EBBC Introduction to Strategy Vodafone Egypt

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EBBC Introduction to StrategyVodafone Egypt

• Ian Gray, Chairman, Vodafone Egypt
• 17 November 2007

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• If you do not know where you are going
• you will never get there!

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• Have a plan!
• Failure to plan
• Planning to fail !

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Key Drivers for Success

• Market led
• Customer focused
• Competitor aware
• Employee driven

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Strategy issues ref Vodafone Egypt Contents

1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary

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Egypt good macroeconomic environment
Demographic facts
77.5m (1.8 p.a. growth)
Population
58 of population
Literacy
50 aged 20 or less
Population distribution
US953 (US4,400 adjusted for PPP)(1)
GDP per capita
6 per annum(2)
GDP growth
Income distribution
Economic facts
US per month

• Economy steadily improving since July 2004
• Strong growth in tourism and Suez Canal revenues
• Increasing FDI and significant acceleration of
  privatisation
• Inflation rate at circa 10 stable exchange rate

397

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A
B
6
238
-
397
B
159
-
238
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C
28
84
-
159
D
44
lt
84
E
(1) 2005 estimates, (2) Estimate for 12 months to
June 2006 Source CIA World Fact book, 9th
Euromoney Arab Financial Forum
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Mobile continues to outgrow fixed
Egyptian telecom market overview
Fixed vs. mobile revenue

• Fast growing mobile market
• 21 penetration 27 YoY growth(1)
• 99 population coverage (8 of land mass)
• mostly prepaid SIM only with no handset
  subsidies
• low blended minute rates (lt5c)
• few mobile HVCs generating high ARPUs

• Slow growing fixed market
• 14 penetration 6 YoY growth(1)

• Only 2.5m PCs 120,000 DSL connections
• Regulator influenced by politics and must approve
  tariffs

Source Company data and analyst consensus
estimates, (1) 3 months to September 2006
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Two player market with a recently launched 3rd
entrant
Vodafone Egypt
Mobinil
Etisalat

• Vodafone controlled with Telecom Egypt as
  strategic partner(1)
• Launched November 1998
• Customers 7.8m(2,3)
• Twelve months revenues LE6.8bn(3)

• Joint Venture ORASCOM/ Orange
• Launched May 1998 (with early lead of 100,000
  HVCs)
• Customers 8.1m(2,3)
• Twelve months revenues LE6.0bn(3)

• UAE controlled with local partners
• Launched April 2007
• Paid LE16.7bn (US2.9bn) for 2G/3G licence (3.4
  of Egypt GDP)

Ownership
20
4
National Bank of Egypt 20
CIB 4
ORASCOM 31
Free Float 37
Vodafone Group 55
Telecom Egypt 45
Etisalat 66
Egypt Post 10
Orange 32
(1) Vodafone Egypt remaining free float 0.44,
(2) Active customers, (3) September 2006 Source
Vodafone Mobinil company data and Egyptian
Government data
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Promising outlook with rapid mobile market growth
Drivers for hitting the S Curve
Total mobile market penetration

• Macro-economic environment
• economy improving since 2004
• Mass market appeal
• mobile moving to mass market necessity no
  longer a luxury product
• Reduced entry and usage barriers
• entry handset now around US20
• prepaid tariff reductions
• lower customer activation charges

Mobilepenetration ()
Reportedcustomers (m)
Source Company data
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Contents

1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary

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Core Purpose

• To connect people and communities
• Accelerating the advancement
• of Egypt

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Vodafone Egypt is growing rapidly
Revenue
EBITDA
38 CAGR
44 CAGR
Revenue components H1 FY06/07(1)
YoY growth H1 FY06/07
Outbound voice 70
Inbound voice 11
Visitors 10
Data (including SMS) 4
Activation fees and other 5
100
(1) of total revenue, (2) Active customers
Source Company data, Egyptian LE (IFRS)
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Vodafone Egypt is outperforming
Customer share ()(1)
Revenue share ()
EBITDA share ()(2)
EBITDA margins ()(2)

• Active customers, (2) Both operators were
  released from liability to pay 1800 spectrum fees
  in Sep 2006 LE100m impact excl. from Mobinil
  EBITDA. LE92m impact incl. in Vodafone Egypt
  depreciation
• Source Company data

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Growth in prepaid with reduction in minute rate
Prepaid vs. contract closing customer split(1)
Outbound minute rate evolution
Contract

• Low outbound minute rate 30pt (lt4c)
• Customer growth slowing indicating maturity

Prepaid

• Growth accelerating from late 2004
• Tariff options increased and price per minute
  reduced to encourage usage

(1) Active customers, estimated prior to October
2003 Source Company data
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Driving usage through positive elasticity
Prepaid vs. contract closing customer split(1)
Outbound minute rate evolution
Prepaid outbound MOU vs. total ARPU
Contract outbound MOU vs. total ARPU
(1) Active customers, estimated prior to October
2003 Source Company data
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Vodafone Egypt outperforms on customer
satisfaction
Vodafone Egypt vs. Mobinil
Network availability
Voice quality
Call continuity
Sending/receiving SMS
Vodafone Egypt
Mobinil
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Source Network Satisfaction Tracker (Logic
Consulting Group). October 2006
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Cost management is critical in low ARPU
environment
Cost principles
Margin breakdown H1 FY06/07

• Break even or better on activations
• No unprofitable tariffs
• Utilise and build on Group buying power
• Front line accountability
• Marginal cash cost per marginal customer
• Every piaster matters

()
Total revenue
Inter-connect costs
Other direct costs
Acquisition retention costs
Operating expenses
EBITDA
Network utilisation
()
Source Company data
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Being part of Vodafone Group offers many benefits
Benefits from Vodafone Group

• Brand
• Buying power
• Market intelligence (product innovation,
  technical support, market trends)
• Resource
• People development

and in return from Vodafone Egypt

• Australian call centre
• Professional IT services
• International help desk

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Vodafone Egypt generates healthy cash flows
Free cash flow FY05/06
Operating
flow
(1) Revenue excluding sales tax, (2) Various
charges including national training fund, telecom
fund, NTRA fees (excl. 2G licence fees) Source
Company data
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Contents

1. Egypt
2. Vodafone Egypt
3. Strategy
4. Summary

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Unrelenting focus and attention on six key areas
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Consistency
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Image and quality
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Small price premium
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Managing market competitiveness
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Values based culture
6
Best team
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Company Vision Strategy ValuesProfitable
Growth Based on Value and Differentiation

• Grow market at appropriate cost
• Focus on value
• Grow adjacent market
• Network quality and coverage
• First to market with key products
• Excellence in customer service
• Relevant brand for the people of Egypt
• Synergies from the Group
• Cost conscious culture
• No compromise on quality
• Experienced management team
• Hiring the best
• Emphasis on training

Profitable Growth
Brand Preference

Cost Containment Synergies
Management Capabilities
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Market LeadershipOur Objective is Building a
Strong Vodafone Brand

• To delight our customers and build our market
  leadership without having to compete on pricing.
• Our brand is a global one yet with a local tone
  that keeps it close to our customers hearts.
• We have the best marketing talents from the local
  market and industry knowledge through our links
  into the Vodafone Group.
• Our tools to build that strong brand is to excel
  and communicate in the following areas
• Superior Coverage
• Better Sound Quality
• Excellent Customer Care
• Leadership in Customer Relevant Product Innovation

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From Strategy to Operational Plans
Tasks
Processes
Resourcing
Behaviour

• Market led
• Customer focused
• Competitor aware
• Employee driven

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Thank You