continue to focus on LTE and 3G

Focus on getting the mix right

2G 75%

3G 15%

3G 15%

01-Jan-15 01-Feb-15 04-Mar-15 04-Apr-15 05-May-15

LTE usage

33

Achievement Service description

MTN Quiz4Moola MTN will send you an SMS to join the game

All you have to do is SMS “WIN” to 30640 to join the fun

Collect points for every answer you get right, and you stand a chance to be the lucky winner of R15 000 a day for 99 days!

And even better, you could be the grand prize winner of a whopping R1 million

3 x R100 000 monthly prizes

A runner’s up grand prize consisting of a family trip to Disney in the United States valued at R300 000

Music+ MTN Music+ is a music streaming app that allows you to (amongst others), stream and download your favourite music

Key features of the service are as follows

• Get access to the latest music content

• Enjoy online streaming of a variety of songs

• Take your music offline to enjoy anytime, anywhere

• Purchase songs using your airtime

• Manage your CallerTunez

• Gift songs to friends on the MTN network

• Create and share music play lists with the Music+ community

SDP Service Partner Services Platform

Currently have 255 services active on the platform

Top performing Services

MTN Quiz 4 Moola

Upstream gamification

Digital: value added services

03

Looking ahead

35

Looking ahead

− Strike and impact on distribution − Mix – focus on 3G and LTE handsets − Improved focus on informal distribution channels

− LTE subscribers – 700k − SIM swap process − Western Cape

− Focus on managing cost of sales

− Alignment to group strategy drive incremental growth

− Vodacom & Neotel − Cell C – up for sale − Telkom – no license sharing – broadband competition

No 1 issue in

2015 & 2016

in S&D

Network

Interconnect

Digital

Competition

impacts

− SIM swop process − Self service improvements

Customer

service

Technology

MTN South Africa

Eben Albertyn

Agenda

01

Spectrum, quality and coverage

02

Fibre and rollout

03

Capex and costs

04

Managing networks

01 Spectrum, quality

and coverage

39

Snapshot

Spectrum, network quality and coverage

− 2X11MHz FDD deployed as GSM and UMTS − 2X12MHz FDD deployed as GSM and LTE − 2X15HMz FDD deployed as UMTS

− 0.7% dropped call rate − 20%+ headroom on radio network − 0.5% Congestion

− 2G – 69% geographic and 97% population − 3G - 53% geographic and 93% population − LTE –3% geographic and 30% population

− 31% 2G sites − 38% 3G sites and 37% 3G co-located − 72% LTE − 91% of Metro LTE and 3G sites are self provided with transmission − 11,351km of fibre (34% owned and 66% leased)

− Telkom bilateral roaming agreement − Energy resilience − Network quality focus − 3G and LTE coverage parity

Spectrum

Quality stats

Coverage

Sites and fibre

Key focus

areas and

challenges

40

Geographic coverage April 2015

Spectrum, quality and coverage

41

Technology coverage

Spectrum, quality and coverage

Network Stats – EDGE, 3G-HS (HSPA & HSPA+) & LTE EDGE – Land Coverage – 842 356 km² = 68.97%

EDGE – Population Covered – 50 334 785 ( total pop – ±51.7m) = 97.23%

3G-HS – Land Coverage – 647 681 km²

3G-HS – Population Covered – 48 279 000 = 93.26%

LTE – Land Coverage – 8 843 km²

LTE – Population Coverage – 12 640 259 = 24.42 %

42

850

2 791

4 731

6000

0

2 000

4 000

6 000

8 000

10 000

12 000

Dec 2014 Jun 2015 Dec 2015 Jun 2016

MTN 3G and LTE site count

3G

LTE

MTN – 3G and LTE rollout

Spectrum, quality and coverage

3G

− Quarterly rollout of 1 400(MTN) vs 750(VC)

− Game changer is U900

− Spectrum re-farming a competitive advantage to VC’s

inability to reuse 900

− U900 coverage 1.5x that of U2100 hence effective

coverage parity

− MTN expected to catch up on coverage in Q4 2015

LTE

− LTE gap down from 1 200 to 260

− Quarterly rollout of 1 200 vs 400

− MTN expected to reach parity in Q4 2015

− Shortage of spectrum re-farming a key limitation on

speed to market

− Restriction of access to 700MHz, 800MHz and 2

600MHz a major impediment to technology growth

− Added 1 214 LTE sites in 4 months 2015

43

0

1 000

2 000

3 000

4 000

5 000

H1 2013 H1 2014 H1 2015 Target

Upgrades / Sites

Network quality – solid improvement

Spectrum, quality and coverage

− Rapid tariff drops significantly increases traffic − Networks compensate by: more towers, more spectrum or better technology − Rollout challenged by: permitting challenges, spectrum shortage, community resistance

− Main road dropped calls have increased − Speech quality challenges in some parts − Significant power challenges reduce availability

Key challenges

Quality issues

Rollout comparison

0.6% 16% 68%

2G CSSR Drops Cong

National overview

2.5% 25%

3G CSSR Drops

National overview

02 Fibre and rollout

45

National long distance fibre

Fibre and rollout

MTN Owned Fibre

− NLD1 → Germiston to New Germany – 697km – Completed: April 2013 – Live: 500G

− NLD2 → Randburg to Bloemfontein via Kimberley – 725km – Completed: July 2013 – Live: 100G

− NLD3 → Bloemfontein to Beaufort West – 544km – Completed: October 2013 – Live: 200G

− NLD4 → Beaufort West to Harrington Street – 467km – Completed: October 2013 – Live: 200G

− NLD5 → Tygerberg to East London – 1248km – Planned: ETA end 2017 – Planned: 400G

− NLD6 → East London to Durban Berea – 687km – Planned: ETA end 2017 – Planned: 400G

− NLD7 → Polokwane to Ladysmith – 722km – Planned: ETA 2017/2018 – Planned: 200G

− NLD8 → Centurion to Polokwane – 386km – Planned: ETA Q4 2015 – Planned: 100G

Leased Fibre

− NLD9 → New Doornfontein to Bloemfontein – 400km – Completed: October 2013 – Live: 200G

− NLD10 → Bloemfontein to East London– 563km – Completed: October 2013 – Live: 200G

100% Transmission Core Network availability

46

Fibre to the site

Fibre and rollout

MTN Metro Fibre

− Major metro expansion → expand into the residential

areas to enable enterprise and consumer business

− Minor metro expansion → fibre enablement in the

smaller towns for capacity expansion and increased

fibre footprint

− Capacity → upgrade key microwave backhaul sites to

fibre to enable capacity and growth in the targeted

areas

− Site builds → enable new site builds with the turnkey

site build project

Note: Includes leased fibre

Year 2010-12 2013 2014 2015 Total

No of sites 1 320 858 556 793 3 527 Distance (km) 3 751 2 436 1 581 2 220 9 988

Polokwane

Klerksdorp

Ermelo

Johannesburg

Durban

Empangeni

Bloemfontein

Kimberly

Cape Town

George

Port Elizabeth

East London

80% Major metro area coverage

47

Fibre to the home

Fibre and rollout

Suburbs

− Build suburbs → Lone Hill, Sandhurst, Beverley,

Waterkloof Ridge, La Lucia, Bryanston, Morningside,

Parkmore, River Club, Kloof, Fresnaye, Welgemoed –

266Km – Completed: 2% / 100 from 8084 houses

passed

− Wayleaves → Sunninghill, Maroeladal, Gallo Manor,

Randpark Ridge, Northcliff, Woodmead, Blue Hills AH,

Waterkloof, Broadway, Witkoppen, Morningside

Manor, Broadacres AH, Oaklands, Hyde Park,

Bedfordview, Douglasdale, Edenburg and Berea West

– 376Km – Completed: 0% / 0 from 11 423 houses

passed

Estates

− Estates acquired → Monaghan Farm, Featherbrooke

Estate, Ravens Hill and Fancourt – Completed: 1

Estate / 56 Houses Connected, 2 in build and 1 in

planning

Year 2015

Planned # houses passed 8 000 Distance (km) 267

Strategy is to target high LSM areas in the

suburbs and pass 8 000 houses in 2015

Waterkloof

Boardwalk

Highveld Blue Hills

Kyalami Lonehill

Bryanston

Constantia Kloof

Boskruin

Bedfordview

Sunward Park

Meyersdal

Northcliff

48

Fibre plans

Fibre and rollout

− Metro fibre – 3 471km by Q4 2015

− National long distance fibre – 2 433km by Q4 2015

− Fibre to the home – 267km by Q4 2015 Rustenburg Nelspruit

Secunda

Gauteng Metro

Bloemfontein

Ventersburg

KZN Metro

Port Elizabeth Metro George Metro

Cape Town Metro

49

Core network

Fibre and rollout

CS core

− Support of mobile voice services

− Situated nationally across 12 centres

PS core

− Support of mobile data services

− Situated nationally across 5 centres

VoIP core

− Support of fixed enterprise telephony

− Solutions include hosted and trunk

− National points of presence for connectivity

Circuit Core

Packet Core

VoIP CoreEnterprise

Interconnect

Internet

2G

3G

LTE

WiFi

Network Capacity Utilisation Performance Supported services

CS Core 25m Subs 18.2m Subs

ASR 77.3% Mobile voice

750k Erlang

400k Erlang

CCR 89.8%

Paging success rate 92.17%

PS Core 40m Subs 9.3m Subs PDP success rate 99.9%

Mobile data

68Gbps 21.2Gbps Paging success rate 91.47%

VoIP Core 7500 SCC 3450 SCC ASR 76.2% Enterprise telephony

50

Mobile and ISP Core

Fibre and rollout

Mobile IP core

− Collapse of GSM-PE and GPRS-PE into clustered

MBN nodes

− 30% increase in 10G port capacity

ISP network

− New CRS-3 national IP Core deployed on 10G fibre

ring

− Refresh of Data Centre network equipment in progress

− Simular core and edge architecture and equipment

deployed in ISP core to that deployed in mobile IP

Core reducing support and maintenance costs across

both networks

99.99% IP core network availability

Mobile and ISP statistics

Mobile MOM (Gb) 20.06

Total (TB) 1 122.32

ISP

International Transit Max (Gb) 28.92

Peering Max (Gb) 67.04

Local

Peering Max (Gb) 13.13

Old Max (Gb) 6.77

New Max (Gb) 9.68

IPC Max (Gb) 24.3

51

Key challenges around rollout

Fibre and rollout

Governmental

− Permitting processes take excessively long

(circa 18-36 months)

− Implementation on national legislature different in each

province

− Way leave applications tedious

Regulatory

− Slow rate of change of regulation

− Innovative world best practice network and spectrum

sharing practices not being applied in SA

− Excessively long time to approve additional

transmission spectrum

− Inability to access high demand frequencies

− Rapid deployment guidelines not being implemented

03 Capex and costs

53

0

20

40

60

80

100

20

15

Cap

ex

Ra

dio

netw

ork

Tra

nsm

issio

n

Core

Civ

ils a

nd p

ow

er

Facilitie

s

IS

2015 Capex guidance

Breakdown of 2015 Capex guidance

Capex and costs

Capex

− 2015 is an aggressive rollout plan focused on 3G and

LTE coverage party as well as quality uplift

− Significant focus on growing fibre footprint, this

includes fibre to sites, fibre to homes, metropolitan

networks and long distance fibre

Challenges

− Currency depreciation limits efficiency of Rand spend

− Electronic equipment prices show steady decline in

price, however, steel, copper and civil works have flat

or increasing prices

04 Managing networks

55

Managed services – strategy

Managing networks

Strategy

− Use of leading world class vendors

− To provide rapid scalability and leading cost efficiency

− Gain access to a resource and skill pool of 10’s of

thousands of resources and tools and processes

developed to be at the cutting edge

− Increase our scalability at short notice

− Shorter start up times of complex technological

projects

− Easier integration of all systems into a single unified

management view

56

Managed services – geographical understanding

Managing networks

If a vendor underperforms, another vendor

could take over with less disruption

− Faster scalability

Price comparisons with careful consideration

to quality and KPI’s

− The vendor to the technology specific – Huawei for

Huawei technology, Ericsson for Ericsson specific for

example

New technological developments

− This increases our speed and quality and new

technological developments

− Radio base stations are spectrum specific, but

technology agnostic

− Adding additional capacity through new spectrum to an

existing site is 60% cheaper than building a new site

BTS vendor map

57

Tower sharing

Managing Networks

Tower sharing

− Significant sharing happening between operators

− MTN has been 1.5 and 2.0 additional tenants on its

towers

Other sharing

− Industry players share other infrastructure as well,

although not as extensively; fibre and power

Outsourcing

− MTN SA currently evaluating the possibility of

partnerships to monetise its tower assets

58

Load shedding

Managing networks

Load shedding

− Sites have been dimensioned for infrequent, short

(1-2hr) interruptions; the norm over the last 20 years

− Currently outages are more frequent and longer,

requiring additional investment

− Not all sites can accept generators due to location and

smaller ground leases

− MTN to invest more than R800m in power upgrades

− Sites will have 8hr power standby

− Data centres protected with multiple layers of power

redundancy including diesel generators and tri-

generation gas turbine plants

Challenges

− Site vandalisation and battery theft remains a

persistent problem with all operators

Status

− Network availability is steadily increasing in resilience

Enterprise Business

MTN South Africa

Alpheus Mangale

Agenda

01

Strategic overview

02

Operating context

03

Looking ahead

Strategic overview 01

62

Purpose and vision

Strategic overview

− To enable and inspire growth

− Be the choice ICT partner for geographic and market expansion

Purpose

Vision

63

Strategic differentiators

Strategic overview

Choice partner for

geographic expansion

Un- or under-served

markets inclusion

Government and citizen

engagement

Cloud, intelligent network,

mobile, big data & security

Cloud, IoT, mobile,

big data & security

Cloud, IoT, big data, mobile,

security & smart machines

Technology enabler

02 Operating context

65

Strategic overview

Financial

excellence

Acquisitions and

partnerships

Customer

experience

Employee

excellence

66

Serving the enterprise market is a different business

Changing the way we work

Consumer market

Enterprise market

Able to serve large numbers of customers

(millions)

vs Built around fewer customer

(hundreds)

Customers driven by brand, price and reliability

vs Customer driven by trust and relationship, all

about end to end service and performance

Few sizes serve all vs Tailored solutions to serve specific needs

Focus on cost efficiency with short term

customer payback

vs

Focus on increasing profitability through long

term relations

67

MTN Business in SA must gear itself for turnaround

Market share: Direct sale channel

Source: BMI-T Market Sizing 2014 and MTN Product revenue 2013_2014

1 Indirect MTN Business accounts for an additional 1.7 Bn ZAR including ISPs, Mobiles VARS, M2M and ICSP

MTN Rest of market

SME

Public

& SOE

Corporate

MNC

Mobile Fixed voice ISP connectivity Other ICT Total

0.56 (11%)

5

1 (6%)

17.5

0.76 (8%)

9.86

1.28 (7%)

20

3.12 (18%)

17.67 0.06 (0%)

13.6 0.54 (5%)

10.97 0.1 (1%)

10.18 3.84 (7%)

52.42

1.78

5

2.54

8.33

0.66

4.19

1.66

7.08

1.23

4.53

2.59

2.6

1.37

3.77

3.05

1.97

0.43

0.69

0.72

1.28

0.12

0.34

Enterprise 2014 market revenue and MTN Direct revenue1

(ZAR Billions, % value share)

03 Looking ahead

69

MTN Business in turnaround strategy

Looking ahead

6 months 18 months +++

Get the basics right

Accelerate growth

Diversify

• Establish appropriate

organisational design

• People and processes

• Sales re-alignment

• KPIs

• Governance & control

• Revised business rhythm with

group and MTN SA

• 3 -5 year business plan

• Focus on SME market & GTM

• Enter un-served markets (public

sector, regions)

• Increase customer share of wallet

through new technologies and

solutions

• Develop key partnerships

• Based on re-defined strategy,

accelerate growth and capability

build-up through product and GTM

• Acquisitions and joint ventures

Deliver

Grow

Lead

70

Delivering on our strategy

Looking ahead

− Significantly improve the customer experience − Focus on go to market strategy

− Align organisation structure based on the following market segments - SME, public, private and partnerships

− Wholesale and partnership focus

− Become a challenger brand in Enterprise – a tactical leader on price − Focus on cloud services across Africa − Increase SME market share − Increase public sector market share − Focus on service in strategic and key accounts (Retain, Attack, Africa/Global) − ICT partner of choice

Customer

experience

Operating

model

Sustainable

growth

Financial review

MTN South Africa

Sandile Ntsele

72

ZAR (million) 2014 2013 % Change Change contr 2012

Mobile postpaid 10 890 10 534 3% 1% 11 248

Outgoing voice 5 272 4 805 10% 5 757

Mobile internet 4 193 4 133 1% 3 583

Messaging 1 425 1 596 -11% 1 908

Mobile prepaid 16 513 17 665 -7% -3% 18 795

Outgoing voice 12 037 13 622 -12% 15 324

Mobile internet 3 831 3 274 17% 2 625

Messaging 645 769 -16% 846

Mobile customer revenue 27 403 28 199 -3% -2% 30 043

Incoming call & messaging 2 368 3 698 -36% -3% 4 926

Broadband & ISP 1 219 1 249 -2% 0% 1 131

Other service revenue 121 103 17% 0% 103

Service revenue 31 111 33 249 -6% -5% 36 203

Devices revenue 7 226 6 963 4% 1% 5 641

Non-service revenue 585 270 117% 1% 441

Revenue 38 922 40 482 -4% -4% 42 285

Mobile internet 8 024 7 407 8% 6 208

Mobile internet

% service revenue 21% 18% 2% 15%

Revenue Lower by 3.9%, post-paid up by 3%, prepaid and incoming lower by 7% and 36% respectively

73

− 7.7m handsets distributed Devices

Revenue

− Subscribers up 8% to 5.4m − Minutes up 4% to 3.9bn − Data users of 3.7m, +4% − Data traffic of 22PB, +30%

− Subscribers up 9% to 22.6m − Minutes up 37% to 24.1bn − Data users off 13.3m, +25% − Data traffic of 14PB, +144%

− Minutes down 3% to 7.8bn − MTR of 0.20 down from 0.40

Postpaid

Prepaid

Incoming

74

Net interconnect 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

2014 NI 185 74 50 26 41 -206 -366 -310 -315

2014 MTR 0.48 0.39 0.39 0.40 0.40 0.20 0.20 0.20 0.20

2014 MTR – asymmetry 0.44 0.44 0.44 0.31 0.31

Net interconnect

− Q2.Q3:asymmetry 2.2x

− Q4:asymmetry of 1.55x

− Net negative in 2014

− Net positive in 2013

− Incoming traffic of 8.4bn

− 3.3% lower YoY

− Outgoing traffic of 7.5bn

− Up 13% YoY

Net

interconnect

75

ZAR (million) 2014 2013 % Change Change contr 2012

Interconnect & roaming 3 531 3 817 7% 1% 4 624

Device and accessories 8 016 7 482 -7% -2% 6 594

Channel and distribution 5 646 6 530 14% 3% 7 807

Marketing and advertising 974 1 125 13% 1% 1 291

Network operating costs 2 923 2 621 -12% -1% 2 578

Staff costs 2 546 2 557 0% 0% 2 485

Other expenses 2 776 2 283 -22% -2% 2 473

Operating Costs 26 412 26 415 0% 0% 27 852

Operating expenditure

Lower interconnect, channel & advertising costs, flat staff costs & increased network costs

76

Operating expenditure

− Lower by 7% − Traffic 7.5bn, up 12% − MTR of 0.41, -18%

− 7.7m devices distributed

− Lower by 14% − Reduced commissions

− Sponsorship − Reduced spend

− Self-provisioning − Rent and utilities

Interconnect

Devices

Channel costs

Marketing

Network

− Reduction in staff Staff costs

− 2012 – R131 million − 2013 –R156 million − 2014 –R616 million

Bad debts

77

Income tax

Effective tax rate increased to 30.4%

2014 ETR

− Up 4.2pts

− Guarantee fee

− Impairments

2013 ETR

− Lower by 1.8pts

− MTN SP

− PY adjustment

28.0%

26.2%

30.4%

2012 2013 2014

Effective tax rates

78

ZAR (million) 2014 2013 % Change 2012

Revenue 38 922 40 482 -4% 42 285

Operating expenditure 26 413 26 415 0% 27 852

EBITDA 12 509 14 067 -11% 14 433

EBITDA margin 32.1% 34.7% -2.6% 34.1%

Depreciation 3 436 3 329 -3% 3 423

Amortisation 662 598 -11% 499

Profit from operations 8 411 10 140 -17% 10 511

Net finance costs 1 454 1 304 -12% 893

Profit before tax 6 957 8 836 -21% 9 618

Income tax expense 2 091 2 268 8% 2 689

Profit after tax 4 866 6 568 -26% 6 929

EBIT % 22% 25% -3% 25%

Effective tax rate 30% 26% 4% 28%

Capex as a % of revenue 15% 14% 0% 15%

Income statement

EBITDA margin of 32.1% and EBIT of 22%

79

ZAR (million) 2014 2013 2012

Non-current assets 30 517 26 230 24 210

Property, plant & equipment 21 791 20 123 18 852

Intangible assets 4 830 4 076 3 458

Other non-current assets 3 896 2 031 1 900

Current assets 15 104 13 103 13 798

Bank balances 2 392 3 143 3 985

Other current assets 12 712 9 960 9 813

Total assets 45 621 39 333 38 008

Capital and reserves 10 143 9 000 9 855

Non-current liabilities 19 047 15 539 13 756

Borrowings 15 713 12 826 11 163

Deferred taxation 2 435 1 934 1 720

Other non-current liabilities 899 779 873

Current liabilities 16 431 14 794 14 397

Borrowings 6 669 5 240 5 274

Taxation 120 8 24

Other current liabilities 9 643 9 546 9 099

Total equity & liabilities 45 621 39 333 38 008

Statement of financial position

Capex of R5.7bn, 15% of revenue

80

Statement of financial position

− R410k subs − Purchase price R1.3bn − Goodwill of R525m − Reduction in commissions

− 200k subs − Purchase price R408m − Goodwill of R319m

− R5.7bn − Capex % revenue 15%

Nashua

Afrihost

Capex

Looking ahead

MTN South Africa

Ahmad Farroukh

82

Delivering on our strategy

Looking ahead

− Improve employee relations − Continued engagement with regulatory authorities

− Capex focused on supporting data growth through 3G and LTE − Improve Net Promoter Score − Consistent customer service at all touch points

− Infrastructure sharing − Project Next! to be rolled out in 2016

− Data and digital services remains a priority − ICT partner of choice − Remain competitive on voice offerings

− Leadership to drive innovation to capitalise on identified opportunities − Agility and sharing best practice critical to ensure speedy go-to-market capability

Stakeholder

value

Customer

experience

Operating

model

Sustainable

growth

Innovation &

best practice

thank you

84

Disclaimer

The information contained in this document has not been verified independently. No representation or

warranty express or implied is made as to and no reliance should be placed on the fairness, accuracy,

completeness or correctness of the information or opinions contained herein. Opinions and forward

looking statements expressed represent those of the Company at the time. Undue reliance should not be

placed on such statements and opinions because by nature, they are subjective to known and unknown

risk and uncertainties and can be affected by other factors that could cause actual results and Company

plans and objectives to differ materially from those expressed or implied in the forward looking

statements.

Neither the Company nor any of its respective affiliates, advisors or representatives shall have any

liability whatsoever (based on negligence or otherwise) for any loss howsoever arising from any use of

this presentation or its contents or otherwise arising in connection with this presentation and do not

undertake to publicly update or revise any of its opinions or forward looking statements whether to reflect

new information or future events or circumstances otherwise.

This presentation does not constitute an offer or invitation to purchase or subscribe for any securities

and no part of it shall form the basis of or be relied upon in connection with any contract or commitment

whatsoever.