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EBBC Introduction to Strategy Vodafone Egypt Ian Gray, Chairman, Vodafone Egypt 17 November 2007.

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Presentation on theme: "EBBC Introduction to Strategy Vodafone Egypt Ian Gray, Chairman, Vodafone Egypt 17 November 2007."— Presentation transcript:

1 EBBC Introduction to Strategy Vodafone Egypt Ian Gray, Chairman, Vodafone Egypt 17 November 2007

2 EBBC – Introduction to Strategy – Vodafone Egypt2 If you do not know where you are going – you will never get there!

3 EBBC – Introduction to Strategy – Vodafone Egypt3 Have a plan! Failure to plan = Planning to fail !

4 EBBC – Introduction to Strategy – Vodafone Egypt4  Market led  Customer focused  Competitor aware  Employee driven Key Drivers for Success

5 EBBC – Introduction to Strategy – Vodafone Egypt5 Strategy issues ref Vodafone Egypt Contents 1.Egypt 2.Vodafone Egypt 3.Strategy 4.Summary

6 EBBC – Introduction to Strategy – Vodafone Egypt6 Demographic facts US$953 (US$4,400 adjusted for PPP) (1) 77.5m (1.8% p.a. growth) GDP per capita Population Egypt – good macroeconomic environment 17% 28% 5% 6% 44% <84 E B C D US$ per month A B Income distribution (1) 2005 estimates, (2) Estimate for 12 months to June 2006 Source: CIA World Fact book, 9th Euromoney Arab Financial Forum Economic facts 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 50% aged 20 or less 58% of populationLiteracy Population distribution ~6% per annum (2) GDP growth

7 EBBC – Introduction to Strategy – Vodafone Egypt7 Mobile continues to outgrow fixed 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 (<5€c) –few mobile HVCs generating high ARPUs Egyptian telecom market overview Fixed vs. mobile revenue Source: Company data and analyst consensus estimates, (1) 3 months to September 2006 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

8 EBBC – Introduction to Strategy – Vodafone Egypt8 20%4% Two player market with a recently launched 3 rd entrant Vodafone controlled; with Telecom Egypt as strategic partner (1) Launched November 1998 Customers 7.8m (2,3) Twelve months revenues LE6.8bn (3) Vodafone EgyptMobinilEtisalat 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 (US$2.9bn) for 2G/3G licence (3.4% of Egypt GDP) Ownership (1) Vodafone Egypt remaining free float 0.44%, (2) Active customers, (3) September 2006 Source: Vodafone & Mobinil company data and Egyptian Government data Vodafone Group 55% Telecom Egypt 45% ORASCOM 31% Free Float 37% Orange 32% Etisalat 66% National Bank of Egypt 20% Egypt Post 10% CIB 4%

9 EBBC – Introduction to Strategy – Vodafone Egypt9 Promising outlook with rapid mobile market growth 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 US$20 –prepaid tariff reductions –lower customer activation charges Drivers for hitting the “S” Curve Total mobile market penetration Source: Company data Mobile penetration (%) Reported customers (m)

10 EBBC – Introduction to Strategy – Vodafone Egypt10 Contents 1.Egypt 2.Vodafone Egypt 3.Strategy 4.Summary

11 EBBC – Introduction to Strategy – Vodafone Egypt11 ‘Core Purpose’ To connect people and communities Accelerating the advancement of Egypt

12 EBBC – Introduction to Strategy – Vodafone Egypt12 Outbound voice70% Inbound voice11% Visitors10% Data (including SMS)4% Activation fees and other5% 100% Revenue EBITDA Vodafone Egypt is growing rapidly (1) % of total revenue, (2) Active customers Source: Company data, Egyptian LE (IFRS) Revenue components H1 FY06/07 (1) YoY% growth H1 FY06/07 38% CAGR 44% CAGR

13 Option 1Analyst and Investor Day – Vodafone Egypt13 Mobinil Vodafone Egypt Vodafone Egypt is outperforming (1)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 Customer share (%) (1) Revenue share (%) EBITDA share (%) (2) EBITDA margins (%) (2)

14 EBBC – Introduction to Strategy – Vodafone Egypt14 Growth in prepaid with reduction in minute rate (1) Active customers, estimated prior to October 2003 Source: Company data Contract Prepaid Low outbound minute rate: 30pt (<4€c) Customer growth slowing indicating maturity Growth accelerating from late 2004 Tariff options increased and price per minute reduced to encourage usage Prepaid vs. contract closing customer split (1) Outbound minute rate evolution ContractPrepaid

15 EBBC – Introduction to Strategy – Vodafone Egypt15 Driving usage through positive elasticity (1) Active customers, estimated prior to October 2003 Source: Company data Prepaid outbound MOU vs. total ARPUContract outbound MOU vs. total ARPU Monthly MOUMonthly ARPU Prepaid vs. contract closing customer split (1) Outbound minute rate evolution ContractPrepaid Monthly MOUMonthly ARPU

16 Option 1Analyst and Investor Day – Vodafone Egypt16 Voice quality Network availability Call continuitySending/receiving SMS 11% Vodafone Egypt outperforms on customer satisfaction Source: Network Satisfaction Tracker (Logic Consulting Group). October 2006 Vodafone EgyptMobinil Vodafone Egypt vs. Mobinil

17 EBBC – Introduction to Strategy – Vodafone Egypt17 Sep May 2005 Jul 2005 Sep 2005 Nov 2005 Jan 2006 Mar 2006 May 2006 Jul 2006 Cost management is critical in low ARPU environment 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 (%) Source: Company data Cost principles Margin breakdown H1 FY06/07 Network utilisation

18 EBBC – Introduction to Strategy – Vodafone Egypt18 Being part of Vodafone Group offers many benefits Brand Buying power Market intelligence (product innovation, technical support, market trends) Resource People development Australian call centre Professional IT services International help desk … and in return from Vodafone Egypt Benefits from Vodafone Group …

19 Option 1Analyst and Investor Day – Vodafone Egypt19 (1) Revenue excluding sales tax, (2) Various charges including national training fund, telecom fund, NTRA fees (excl. 2G licence fees) Source: Company data Vodafone Egypt generates healthy cash flows Free cash flow FY05/ (7) (18) (20) (11) (22) Revenue (1) Government charges (2) Direct costsOperating expenses Capex free cash Corporate tax Free cash flow (%) Operating flow

20 Option 1Analyst and Investor Day – Vodafone Egypt20 Contents 1.Egypt 2.Vodafone Egypt 3.Strategy 4.Summary

21 EBBC – Introduction to Strategy – Vodafone Egypt21 Small price premium Managing market competitiveness Unrelenting focus and attention on six key areas Image and quality Values based culture Best team Consistency

22 EBBC – Introduction to Strategy – Vodafone Egypt22 Company Vision Strategy & Values Profitable 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

23 EBBC – Introduction to Strategy – Vodafone Egypt23 Market Leadership Our 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

24 EBBC – Introduction to Strategy – Vodafone Egypt24 From Strategy to Operational Plans Tasks Behaviour ProcessesResourcing  Market led  Customer focused  Competitor aware  Employee driven

25 Thank You


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