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Etisalat Group
Q4 2013 Results Presentation
Abu Dhabi, UAE
March 5th, 2014
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.
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Disclaimer
1. Business Overview Ahmad Julfar Chief Executive Officer Etisalat Group
24 28
17 19
2012 2013
Aggregate Consolidated
58 67
33 39
2012 2013
Aspiring to be the most admired emerging markets telecom group
139 148
2012 2013
Subscriber (m)
Revenue (AED bn)
EBITDA (AED bn)
Robust EBITDA growth resulting in one of the best EBITDA margins in the telecom sector
Further cost efficiency and optimization can support margin levels
9 million net new customers joined Etisalat Group increasing our subscriber base to 148 million
Continued subscriber acquisition expected mainly in Africa and Asia, as voice opportunities still exist
Strong revenue growth experienced in our markets supported by quality network, innovative products and attractive promotions
Reinforced market leadership in the UAE
Launched m-commerce services in nine new operations to reach eleven countries
16%
18%
16%
12%
Consolidated
Growth Y/Y % Aggregate
Growth Y/Y %
7%
5
Investing in state of the art technologies while focusing on shareholders return
CapEx (AED bn)
EPS & DPS (AED) / DY (%)
Increased returns to shareholders
Dividends payout ratio exceeding 78%
One of the highest dividends yield in the region
Network quality a key differentiator for profitable growth
Continued major strategic investments for future growth ― expanded LTE and Fiber networks in UAE and Saudi Arabia ― Acquired and deployed 3G networks in Asia and Africa
Best network quality in the UAE, Egypt, Nigeria and other markets
0.85 0.90
0.7 0.7
2012 2013
EPS DPS
8
13
4
6
2012 2013
Aggregate Consolidated
7.3% 5.8%
59%
52%
Consolidated
Growth Y/Y % Aggregate
Growth Y/Y %
Dividend
Yield % 6
Priorities in 2014
Deliver on 2014 financial outlook
Reinforce market leadership in the UAE and Pakistan
Be the operator of choice across all market segments in the core markets
Tap into the ICT potential in our prime markets
Increase value share in the high value customers and enterprise segments
Continue to invest in network quality for future growth and differentiation
Grow m-commerce and services digital revenue streams
Complete acquisition of 53% stake in Maroc Telecom
Improve synergy value across the footprint (Procurement, Wholesale, Roaming,
Customer Experience)
1
2
3
4
5
6
7
8
7
9
2. Financial Overview Serkan Okandan Chief Financial Officer Etisalat Group
Etisalat Group
8
Q4’12 Q3’13 Q4’13 QoQ
Growth YoY
Growth FY’12 FY’13
YoY Growth
Subs (m) (1) (2) 139 144 148 +3% +7% 139 148 +7%
Revenue (AED m) 8,479 9,594 9,774 +2% +15% 32,946 38,853 +18%
EBITDA (AED m) 4,279 4,617 4,372 -5% 2% 16,855 18,901 +12%
EBITDA Margin 50% 48% 45% -3pp -6pp 51% 49% -3pp
Net Profit 854 1,825 1,453 -20% +70% 6,742 7,078 +5%
Net Profit Margin 10% 19% 15% -4pp +5pp 20% 18% -2pp
EPS (AED) 0.11 0.23 0.18 -20% +70% 0.85 0.90 +5%
Strong Y/Y subscriber growth across most operations
Solid revenue growth driven by strong performance of domestic operations and consolidation of Pakistan Operations
EBITDA margin declined Y/Y mainly due to higher proportion of low margin handsets and higher interconnection costs
Despite higher depreciation charges, taxes and lower finance income, net profit improved due to higher share of results and lower impairment charges
(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
8,479
9,774 437 32
1,011
(183)
Q4'12 UAE Egypt Asia Africa Other Q4'13
(3)
Group Revenue
9
Note: “Other revenues” consist of non-telecom revenues, management fees, etc.
In Q4’13, consolidated revenues grew by 15% Y/Y attributed to strong performance of the UAE operations and Asia Cluster
Revenues from international operations grew by 43% and contributed 35% of consolidated revenues of Q4’13
— Revenue growth in Egypt despite currency devaluation
— Revenue growth in Asia Cluster benefited from the consolidation of operations in Pakistan
— Revenue growth is flat in Africa
Highlights
Revenue (AED m) and YoY growth (%) Sources of Revenue growth – Q4’13 vs Q4’12 (AED m)
Revenue by Cluster (Q4’13)
UAE 64%
Int’l 35%
Others <1%
International
Pakistan 31%
Egypt 39%
Others
AT 16%
Afghanistan 7%
8,479 9,594 9,774
32,946
38,853
3%
20% 15%
2%
18%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
Revenue YoY growth %
Group EBITDA
10
In Q4’13, consolidated EBITDA declined by 5% to AED 4.4 bn
FY’13 EBITDA margin declined by 2 points to 49% mainly due to higher cost of sales and interconnection costs.
EBITDA of consolidated international operations increased Y/Y by 13%, resulting in 21% contribution to Group EBITDA, an improvement of 5 points compared to Q4’12
— Egypt impacted by currency devaluation and higher operating costs
— Asia Cluster improvement mainly due to consolidation of Pakistan
— Africa Cluster impacted by higher cost of sales and operating expense
4,279 4,617 4,372
16,855 18,901
50% 48%
45% 51% 49%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
EBITDA EBITDA Margin
4,279 4,372
(211)
377
(59)
22
Q41'12 UAE Egypt Asia Africa Other Q4'13
(37)
Note: “Other EBITDA” consist of results from non-telecom operations, management fees, etc.
Highlights
EBITDA (AED m) & EBITDA Margin Sources of EBITDA growth – Q4’13 vs Q4’12 (AED m)
EBITDA by Cluster (Q4’13)
Domestic vs. Int’l International
UAE 77%
Inter- National
21%
Others -6% AT 6% Others 5%
Egypt 44%
Pakistan 45%
Group CAPEX
11
1,470 1,269 2,148
4,164
6,334
17% 13%
22%
13%
16%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
CAPEX CAPEX/Revenue
CAPEX (AED m) & CAPEX/Revenue Ratio (%)
In Q4’13 Consolidated Capex increased Y/Y by 46% resulting in a Capex/Revenue ratio of 22%. This increase was mainly due to international operations
FY’13 Consolidated impacted by consolidation of Pakistan operations and acquisition of universal Mobile License in Benin. Adjusting for this Capex/Revenue ratio would have been 12%
Capital investment in the UAE focused on leadership in network coverage and ensuring best mobile and fixed networks
Capital investment in international operations grew by 79% Y/Y and represented 76% of total capex in Q4’13:
− Lower capex spend in Egypt
− Asia Cluster impacted by consolidation of Pakistan operations representing 26% of Group consolidated capex
− Substantial increase in Africa Cluster due to acceleration in network deployment in Ivory coast and Benin
Highlights
CAPEX by Cluster (Q4’13)
Domestic vs. Int’l International
Pakistan 34%
Egypt 30%
AT 27%
Others 9%
UAE 24%
Inter- National
76%
Others 1%
Repayment Schedule (AED m) Net cash position (AED m) FY’12 FY’13
Operating 10,486 12,974
Investing (225) (4,854)
Financing (6,327) (6,585)
Net change in cash 3,934 1,535
Effect of FX rate changes 28 (19)
Ending cash balance 13,934 15,450
Borrowings by Operation FY’13 (AED m)
1,782 1,635
736 579
464 351 324
Egypt AT Afgh. EIP Pakistan Tanzania Sri Lanka
Group Balance Sheet & Cash Flows
12
Balance Sheet (AED m) Dec’12 Dec’13
Cash & Cash Equivalent 13,934 15,450
Total Assets 84,606 85,716
Total Debt 5,806 5,872
Net Cash 8,128 9,579
Total Equity 49,913 49,593
(1) Atlantique Telecom 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.
(1) (2)
1,405
1,112
3,355
FY'14 FY'15 FY'16 & Beyond
Group Dividends: Proposed dividends for 2013 of AED 70 fils per share
13
Dividend Payout Ratio (%) Dividend Yield (1)
Dividends Per Share (AED) Cash Dividends (AED m)
1,977 1,977 2,767
2,767 3,558
2,767
2011 2012 2013
Interim Final
5,535 5,535
4,744
6.1%
7.3%
5.8%
2011 2012 2013
0.60
0.70 0.70
2011 2012 2013
81.2% 82.1% 78.2%
2011 2012 2013
(1) Dividend yield is based on share price as of August 15th 2013 and March 3rd 2014
Proposed dividends are subject to the shareholders approval on the AGM scheduled on March 26th, 2014
Final dividends payment will commence on April 13th, 2014
19.0
32.9
14.0
Domestic Regulated Revenues
Non-Telecom and Int’l revenues
Total Revenues FY’12
6.4
2.9
Royalty FY’12 Foreign taxes
0.0
Royalty on Int’l net
profits @ 35%
0.9
Royalty on domestic net
profits @ 35%
2.7
Royalty on regulated domestic
revenues @ 15%
Federal Royalty Computation FY 2012 & FY 2013
19.0
19.8
38.8
Domestic Regulated Revenues
Non-Telecom and Int’l revenues
Total Revenues FY’13
6.1
3.0
Royalty on regulated domestic
revenues @ 15%
2.3
Royalty on domestic net
profits @ 35%
0.9
Royalty FY’13 Foreign taxes
0.1
Royalty on Int’l net
profits @ 35%
Ro
ya
lty F
Y’1
3 (A
ED
bn
) R
oya
lty F
Y’1
2 (A
ED
bn
)
15
Country by Country Financial Review
UAE: Operational excellence driven by focus on execution
16
Q4’12 Q3’13 Q4’13 QoQ
Growth YoY
Growth FY’12 FY’13
YoY Growth
Subs(1) (m) 9.0 10.2 10.4 +2% +16% 9.0 10.4 +16%
Revenue (AED m) 5,851 6,165 6,288 +2% +7% 22,747 24,763 +9%
EBITDA (AED m) 3,398 3,578 3,361 -6% -1% 13,456 14,047 +4%
EBITDA Margin 58% 58% 53% -5pp -5pp 59% 57% -1pp
Net Profit 1,448 1,575 1,461 -7% +1% 5,907 6,094 +3%
Net Profit Margin 25% 26% 23% -2pp -2pp 26% 25% -1pp
CAPEX 530 404 508 +26% -4% 1,795 2,014 +12%
CAPEX/Revenue 9% 7% 8% +1pp -1pp 8% 8% -pp
Solid double digit Y/Y growth in subscribers driven by mobile and eLife segments
Strong Y/Y revenue growth driven by higher data, e-life, and mobile market-share winback
EBITDA margin was impacted by higher cost of sales; international interconnection, device costs, and channel commissions for Q4 activities
Net profit improved Y/Y despite higher depreciation and lower interest income;
― Increased competitive activity evident on Q4 results
Capex/Revenue ratio is stable at 8% - focus on capacity enhancement, network expansion, and 4G rollout
(1) Subscriber numbers calculated as aggregate number of GSM, fixed, fixed broadband and eLife lines generating revenue during the last 90 days.
Highlights
1.11 1.25 1.31
5.96 7.01 7.14
136 124 122
Q4'12 Q3'13 Q4'13
Postpaid Prepaid Blended ARPU
UAE: Subscriber Growth in High Value Segments
17
1.10 1.06 1.04
107 108
133
Q4'12 Q3'13 Q4'13
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)
0.51 0.65 0.67
341 363 372
Q4'12 Q3'13 Q4'13
E-Life (2P & 3P) ARPL
0.81 0.89 0.90
429 458 464
Q4'12 Q3'13 Q4'13
Fixed BB ARPL
621
362 479
1,174 1,229
48%
32% 36%
23% 26%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
CAPEX CAPEX/Revenue
Egypt: Maintained growth in local currency despite challenging macro environment
18
Total Subscribers (1) (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
1,303 1,115 1,335
5,075 4,742
47%
37%
30%
39%
34%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
Revenue EBITDA %
Maintained subscriber growth despite economic slowdown
Double digit revenue growth Y/Y in local currency due to an increase in the post-paid customer base, data segment and handset sales;
Growth in reporting currency impacted by currency devaluation
EBITDA margin impacted by higher proportion of low margin handset sales, higher network costs and marketing expenses and one-off
Margins in Q4’13 and FY’13 were impacted by one-off related to provision for disputes on interconnection rates. Adjusting for this item, EBITDA would have been 38% and 36% respectively.
Capital spending during the quarter focused on network expansion and reached 36% of revenue
Highlights
94 97 97
24% 23% 23%
Q4'12 Q3'13 Q4'13
Revenue Market Share
(1) Subscribers and market share data as per statistic published by the Ministry of Information and Technology
38% 36%
396
1,569 1,407 1,564
6,269
15%
27% 31%
11%
31%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
Revenue EBITDA %
8.2
36.5 36.3
Q4'12 Q3'13 Q4'13
126 298
714 566
1,801
32%
19%
51%
36%
29%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
CAPEX CAPEX/Revenue
Asia: Steady margin improvements Afghanistan, Pakistan(1) and Sri Lanka
19
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
(1) Consolidation of Pakistan effective from 1 Jan 2013.
Asia Cluster Revenue Breakdown (Q4’13)
Sri Lanka 9%
Pakistan 75%
Afgh. 16%
Slow down in Subscriber acquisition
In Q4’13, Asia Cluster benefited from consolidation of Pakistan operations effective from 1 Jan 2013. Excluding Pakistan:
— Q4’13 Y/Y revenue growth would have been negative 5% and EBITDA margin would have been 8%
— FY’13 Y/Y revenue growth would have been negative 4% and EBITDA margin would have been 15%
Higher Capex mainly due to Pakistan operation
Highlights
27.6
28.5 28.2
Q4'12 Q3'13 Q4'13
1,281 1,200
1,057
4,653 4,761
42% 37% 39%
28%
35%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
Revenue EBITDA %
315
189
559
1,094
1,392
25%
16%
53%
24% 29%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
CAPEX CAPEX/Revenue
Pakistan: Top-line expansion and cost efficiencies
20
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Y/Y growth in subscribers base driven by mobile and EVO segments
Single digit consolidated revenue growth in local currency mainly driven by increase in data revenues and international clearing house (ICH) operations
― Revenue growth in H2’13 was impacted by newly introduced Government sales tax on international incoming traffic
Margin impacted by GST and higher network and marketing expenses
Capex spending during Q4’13 increased 77% mainly due to spectrum acquisition for EVO. Adjusting for EVO spectrum, Capex/Revenue would have been 44%
― On annual basis, Capex spending increased Y/Y by 27% resulting in Capital intensity ratio of 29%
3G/4G licenses auction expected mid April 2014
Highlights
Subscriber growth impacted by the SIM registration in Tanzania. However, maintained strong subscriber acquisition in Benin, Togo and Gabon.
Revenue growth Y/Y is flat impacted by operations in Ivory Coast & currency devaluation in Sudan
In Q4’13 EBITDA margin declined Y/Y by 8 points due to non-recurring items/provision in Atlantique.
― Adjusting for this items, EBITDA margins in Q4’13 and FY’13 would have been 23% and 22% respectively
Significant increase in capital investment due to acceleration of network deployment in Benin and Togo.
― Adjusting FY’13 Capex for the Universal Mobile license acquisition in Benin, Capex / revenue would have been 31%
709 699 706
2,775 2,793
19% 18%
10%
26%
19%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
Revenue EBITDA %
162 184
429 485
1,240
23% 26%
61%
17%
44%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
CAPEX CAPEX/Revenue
12.2 12.0 11.9
Q4'12 Q3'13 Q4'13
Africa: Investing in 2G & 3G networks
Ivory Coast, Benin, Togo, Gabon, Niger, CAR(1), Tanzania, & Sudan
21
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
(1) CAR stands for Central African Republic
Africa Cluster Revenue Breakdown (Q4’13)
AT 88%
Tanzania 12%
Sudan 11%
Highlights
AT 78%
Tanzania 11%
Sudan 11%
31%
22% 23%
14.9
15.8
17.0
Q4'12 Q3'13 Q4'13
809 822 935
2,957
3,341
6%
(9%)
4%
6%
1%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
Revenue EBITDA %
384 378 536
1,533 1,487
48% 46%
57% 52%
45%
Q4'12 Q3'13 Q4'13 FY'12 FY'13
CAPEX CAPEX/Revenue
Nigeria: Network quality driving customer and revenue growth
22
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Subscriber base grew Y/Y by 14% driven by new products
Double digit revenue growth of 16% driven by subscriber acquisition and data segment
Lower EBITDA margin Y/Y as a result of higher network costs supporting network expansion and higher marketing expenses
― EBITDA margin in FY’13 impacted by non recurring items during Q3’13; Adjusting for these items, EBITDA margin in FY’13 would have been 4%
Higher capital spending in Q4’13 focusing on network quality and coverage
Highlights
4%
2%
2013 Actual Against Guidance (1) : Delivered on financial guidance
23
Revenue Growth %
EBITDA Margin%
CAPEX / Revenue Ratio
17% - 18%
49% - 50%
15% - 17%
18%
49%
16%
(1) All figures represent consolidated numbers and include impact of consolidation of Pakistan operations in 2013
Financial Objective Guidance 2013 Actual FY 2013
2014 Outlook (1) : Management’s Guidance
24
Revenue Growth %
EBITDA Margin%
CAPEX / Revenue Ratio
2% - 3%
47% - 49%
16% - 19%
Financial Objective Outlook 2014
(1) All figures represent consolidated numbers and does not include any impact from a potential M&A transaction during 2014. (2) Capex / Revenue Ratio guidance does not include potential acquisition of 3G/4G licenses in Pakistan.
