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Etisalat Group
Q2 2014 Results Presentation
21st July 2014, Abu Dhabi Aspire Forward
Disclaimer
2
Emirates Telecommunications Corporation and its subsidiaries (“Etisalat” or the “Company”) have prepared this presentation (“Presentation”) in good faith, however, no warranty or representation, express or implied is made as to the adequacy, correctness, completeness or accuracy of any numbers, statements, opinions or estimates, or other information contained in this Presentation.
The information contained in this Presentation is an overview, and should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary.
Where this Presentation contains summaries of documents, those summaries should not be relied upon and the actual documentation must be referred to for its full effect.
This Presentation includes certain “forward-looking statements”. Such forward looking statements are not guarantees of future performance and involve risks of uncertainties. Actual results may differ materially from these forward looking statements.
Agenda
3
1. Business Overview – Ahmad Julfar (CEO-EG)
2. Financial Overview – Serkan Okandan (CFO-EG)
4
Business Overview
Ahmad Julfar Chief Executive Officer Etisalat Group
7.2 8.1
4.9 5.9
Q2'13 Q2'14Aggregate Consolidated
5
Aspiring to be the most admired emerging markets telecom group
Subscriber (m)
Revenue (AED bn)
EBITDA (AED bn)
Drive for operational excellence that translates to improved financial performance
Continued growth in subscriber base across our key markets resulting in 182 million subscribers
Progressing towards creation of the largest French-Speaking West African cluster with 9 countries (Benin, Burkina Faso, Central African Republic, Gabon, Ivory Coast, Mali, Mauritania, Niger, Togo)
Revenue growth momentum expected to continue as we ensure leadership in the mobile data segment and optimise ICT opportunities by leveraging our portfolio and economies of scale
+20%
+27%
+20%
+21%
Aggregate
Growth Y/Y % Consolidated
Growth Y/Y %
+27%
16.5 19.8
9.9 12.6
Q2'13 Q2'14Aggregate Consolidated
143
182
Q2'13 Q2'14
2.1
3.7
1.9
3.4
Q2'13 Q2'14Aggregate Consolidated
6
Investing in network quality and improving returns to shareholders
CapEx (AED bn) *
EPS (AED) / DPS (AED)
Improved shareholder value as earnings increase through strategic investments and improved financial performance of our core operations
35 fils per share interim dividend for the year 2014 to be paid to shareholders in August 2014
Invest in high quality networks across our footprint to ensure enhancement of customer experience and drive profitability
Continued major strategic investments for future growth ― Acquired a 3G licence in Pakistan for USD 147.5 million
+84%
Aggregate
Growth Y/Y %
Consolidated
Growth Y/Y %
0.25
0.32 0.35 0.35
Q2'13 Q2'14
EPS
* Aggregate Capex excludes Mobily
DPS
7
Update on Corporate transactions
Successful completion of the acquisition of Vivendi’s 53% shareholding in Maroc Telecom for a final
consideration of EUR 4.1 billion;
― Received dividends of ~ AED 2.5 billion for FY 2012 and FY 2013
― Etisalat commenced consolidation of Maroc Telecom and its subsidiaries effective from May 2014.
Etisalat and Maroc Telecom signed a Share Purchase Agreement for the sale of Etisalat’s shareholding in its
operations in Benin, the Central African Republic, Gabon, the Ivory Coast, Niger and Togo. Total consideration
in return for Etisalat’s equity in and receivables (including shareholder loans) from these companies amounts to
USD 650 million.
― Closing expected Q3 2014 subject to securing regulatory and competition approvals in the jurisdictions of
operating countries
Etisalat successfully issued its inaugural bond under the GMTN programme listed on the Irish Stock Exchange
and raised USD 4.2 billion.
With the proceeds from the bond issuance, syndicated bank facilities, amounting to EUR 3.2 billion, repaid.
8
Financial Overview Serkan Okandan Chief Financial Officer Etisalat Group
Etisalat Group
9
Q2’13 Q1’14 Q2’14 QoQ
Growth YoY
Growth
Subs (m) (1) 143 145 182 +25% +27%
Revenue (AED m) 9,882 9,899 12,579 +27% +27%
EBITDA (AED m) 4,867 4,939 5,866 +19% +21%
EBITDA Margin 49% 50% 47% -3pp -3pp
Net Profit 1,976 2,024 2,507 +24% +27%
Net Profit Margin 20% 20% 20% -1pp -pp
EPS (AED) 0.25 0.25 0.32 +24% +27%
Double-digit Y/Y growth in subscriber base due to consolidation of Maroc Telecom Group
Robust Y/Y revenue growth led by strong performance of UAE operations and consolidation of Maroc Telecom
Steady improvement in EBITDA level in absolute terms
Higher net profit due to higher other income
(1) Subscriber numbers calculated as aggregate number of GSM, CDMA, fixed, fixed broadband and WLL lines generating revenue during the last 90 days.
Highlights
Domestic vs. Int’l
Group Revenue
10
Note: “Other revenues” consist of non-telecom revenues, management fees, etc.
In Q2’14, continued revenue growth momentum and recognized revenue growth Y/Y of 27%; adjusting for Maroc Telecom (like for like) revenue would have increased by 5%. This is attributed to strong performance in the UAE, Egypt & Pakistan operations
Revenue from international operations increased Y/Y by 64% and contributed 46% of consolidated revenues mainly due to:
― First time consolidation of Maroc Telecom since May 2014
― Better performance in Egypt
― Revenue growth in Pakistan
Highlights
Revenue (AED m) and YoY growth (%) Sources of Revenue growth – Q2’14 vs Q2’13 (AED m)
Revenue by Cluster Q2’14
Int’l
9,882
5 12,579
531 53
(16)
7
Q2'13 UAE Egypt MT Asia Africa Others Q2'14
2,118
Int'l 46% UAE
54%
Others <1%
9,882 9,899
12,579
20%
3%
27%
Q2'13 Q1'14 Q2'14
Revenue YoY Growth
5%
AT 10%
Pakistan 25%
Egypt 23%
MT Group 41%
Others 1%
UAE 77%
Inter- National
21%
Int'l 41% UAE
66%
Others -(6%)
Group EBITDA
11
In Q2’14, consolidated EBITDA increased Y/Y by 27%; excluding Maroc Telecom (like for like), EBITDA would decline by 4%
EBITDA of consolidated international operations increased Y/Y by 117% resulting in 41% contribution to Group EBITDA, an improvement of 18 points compared to Q2’13
― Positive contribution from Egypt due to better revenue
― Asia cluster impacted by competitive pressure in Afghanistan and higher network and regulatory costs in Pakistan
― Slight improvement n Africa Cluster
4,867 4,939
5,866
49% 50%
47%
Q2'13 Q1'14 Q2'14EBITDA EBITDA Margin
4,867 (378)
5,867
68 (14)
15
Q2'13 UAE Egypt MT Group Asia Africa Other Q2'14
268
1,217
Note: “Other EBITDA” consist of results from non-telecom operations, management fees, etc.
Highlights
EBITDA (AED m) & EBITDA Margin Sources of EBITDA growth – Q2’14 vs Q2’13 (AED m)
EBITDA by Cluster Q2’14
Domestic vs. Int’l Int’l
AT 7%
Pakistan
19%
Egypt 20%
MT Group 51%
Others 3%
45%
Int'l 84%
UAE 14%
Others 2%
Group CAPEX
12
1,857
910
3,413
19%
9%
27%
Q2'13 Q1'14 Q2'14
CAPEX CAPEX/Revenue
15%
CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Capex increased Y/Y by 84% resulting in Capex/Revenue ratio of 27%. This increase is mainly attributed to:
― 3G license acquisition and 2G license renewal in Pakistan
― Consolidation of Maroc Telecom
Adjusting for these items Capex would have been AED 1.5 billion, down by 17% and capex/revenue ratio of 15%
Capital spending in the UAE declined by 21% representing a 7% capex/revenue ratio
Capital expenditure in international operations increased by 136% and contributed 84% of consolidated capex in Q2’14:
― 2G/3G license renewal and acquisition in Pakistan
― Higher capex spend in Egypt for capacity upgrade
― First time consolidation of Maroc Telecom effective from May 2014
Highlights
CAPEX by Cluster Q2’14
Domestic vs. Int’l Int’l
Pakistan 69%
Maroc 15%
Egypt 10%
AT 5%
Others 1%
Net cash position (AED m) 6M’13 6M’14
Operating 2,633 5,145
Investing (2,277) (19,867)
Financing (3,324) 14,749
Net change in cash (2,969) 24
Effect of FX rate changes 32 72
Ending cash balance 10,997 15,547
Group Balance Sheet & Cash Flows
13
Balance Sheet (AED m) Dec-13 Jun-14
Cash & Cash Equivalent 15,450 15,547
Total Assets 85,716 123,622
Total Debt 5,872 26,350
Net Cash / (Debt) 9,579 (10,803)
Total Equity 49,593 58,065
Highlights
Maintained strong cash balance and enhanced financial
flexibility
Balance sheet impacted by the consolidation of Maroc
Telecom
Significant increase in total debt to fund the acquisition of
53% stake in Maroc Telecom resulting in net debt position for
the first time and improving the capital structure
Operating cash flow impacted by consolidation of Maroc
Telecom and other income in Q2’14
Cash flow from investing activities impacted by AED 18.7
billion cash acquisition of Maroc Telecom
Cash flow from financing increased due to the bond
issuance to finance acquisition of Maroc Telecom
Debt Profile
14
15,495
4,642
1,812 1,740 684 731 574 352 321
Group MT Egypt WestAfrica(1)
Pakistan Afghanistan EIP (2) Tanzania Sri Lanka
Borrowings by Currency Q2’14
Debt by Source Q2’14 (AED m)
Borrowings by Operation Q2’14 (AED m)
744
5,310
1,999
18,296
FY'14 FY'15 FY'16 Beyond
Repayment Schedule
15,495
9,899
311 645
Bonds Bank Borrowings Vendor Financing Others
(1) West Africa Countries are Benin, Central African Republic, Cote d’Ivoire, Gabon, Niger, Togo.
(2) Advances from non controlling interest from minority shareholders of Etisalat Pakistan International.
USD 7%
EGP 6%
EURO 65%
MAD 14%
Others, 10%
Consistent Track Record of Shareholder Remuneration
15
Interim Dividend Payout Ratio Interim Dividends and Dividends Per Share
1.98 1.98 1.98
2.77 2.77
0.25 0.25 0.25 0.35 0.35
2010 2011 2012 2013 2014
Interim Dividends (AED bn) DPS
51.1%
57.9% 53.8%
72.8%
61.1%
2010 2011 2012 2013 2014
Payout Ratio
Highlights Interim Dividend & Earnings Per Share (AED)
H1'10 H1'11 H1'12 H1'13 H1'14
DPS 0.25 0.25 0.25 0.35 0.35
EPS (1) 0.49 0.43 0.46 0.48 0.57
Etisalat’s Board approved 35 fils per share to be distributed from 13 August 2014 to the shareholders registered in the shareholders’ register on 30 July 2014
(1) Represents diluted earnings per share
16
Country by Country Financial Review
UAE: Disciplined execution drives growth in revenue and profitability
17
Q2’13 Q1’14 Q2’14 QoQ
Growth YoY
Growth
Subs(1) (m) 9.9 10.9 11.3 +4% +14%
Revenue (AED m) 6,303 6,503 6,834 +5% +8%
EBITDA (AED m) 3,593 3,715 3,860 +4% +7%
EBITDA Margin 57% 57% 56% -1pp -1pp
Net Profit 1,519 1,651 1,707 +3% +12%
Net Profit Margin 24% 25% 25% 0pp +1pp
CAPEX 625 460 491 +7% -21%
CAPEX/Revenue 10% 7% 7% 0pp -3pp
Sustained subscriber growth momentum in mobile and eLife segments
Strong revenue growth attributed to fixed and mobile data, internet and handset
Improved EBITDA level as a result of improvement in revenue trends and cost discipline
EBITDA margin slightly lower Y/Y due to higher interconnection costs and cost of devices
Net profit growth and margin expansion attributed to higher EBITDA level
Capex spend focused on network modernization
(1) Subscriber numbers calculated as aggregate number of GSM, fixed, fixed broadband and eLife lines generating revenue during the last 90 days.
Highlights
1.19 1.38 1.48
6.82 7.54 7.85
132 115 115
Q2'13 Q1'14 Q2'14
Postpaid Prepaid Blended ARPU
UAE: Continued to expand subscriber base in mobile and eLife segments
18
1.08 1.03 1.02
108 127
130
Q2'13 Q1'14 Q2'14
Fixed ARPL
(1) Mobile ARPU (“Average Revenue Per User”) calculated as total mobile voice, data and roaming revenues divided by the average mobile subscribers. (2) ARPL (“Average Revenue Per Line”) calculated as fixed line revenues divided by the average fixed subscribers. (3) Fixed broadband subscriber numbers calculated as total of residential DSL (Al-Shamil), corporate DSL (Business One) and E-Life subscribers.
Mobile Subs (m) & ARPU(1) (AED)
Fixed Broadband(3) Subs (m)
Fixed Subs (m) & ARPL(2) (AED)
eLife Subs – Double & Triple-Play (m)
0.60 0.70 0.72
367 374 384
Q2'13 Q1'14 Q2'14
E-Life (2P & 3P) ARPL
0.86 0.93 0.95
450 479 485
Q2'13 Q1'14 Q1'14
Fixed BB ARPL
207
116
292
18% 10%
24%
Q2'13 Q1'14 Q2'14
CAPEX CAPEX/Revenue
Egypt: Confirmation of top-line growth and margin expansion
19
Total Subscribers (1) (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
1,156 1,146 1,208
35% 39% 39%
Q2'13 Q1'14 Q2'14
Revenue EBITDA %
Maintained Y/Y growth in subscriber base with focus on post-paid segment
Revenue growth Y/Y attributed mainly to data segment
Strong improvement in EBITDA level in absolute terms underpinned by effective cost measures
EBITDA margin expanded by 4 points
Granting of unified license to the incumbent fixed operator delayed but expected to increase competitive pressure
for the rest of the year
Highlights
97 100 102
23% 23% 23%
Q2'13 Q1'14 Q2'14
Market Subs Market Share
(1) Subscribers and market share data as per statistic published by the Ministry of Information and Technology
1,664
1,514
1,648
32% 32% 32%
Q2'13 Q1'14 Q2'14
Revenue EBITDA %
37.6
35.7 35.8
Q2'13 Q1'14 Q2'14
412
248
2,004
25% 16%
122%
Q2'13 Q1'14 Q2'14
CAPEX CAPEX/Revenue
34%
Asia: Stable EBITDA margins with investment in 2G/3G licenses in Pakistan Afghanistan, Pakistan and Sri Lanka
20
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Asia Cluster Revenue Breakdown (Q2’14)
Subscriber growth impacted by operations in Pakistan
Revenue growth Y/Y was flat due to adverse competitive
environments in Afghanistan and Sri Lanka
EBITDA margins remained stable
Increased capital spending during the quarter driven by Pakistan
operations
Highlights
Pakistan 79%
Sri Lanka
8% Afghanistan
13%
29.5
27.6 27.8
Q2'13 Q1'14 Q2'14
1,271
1,180
1,310
37% 37% 35%
Q2'13 Q1'14 Q2'14
Revenue EBITDA %
336
189
1,993
26% 16%
152%
Q2'13 Q1'14 Q2'14
CAPEX CAPEX/Revenue
Pakistan: Capitalize on strategic investments in 3G and fixed broadband
21
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Subscriber growth Y/Y impacted by cleansing exercise of mobile subscriber during Q1’14;
Revenue growth Y/Y underpinned by growth in fixed data
― Ufone was first operator to launch 3G services in Pakistan
EBITDA margin impacted by higher network costs, regulatory costs and staff cost
Significant increase in capital spending due to the 3G license acquisition and 2G license renewal during Q2’14
Highlights
42%
Africa Cluster operational and financial results benefited from the
consolidation of Maroc Telecom effective from May 2014
Excluding Maroc Telecom:
― Y/Y subscriber growth is flat
― Y/Y revenue growth is 1%
― EBITDA margin is up by 2points
― Capex/revenue ratio is at 34%
694 685
2,818
23% 23%
49%
Q2'13 Q1'14 Q2'14
Revenue EBITDA %
24%
597
94
572
86%
14%
23%
Q2'13 Q1'14 Q2'14
CAPEX CAPEX/Revenue
12.4 12.0
50.4
Q2'13 Q1'14 Q2'14
Africa: Increased footprint in West Africa by 4 new countries Benin, Burkina Faso, CAR, Gabon, Ivory Coast, Mali, Mauritania, Morocco, Niger, Togo, Tanzania, & Sudan
22
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Africa Cluster Revenue Breakdown (Q2’14) Highlights
AT 19%
Others 6%
MT Group 75%
11.9
21%
Maroc Telecom: Continued market leadership in all markets Burkina Faso, Gabon, Mali, Mauritania and Morocco
23
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Etisalat started to consolidate the results of Maroc Telecom effective from May 2014
Strong subscriber acquisition with Y/Y growth exceeding 9%
Revenue growth Y/Y driven by strong performance of international operations
Maintained healthy EBITDA margin at 56%
Capital spending is focused on deployment of ultra-high-speed fixed broadband and mobile services
Highlights
35.2
39.2 38.4
Q2'13 Q1'14 Q2'14
3,134 3,241 3,308
57% 55% 56%
Q2'13 Q1'14 Q2'14
Revenue EBITDA %
1,183
916
19%
14%
H1'13 H1'14
CAPEX CAPEX/Revenue
15.3
18.7 19.4
Q2'13 Q1'14 Q2'14
741
1,009
1,097
2%
11% 15%
Q2'13 Q1'14 Q2'14
Revenue EBITDA %
217
437
290
29%
43%
26%
Q2'13 Q1'14 Q2'14
CAPEX CAPEX/Revenue
Nigeria: Impressive performance with solid operational execution
24
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Highlights
Strong growth in subscriber base driven by new services and products launched, better quality network and MNP
Significant Y/Y revenue growth of 48% driven by improved commercial activities
Continuous increase in EBITDA margin attributed to improvement in revenue trend and operational cost control
Maintained investment in network quality
2014 Outlook : Revised Management Guidance after Maroc Telecom acquisition
25
Revenue Growth %
EBITDA Margin%
CAPEX / Revenue Ratio
25% - 27%
49% - 50%
18% - 20%
15%
48%
19%
Financial Objective Guidance 2014 Actual 6M 2014
Q&A
26
27
Etisalat Investor Relations Email: ir@etisalat.ae
Website: www.etisalat.com/html/ir
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