Safaricom Ltd

FY 2013 Presentation
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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 its contents.

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 within the Company.

The presentation also contains certain non-GAAP financial information. The Group’s
management believes these measures provide valuable additional information in
understanding the performance of the Company’s businesses because they provide measures
used by the Company to assess performance. Although these measures are important in the
management of the business, they should not be viewed as replacements for, but rather as
complementary to, the comparable GAAP measures.

Safaricom, M-PESA and Safaricom/M-PESA logos are trademarks of Safaricom Ltd. Other
products and company names mentioned herein maybe the trademarks of their respective
owners.
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Contents

FY 2013 Highlights

FY 2013 Financial Review

Strategic Focus and Guidance

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FY 2013 Highlights

• Strong commercial and financial performance across all segments and metrics

• Continued investment and innovation in network and services

• Best Network in Kenya program progressing well

• Nationwide metro fibre network build begun

• M-Shwari launched to enable access to micro deposits and loans

• Robust growth in Non-Voice service revenue

• Brand engagement and customer satisfaction continues to increase

• Great progress on our initiatives to transform lives, especially in financial inclusion

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Delivering on key financial metrics
TOTAL REVENUE +16% to Kshs 124.3bn

VOICE REVENUE +13% to Kshs 77.7bn

NON-VOICE REVENUE +29% to Kshs 40.4bn

(SMS, DATA and M-PESA)

EBITDA +31% to Kshs 49.2bn

NET PROFIT BEFORE TAX +47% to Kshs 25.5bn

FREE CASH FLOW +55% to Kshs 14.5bn

PROPOSED DIVIDEND PER SHARE +41% to Kshs 0.31

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Contents

FY 2013 Highlights

FY 2013 Financial Review

Strategic Focus and Guidance

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Delivering on strategy: Strong financial results

Total Revenue EBITDA Net Income Free Cash Flow

Kshs. Billion Kshs. Billion Kshs. Billion Kshs. Billion

+16.2% +31.2% +38.9% +55.2%

124.29
49.18 17.54
107.00
14.51
37.50 12.63
9.35

FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY13

Increased usage for all 16% growth in Driven by Positive impact of

services (Voice, SMS, revenue whilst improved EBITDA EBITDA increase
data and M-PESA) containing costs and lower whilst holding
growth at 8% financing costs capex steady
Increasing ARPUs
across Voice, SMS and Robust EBITDA
M-PESA margin at 39.6% -
up 4.5 ppt
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Strong revenue growth in the year
FY13 Revenue • 16% growth in total revenue; with growth
Kshs. Billion
across all service revenue streams
16.2% 124.29
• Customer base now 19.4m customers
107.00
94.83
(19.1m in FY 2012) following disconnection
83.96 of 1.4m customers who did not meet the
new customer registration requirements

• Successfully growing usage across all

service revenue streams
FY10 FY11 FY12 FY13 Revenue Breakdown
Kshs. Billion

FY12 FY13
6% 5%
Revenue Growth
Kshs. Billion 124.29
(0.57)
4.97

1.83 33%
2.36 29%
65% 62%
8.70
107.00

Voice Non-Voice Devices

FY12 Voice SMS Data M-PESA Devices FY13
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Service revenues: Growth across all products

120 2.11
6.31

1.37 21.84
100 5.22
0.84
0.08 4.54 16.87 10.13
80 2.89 Fixed data revenue
11.78
7.56 7.77
5.19 7.54 Mobile broadband revenue
60 M-PESA revenue
SMS revenue
40 77.66
68.96 Voice revenue
63.5
64.58
20

0
FY10 FY11 FY12 FY13
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Lowest retail prices & MTR rate in sub-Saharan Africa
Country Prepay Retail MTR Country Prepay Retail MTR
Price per Minute Price per Minute

Kenya $0.04 $0.02 Burkina Faso $0.16 $0.10

Angola $0.04 Cote D'ivoire $0.17 $0.06
Ghana $0.06 $0.02 Malawi $0.17 $0.08
Rwanda $0.08 $0.07 Botswana $0.18 $0.04
Nigeria $0.08 $0.05 Central African
Republic $0.19
Gambia $0.09 $0.03
Cameroon $0.19 $0.16
Uganda $0.10 $0.04
Mali $0.21
Tanzania $0.10 $0.02
Togo $0.23 $0.11
Benin $0.14 $0.12
Chad $0.25
Namibia $0.14 $0.04
Madagascar $0.30
Burundi $0.14 $0.03
Gabon $0.32 $0.06
Mozambique $0.14 $0.08
Cape Verde $0.34
Guinea Bissau $0.15
Lesotho $0.42 $0.06
Congo $0.16
Liberia $1.71 $0.15
South Africa $0.16 $0.04
Source: Mobile Africa Tariff Tracker 2013
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Voice: Growth momentum sustained
Voice Revenue
Kshs. Billion
• 13% growth in voice revenue
12.6%
77.66
68.96 • Promoting brand recognition and customer
64.58 63.50
loyalty

o Revitalization of the brand

o Variety of promotions aimed at retention

FY10 FY11 FY12 FY13 • Improved distribution

Customers o Airtime distribution across over 250,000

Million retail outlets
1.8%
19.07 19.42 o 32% of airtime top-ups directly through
15.79
17.18 M-PESA

• Our programme to ensure we have the best

network in Kenya has reduced dropped calls
and improved call quality considerably

FY10 FY11 FY12 FY13

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Strong growth in Non-Voice service revenues
• Non-Voice revenue grew 29% - now 33% of total
revenue
Non-Voice Revenue
Kshs. Billion
29.3% • Driven by increased customers and increased
40.39
usage. Revenue growth of:
31.23
24.70 • M-PESA +29%

15.72 • SMS +30%

• Mobile data +21%

FY10 FY11 FY12 FY13 • Fixed service +54%

Mobile Data/M-PESA/SMS Contribution to Total Revenue

35%
29% 33%
30% 26%
25%
19%
20% 16% 18%
15% 12%
9%
10% 8% 7% 8%
5% 6%
4% 6% 7%
6%
0%
FY10 FY11 FY12 FY13
Mobile & FixedData M-PESA SMS Total Non-Voice Revenue
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M-PESA: Major Non-Voice revenue driver
M-PESA Revenue • 29.5% growth in M-PESA revenue, driven by
Kshs. Billion

29.5% • Increase in 30 day active users to 10.5m

21.84
• Increase in number of transactions
16.87

11.78 • Contributes 18% of total revenue

7.56 • 26,000 M-PESA agents added in the year; now
65,547 M-PESA agents

• 10% excise duty introduced through the

FY10 FY11 FY12 FY13
Finance Act of 2012; effective February 2013
M-PESA Customers
Million
Kshs 522bn* payments transacted
14.8% 17.11 between customers within M-PESA

14.91
13.80

9.48

Kshs 444bn* Kshs 390bn*

deposited into withdrawn from
M-PESA via M-PESA via
agents agents

FY10 FY11 FY12 FY13

* Oct. 2012 -Mar. 2013
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Data: Customers and usage drive growth
Mobile Data & Fixed Service Revenue • 28% growth in mobile data and fixed service
Kshs. Billion revenue

27.8% • 30 day active mobile data users grew 57% to

8.42
7.1m – now 37% of our customer base
6.59
5.37 • Usage per customer increased by 1%, while
price per MB declined by 28%
2.98
• 12% increase in fixed data customers to 6,731

• Prices of data enabled handsets and devices

FY10 FY11 FY12 FY13
declining

30-day active Data Customers

Million

56.7% 7.13

4.55
3.48
2.64

FY10 FY11 FY12 FY13

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Sustained ARPU growth
Voice SMS M-PESA Mobile Broadband Service ARPU

Kshs. Kshs. Kshs. Kshs. Kshs.

337 44 117
507
319 462
102
36
96 90

FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY13 FY12 FY13

Loyal customer New SMS Increased in active Reduced pricing 10% increase
base benefiting bundles customers diluted ARPU, but
from positive driving usage attracted growth Includes fixed
Increased
promotions in customer line ARPU of
transactions per
numbers by 57% Kshs 26,584
active customer

* Voice, SMS and Service ARPU are calculated based on total customers
* M-PESA and Mobile Broadband ARPUs are calculated based on total M-PESA and Mobile Broadband customers
respectively
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Direct cost control improves contribution margin
FY Direct Costs FY Direct Costs Breakdown
Kshs. billion Kshs. billion
124.29

(6.70)

(17.40)
43.5 46.3
37.2
28.5
(5.31)

(5.37)

FY10 FY11 FY12 FY13

(11.48)
• 6% increase in direct costs , compared 106.91
to a 16% increase in total revenue

• Contribution margin increased to 62.8%

up 3.4 ppt

• Cost savings in:

• Interconnect costs
• Acquisition costs
• Handset costs * Other costs relate to SIM cards, top-up cards, VAS billing, bad debts
• Spectrum management and license fees costs
• Top-up card production costs
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Focus on operating cost initiatives continues
FY OPEX
Kshs. billion

• Operating costs as a % total of revenue

35
23% 23%
24% 26% declined to 23% of total revenue
23%
30 • 11% increase in operating costs versus a 16%
21% increase in revenue
25
• Operating cost saving initiatives focus on
16%
20 • Transmission costs
• Inventory costs
15
28.85 11% • Network operating costs (including fuel)
26.03 • IT operational costs
21.87
10 18.85 • Headcount control
6% • Insurance
5

0 1%
FY10 FY11 FY12 FY13
Opex Opex as a % of revenue

* Operating costs relate to Payroll, Publicity, Leased Lines, Network & IT operational costs, and
Other (rent, rates, insurances, etc)
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Strong growth in EBITDA
H1/H2 EBITDA
Kshs. Billion

30
26.9
25 22.7 22.3
20.1
20 18.8
16.5 16.9
14.8
15

10

0
H1 FY10 H2 FY10 H1 FY11 H2 FY11 H1 FY12 H2 FY12 H1 FY13 H2 FY13

• 31% growth in FY EBITDA to Kshs 49.2bn

• FY EBITDA margin improves 4.5 ppt to 39.6%
• 2nd half EBITDA traditionally stronger, except for FY11 price war
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Largest & Fastest Network in Kenya
CAPEX Base Stations
Kshs. Billion
2905
30 27% 30% 2690
24% 2501
25 25%
21% 2162
20%
20 20%
1604
15 15% 1439
25.48 25.28 24.88 1140
10 10%
17.44
607
5 5%

140 193 187 203

0 0%
FY10 FY11 FY12 FY13
FY10 FY11 FY12 FY13
CAPEX CAPEX Intensity
Total (inc 2G) 3G Wimax

Capital expenditure of Kshs 24.9bn invested in: Largest 2G and 3G network:

• Site roll out • 2,905 2G enabled base stations

• RAN modernization and Radio optimization
• Transmission improvements • 1,604 3G enabled base stations
• Energy efficiency
• 689 3G sites at 21mbps

• 155 3G sites at 42mbps

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Improved cash generation
FY Free Cash Flow FY Net Debt
Kshs. billion
49.18 Kshs. billion

(1.45)

(5.98) 8.23
12.00
(15.00)

(24.88)

14.51 5.23
(2.44)
0.08

EBITDA Interest Tax paid Capex Working Other Free cash

paid capital capital flow
mvmts

• Improved Free Cash Flow from Kshs 9.35bn in • Kshs 8bn corporate bond at 12.25%, expires Nov
FY12 to Kshs 14.51bn. 2014
• Driven by improved EBITDA and steady capex • Kshs 4bn corporate bond at 7.75%, expires Dec
2015
• Bank borrowing range between 1% and 1.5%

* Free Cash Flow excludes Mergers & Acquisitions activity above 91/182 day T-bill rate
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Key Financials:
FY 12 FY 13 VARIANCE H2 FY12 H2 FY13 VARIANCE

Voice revenue 68.96 77.66 12.6% 37.47 40.24 7.4%

Messaging revenue 7.77 10.13 30.4% 4.12 5.86 42.2%
Mobile data revenue 5.22 6.31 20.9% 2.77 3.34 20.6%
Fixed service revenue 1.37 2.11 54.0% 0.74 1.10 48.6%
M-Pesa revenue 16.87 21.84 29.5% 8.99 11.41 26.9%
Service Revenue 100.19 118.05 17.8% 54.09 61.95 14.5%
Handset revenue 5.94 4.93 -17.0% 2.83 2.50 -11.7%
Acquisition and other revenue 0.87 1.31 50.6% 0.45 0.72 60.0%
Total Revenue 107.00 124.29 16.2% 57.37 65.17 13.6%
Direct costs (43.47) (46.26) -6.4% (21.50) (23.86) -11.0%
Contribution margin 63.53 78.03 22.8% 35.87 41.31 15.2%
Contribution margin % 59.4% 62.8% 3.4% 62.5% 63.4% 0.9%
Operating costs (26.03) (28.85) -10.8% (13.13) (14.42) -9.8%
Operating costs % total revenue 24.3% 23.2% -1.1% 22.9% 22.1% -0.8%
EBITDA 37.50 49.18 31.1% 22.74 26.89 18.2%
EBITDA margin % 35.0% 39.6% 4.5% 39.6% 41.3% 1.6%
Depreciation & amortisation (17.35) (22.08) -27.3% (8.62) (12.17) -41.2%
Net Financing cost (2.78) (1.65) 40.6% (2.14) (0.78) 63.6%
Taxation (4.74) (7.91) -66.9% (3.36) (4.17) -24.1%
Net Income 12.63 17.54 38.9% 8.62 9.77 13.3%
Earnings per share 0.32 0.44 37.5% 0.22 0.25 13.6%
Free Cash Flow 9.35 14.51 55.2% 10.09 9.37 -7.1%
Recommended Dividend 8.80 12.40 40.9%
Dividend per share 0.22 0.31 40.9%
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Contents

FY 2013 Highlights

FY 2013 Financial Review

Strategic Focus and Guidance

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Strategy Overview

Our focus for the next 12 months is to:

• Deliver the Best Network in Kenya program

• Grow Mobile and Fixed Data

• Deepen financial inclusion

• Retain and reward our loyal customer base

• Encourage further innovation

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Deliver the Best Network in Kenya
What we have achieved:

• Modernization of 80% of the planned cell sites

complete

• Call drops have reduced by 25%

• Network downtime reduced by 66% to below

20 min per week

Top priority items in pipeline:

• Complete network modernization in 6 key

cities

• Increase population coverage in 2G and 3G

• Fibre rollout to 40% of sites in Nairobi

• Improve on network quality and coverage

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Grow Mobile and Fixed Data
What we have achieved:

• Increased data customers by 57% to 7.1m

• Increased the number of 3G devices on the

network to 2.3m, of which 1.2m are smartphones

• Introduced Sambaza Internet

• Data bundles purchase via M-PESA

Top priority items in pipeline:

• Lay fibre to our metro base stations

• Keep providing lower priced 3G smartphones

• Encourage developers to create relevant local

content

• Ensure seamless purchase of data bundles

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Deepen financial inclusion using M-PESA
What we have achieved:

• Recruited 26,000 new M-PESA agents in the year

• Increased the 30 day active customer base to 10.5m

• Improved system availability substantially

• Launched M-Shwari, currently 1.2m active customers

Top priority items in pipeline:

• Improved M-PESA system availability

• System redundancy across geography

• Embark on 18 month project to replace existing M-PESA

system

• Grow retail and e-commerce payments

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Retain market leadership
Subscriber market share-Dec 2012 Voice traffic market share-Dec 2012
10.5% 8.6%
8.1% 1.4%

12.5%

16.9%
64.5%
77.5%

Safaricom Airtel Orange Yu Essar Safaricom Airtel Orange Yu Essar

Mobile Data market share-Dec 2012 SMS market share-Dec 2012

9.1% 6.7% 1.2% 0.6%

4.5% 93.7%

11.7%

72.6%

Safaricom Airtel Orange Yu Essar Safaricom Airtel Orange Yu Essar

Source: Communication Commission of Kenya (CCK)
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Encourage further innovation
What we have achieved:

• Launched M-Shwari to provide interest bearing

deposits and micro-loans

• Launched m-health, e-learning and m-agriculture

services

• Launched m-Kopa solar lighting : pay as you go

• Launched the Safaricom AppStar competition to drive

and reward innovations in mobile applications

• Launched a Contacts back-up service

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FY 2014 Guidance
Free Cash Flow:

Expected to be in the range of Kshs 15.5 bn to Kshs 17.5bn

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FY 2013 Highlights

• Strong commercial and financial performance across all segments and metrics

• Continued investment and innovation in network and services

• Best Network in Kenya program progressing well

• Nationwide metro fibre network build begun

• M-Shwari launched to enable access to micro deposits and loans

• Robust growth in non-voice service revenue

• Brand engagement and customer satisfaction continues to increase

• Great progress on our initiatives to transform lives, especially in financial inclusion

Q&A