MTN SATim Lowry

VP SEA Region & MD SA

2

Agenda

1. Introduction – Tim Lowry, MD

2. Unpacking the financials – Zunaid Bulbulia, CFO

3. People and organisation – Tim Lowry, MD

4. Brand and value propositions – Pieter Verkade, CMO

5. Distribution and customer experience – Brian Gouldie, CSSO

6. Quality network and IT – Sameer Dave, CTO

7. Regulatory – Zunaid Bulbulia, CFO

8. In summary – Tim Lowry, MD

3

Introduction

IntroductionTim Lowry

MD

4

Strategy going forward

Preparing for increase in market maturity

Balance between financial efficiency and market effectiveness

Opportunities

• Market still growing both in terms of subscribers and revenues

• Low residential fixed line penetration giving- Mobile a strong position

- Wireless data opportunities

• Business- Fixed-mobile convergence

- SME opportunity

• Class mobility

5

Total market size

Total number of subscribers still growing

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010

Pre Post

Total market (90 days active)

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010

Net adds (90 days active)

• Unadjusted penetration grow from 81% in 2007 to around 98% in 2012

• People penetration will increase from 56% to just under 70% in 2012

• Multiple devices (data cards, data centric vs. voice centric) account for largest increases

• Payphones, telemetry• Multiple price plans and NWs (business vs.

private)• Illegal immigrants

6

Market dynamics

Fixed and mobile data to drive revenue growth (Rb)

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

2005A 2006A 2007E 2008E 2009E 2010E 2011E 2012EMobile voice Mobile data Fixed voice Fixed VoIP Narrowband internet Broadband internet

Overall telecom market set to grow by over ZAR 20 billion between 2007 and 2010

Source: Pyramid Research, Price Waterhouse Coopers

7

Strong growth in corporate telecom spend

9,714 10,721 11,725 12,706 13,642 14,512

8,7618,674

8,5878,501

8,416 8,332

3,4653,612 3,7225,967

6,6957,512

8,4289,457

10,610

3,2592,917

2,503

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2007 2008 2009 2010 2011 2012Mobile voice, LCR and SMS Fixed voice Internet Other data

Source: BMI-T, 2007

Corporate telecoms spend by service type (Rm), 2007-2012

8

Competitive trends

Total MTN Vodacom Cell C

10%

15%

20%

25%

30%

35%

40%

45%

50%

Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 081.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

Mill

ions

Total prepaid acquisition

• Low end value proposition driving subscriber market share• MTN overall market share growing (unique A+B party)

9

Key pillars of MTN SA’s strategy

10

Unpacking the financials

Unpacking the financialsZunaid Bulbulia

CFO

11

Overview

• Prepaid voice is still key revenue driver

• Data increasingly important

• Interconnect

• Current investment programme:- Quality network

- Distribution

- Customer service

• Continued strong cost control

Balance between financial efficiency and market effectiveness

12

• Data contribution increasing• Interconnect contribution decreasing

Total prepaid and postpaid revenue

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Dec 04 Dec 05 Dec 06 Dec 07

ZAR

m

0000000000

(Total postpaid revenue (linear (Total prepaid revenue (linear

Driven by prepaid voice revenue

13

Quarterly ARPU trend vs customer base

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

R 0

R 100

R 200

R 300

R 400

R 500

R 600

Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007

Cust

omer

Bas

e

ARPU

Quarterly ARPU Trend vs Customer Base

Postpaid ARPU

Prepaid ARPU

Postpaid Base

Prepaid Base

14

Quarterly net addition trend

(400,000)

(200,000)

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007

Quarterly Net Addition Trend

Postpaid

Prepaid

15

InterconnectInterconnect revenue

3,784

2,637

5,600

3,038

6,346

2,010

954

1,952

970

1,572

7.12%7.29%

8.59%

10.19%

7.97%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Dec-05* Jun-06 Dec-06 Jun-07 Dec-070.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Interconnect revenue

Net interconnect

Net interconnect %

• Interconnect revenue has decreased from 25% (FY05) to 22% (FY07) of total revenue

16

DataData revenue

8.2% 8.0% 10.0%

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

F2005 F2006 F20070%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Data revenue % of total revenue

SMS as % 85 79 63

• 750% increase in traffic from FY06 to FY07 to 55 gigs per month• 42% increase in revenue

17

EBITDA

34.3% 33.9% 34.8%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

F2005 F2006 F20070%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EBITDA % of total revenue

• Margin improvement• Current pressures include increased investment, transmission and increasing competition

Transmission costs 400 500 600

18

Capex analysis

Key focus areas• Quality, quality and quality• Coverage:

- 50% more 3G sites than 2007- Rural 2G/EDGE

• Transmission self provisioning• Product and service development• Distribution and customer service

19

People and organisation

People and organisationTim Lowry

MD

20

Organisational requirements of strategy

Organisational requirements

Strong brand • Brand driven organisation with consistent brand communications• Brand driven value propositions

Value proposition• Clear and actionable segmentation• Consistent and differentiated value propositions• Reinforced focus on SMEs

Customer driven delivery

• Consistent customer experience across all channels• Stronger and share support platforms to deliver efficiency

Quality network• Stronger focus on network expansion and quality• Agile logistics and investment decision processes• Closer interaction between network/IT

Control over distribution

• Strong MTN branded sales and distribution• Co-ordination across sales channels to optimise profitability

Focused people • Clear roles and responsibilities• Empowered and focus organisation

Efficiency and effectiveness

• Minimal layers and optimal spans of control• Minimal duplications and overlaps

21

Marketing Sales and services NW and IT

Finance HR, corporate services

From business units to functional

Consumer BU Reseller BU Corporate BU

MD

Finance

Productsand services

Network and IT

HR, corporate services

MD

• Reduce complexity in the management process• Quicken decision-making• Increase business focus of the organisation• Functional organisation provides streamlined reporting• Maximum co-ordinated approach especially in marketing

22

New operational structure

Managing DirectorTim Lowry

Significant organisational restructuring to enable execution of new strategy

Chief Sales and Service OfficerBrian Gouldie

Chief Financial Officer

Zunaid Bulbulia

Chief Information Officer

Erich Roberts

Chief Technology Officer

Sameer Dave

Chief Marketing Officer

Pieter Verkade

Human ResourcesThemba Nyathi

Company SecretaryAbsolom Sithole

23

New sales and services organisation

Consumer Channels

BusinessChannels

CSSOBrian Gouldie

CustomerOperations

CustomerExperience and

Integration

Consumer Supply Chain

Sales Planning, Control and Intelligence

• Sales and services integrated to ensure delivery of a consistent customer experience across all customer touch points

• Consumer and business focused sales channels teams to push Marketing driven value propositions consistently and efficiently across all sales channels

• Stronger integration and customer orientation on handset management

• Integrated customer service to explore synergies with differentiated service levels aligned with value propositions

• Strategy, planning and control support function to monitor and control sales and optimise channels mix, sales performance and profitability

24

New marketing organisation

• Consolidation brand and communications to deliver a consistent brand

• Consumer and business focused marketing teams to design segmented and differentiating value propositions

• Market intelligence and customer insightsto re-enforce MTN SA’s understandingof customer trends and needs and competitive intelligence

• Products and services to co-ordinateall developments efforts across the organisation

• Specialised CRM function to createfocused customer acquisition and retention programmes

Consumer Segments

BusinessSegments

Brand and Comms

CMOPieter Verkade

MarketingSupport

Products and services

FIFA 2010

CustomerDevelopment and Retention

25

Key aspects of the MTN-IBM partnership

Access to scarce skills • IBM has a worldwide reach of skills

Share pooling of key skills • There are some key skills which we can only afford to employ in limited numbers

Dealing with fluctuating

demand

• A partner would be in a position to have a large pool of resources• They would be in a better position to manage these peaks

Access to best IS practice • Access to best practice or out of the box implementations is key

Managementfocus • Allow management to focus on those things which could gain advantage for MTN

26

Brand and value propositions

Brand and value propositionsPieter Verkade

CMO

27

Key focus items on the brand

• Consistency: Messages

• Consistency: Tone of voice

• Consistency: Look and feel

• Honour our brand values

• Do what we promise internally and externally

28

Value propositions

From many small things…

29

Value propositions

…to a few big ones

30

Value propositions

31

The MTN Zone price plan

32

MTN Zone – the results

• ~400k “new” customers

• 35% of prepaid base, 39% prepaid revenue

• Churn 1.2% per month

MTN Zone customers call more

33

1400 town stormers

34

Traffic increase on net

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23Hour of day

Prepaid MTN Zone

On-net minutes

35

Corporate value proposition

36

ISP and MTN

The combination of an ISP and MTN creates a strong proposition

• The transaction is in line with MTN’s stated strategy to provide integrated communications solutions in all of its markets and follows similar acquisitions by MTN subsidiaries in Nigeria, Cameroon, Cyprus and Cote d’Ivoire.

• Supports MTN’s strong customer focus and commitment to providing greater choice and a broad range of communication offerings beyond its strong mobile services.

37

MTN’s corporate value proposition

Comprehensive solutions based on customer demands

• Single outsource solution provider

• Provision of data connectivity

• Ensuring quality of service

• Providing managed services

• Creating operational visibility

• Service management –single point of contact

• African ISP opportunity

38

Distribution and customer experience

Distribution and customer experienceBrian Gouldie

Chief Sales and Services Officer

39

Distribution

Changing market environment requires adjustments in distribution strategy

• South African market will steadily move from acquisition to retention- Upgrades and churners will increasingly drive market share movement

- Therefore MTN South Africa’s distribution strategy has been revised to enhance it sales effectiveness and profitability

- In a retention market (and increasingly sophisticated products) it is essential to build a more intimate customer relationship

• Our key initiatives include- Extending our own distribution footprint

- Realigning our channel mix

- Improving the customer experience (people, systems, facilities)

40

Balancing and realigning the channel mix

41

A differentiated customer touch point

• Increased footprint

• Seamless customer experience in all branded MTN point of sales

• Premium retails locations

• Target focus on high value individuals and youth segments

Flagship Store Kiosk

42

Performance improvements

High volume repair centre – repair time time significantly decreased from 10 days to 3 days

Call centre performance – increased answer rate from approximately 77% to above 90%

Service Centers – significant decrease from an average of 25 minutes to below 10 minutes

43

Building a quality network

Building a quality networkSameer Dave

CTO

44

Quality network

• Coverage and capacity

• Segmented quality of service

• Abundant transmission- Self provisioning

- International cabling

45

Coverage and capacity

• Build capacity headroom using “step increase” strategies to keep aheadof demand

- The network signaling capacity increased by 70% YTD

- Provisioned subscriber capacity increased by 43% YTD

- Active subscriber capacity increased by 20% YTD

• Identify where customers live, work, play and deploy the appropriate bearers- Drive traffic and revenue increase

• 2G and 3G in-building coverage consolidation in urban areas

• Expansion of 3G coverage footprint and deployment of high speed bearers- 26% channel element (simultaneous voice calls) capacity added on 3G

radio network

• New 2G coverage in rural and virgin growth areas- 9% erlang capacity added on 2G radio network

46

Quality of service

• Improve voice quality by developing better codecs on radio ad lowering compression core network

- Sandton area reduction in half rate, increase AMR and improvement in speech quality

- Reduction in usage of half rate channels, introduction of better quality adaptive multi rate channels, reduction of ATM core network compression

• Make network more resilient and robust by revisiting / optimising network architecture

- IP ready

• Intense ongoing focus on network optimisation- National percent AMR HR traffic take-up all hours weekly

- Significant improvement in 3G drop call rate

- Significant improvement in call set-up success rate

47

Self provisioning

Deployment of a fibre optic metropolitan network in high traffic

zone of Gauteng

• Trials completed in June, contact award imminent• Going live in 3Q09• Estimated total CAPEX R120-150 million

Deployment of a5000km national fibre optic network

• Initial tender evaluation complete, possible co-building• Build to start in 2008, planned completion by 2010• Estimated total CAPEX R1.2-1.5 billion

Analysing alternatives to meet MTN’sinternational connectivity requirements,

including option of deploying West African SA-Europe submarine cable

• Issue is being addressed at the MTN Group level, as part of the International Carrier Services Strategy

• Significant OPEX savings• Better service quality

Significant acceleration in site-roll and capacity expansions

48

Self provisioning – fibre rollout

49

International connectivity

SAT3EASSy

EIG

• Invested in EASSy(East Africa) and EIG(Europe and India Gateway)submarine cables• Capacity leased from SAT3• Will enable connectivity

through key routes for SAand other MTN operations

50

Regulatory issues

RegulatoryZunaid Bulbulia

CFO

51

Regulatory

Mobile licences• Licence conversion required by the ECA by January 2009• MTN engaging with ICASA re: content and finalisation

Spectrumallocation

• 900MHz, 1800MHz and 3G frequencies to be confirmed as part of the licence process

Interconnectand facilities

• ICASA issued draft regulations on 24 Dec 2007• Public hearings were held to solicit further views from industry• Industry awaiting final regulations to be published by ICASA

BEE• Industry aligned the ICT Charter to BEE Codes and submitted to DTI• Still to be finalised by DTI

52

Summary

SummaryTim Lowry

MD

53

In summary

From planning to execution

54

DIVIDER: Thank you

Thank youQuestions?