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Q4 2018
2
Disclaimer
This document has been prepared by Telecom Egypt (the “Company”) solely for the use at the analyst/investor presentation, held in connection with the Company. The information
contained in this document has not been independently verified. This document contains statements related to our future business and financial performance and future events or
developments involving Telecom Egypt that may constitute forward-looking statements. Such statements are based on the current expectations and certain assumptions of Telecom
Egypt's management, of which many are beyond Telecom Egypt's control. Such assumptions are subject to a number of risks and uncertainties. Should any of these risks or
uncertainties materialize, or should underlying expectations not occur or assumptions prove incorrect, actual results may (negatively or positively) vary materially from those described
explicitly or implicitly in the relevant forward-looking statement. Telecom Egypt neither intends, nor assumes any obligation, to update or revise these forward-looking statements in
light of developments, which differ from those anticipated.
This document does not constitute an offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares of the Company and neither it nor any
part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. This presentation has been made to you solely for information purposes
and is subject to amendment. This presentation (or any part of it) may not be reproduced or redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any
other person or published in whole or in part for any purpose without the prior written consent of the Company.
3
Q1 2019 results highlightsStrong operational start for the year
6.1bn+27% YoY / +12% QoQ
1.9bn+26% YoY / +137% QoQ
1.6bnVs 0.8bn in Q1 2018
Revenue (EGP bn)
EBITDA (EGP bn)
Customers ( mn)
Net profit(EGP bn)
Fixed
Mobile
Voice Data
EBITDA margin of 31%, -24bps YoY, +1,645bps QoQ Net profit margin of +27%, +1,036bps YoY, +2,694 bps QoQ
8.1+11% YoY
5.5+27% YoY
4.2+45% YoY
Consolidated revenue mainly grew on
home data revenue followed by domestic
wholesale and ICA. Retail contributed 57% to
top line YoY growth.
Customers grew across all segments.
Mobile base included 613k data SIMs
distributed in March among school students.
Wholesale witnessed a spike of 24% YoY
on domestic IRU sales (EGP c400mn).
Organically, wholesale grew by 13% YoY,
reflecting continued data demand by MNOs.
EBITDA margin came in at 31%. High
margin revenue mix offset the increase in
employee costs (incl. one-off employee
bonus of EGP 175mn). Normalized EBITDA
for IRU and employee bonus grew 21%,
recording a margin of 29%.
Net profit doubled YoY due to the
revaluation of USD facilities, EBITDA growth
and the rebound in Vodafone’s investment
income.
Q1 2019: Strong operational growth on all
fronts
4
Highlights of the main events of the quarterFulfilling Telecom Egypt’s objectives with solid, on ground actions
Events in the quarter
Subsequent to the quarter
18 Feb: TE and Vodafone Egypt announce the signing of two ten-year transmission and infrastructure agreements with a total value of EGP 10.85bn. Additionally, Vodafone Egypt has proposed a dividend of EGP12.2bn, of which Telecom Egypt’s share is the equivalent of EGP 5.5bn
31 Jan: The government of Egypt, being TE’s major shareholder with an ownership of 80%, has announced changing some of its representatives in TE’s Board of Directors by a decree from the Egyptian Prime Minister with immediate effect and for the remaining period of Board of Directors.
12 Feb: TE and Orange Data announce the signing of a new
agreement on bitstream access services enabling Orange Data as the
first operator to sign this agreement to provide its customers with
higher speed internet services.
21 Mar: Telecom Egypt has published an all-encompassing report about its operations in 2018 and its strategic directions, resuming an important practice to come closer to its goal of providing timely, accurate and comprehensive disclosure.
24 Mar: Telecom Egypt announced that its Board of Directors approved to proceed with a voluntary early retirement program for its employees. The program is one of the largest cost saving initiatives proposed by the management targeting 2000 employees in 2019.
27 Mar: Telecom Egypt’s Ordinary General Assembly appointed its board of directors for a new term of three years by renewing its confidence in the seven representative members of the government from the previous term for a new term and approved the change of two independent board members.
27 Apr: Telecom Egypt signed a binding letter of intent (LoI) with
PEACE Cable International Network Co. and its affiliate HENGTONG
OPTIC-ELECTRIC enriching the partnership between PEACE and
Telecom Egypt further and extending it to other service lines.
27 Apr: Telecom Egypt announces that it has signed a landing party agreement with PEACE Cable International Network Co. and PCCW Global. PEACE is a 12,000 km long cable system with landings in Pakistan, Djibouti, Egypt, Kenya and France that provides open, flexible and carrier-neutral services for its customers.
5
1 Education reform program
Ph
ase
1P
ha
se
2
Q3 2018: Connected 2,550 schools with fiber within 2
months, recognizing EGP 482mn.
Q1 2019: Provided data SIMs for students in their first
year of high school.
2 Port Said Digital transformation
Ph
as
e 1
Ph
ase
2
Q1 2019: Connected governmental service
buildings in Port Said with fiber to provide citizens
with digital services.
Connecting 5 more governorates with fiber (timeline to be
agreed upon later within the 2 year timeframe of the
protocol)
613kdata SIMs
4 daysto distribute the SIM cards
8,000TE employees
working on the
project
670buildings
connected
service offices
included
700
further monetization
from service
subscriptions
further monetization
from service
subscriptions
Projects in Q1 2019Further steps towards nation-wide digital transformation
The offer: Data bundle price is EGP 5 for the 1st GB then each student has to
subscribe to one of WE’s existing data bundles
EGP 86mnrecognized
revenue
6
Revenue (EGP mn)
EBITDA (EGP mn)
Net profit(EGP mn)
Operating Profit(EGP mn)
Financial highlights
4,782
5,413
6,087
Q1 2018 Q4 2018 Q1 2019
+27.3%
+12.5%
1,506
802
1,903
Q1 2018 Q4 2018 Q1 2019
+26.3%
+137.3%
948
-32
1,179
Q1 2018 Q4 2018 Q1 2019
+24.4%
+3732.7%
774
-22
1,615
Q1 2018 Q4 2018 Q1 2019
+108.7%
+7472.3%
7
Revenue by business unitRetail services continue to lead operational and financial growth
Home &
Consumer DomesticEnterprise
International
Carriers Affairs
International
Customers & Networks
1,096
1,077
1,128
Q1 2018 Q4 2018 Q1 2019
+2.9%
+4.7%
1,829
2,2152,401
Q1 2018 Q4 2018 Q1 2019
+31.3%
+8.4%
880818
1,309
Q1 2018 Q4 2018 Q1 2019
+48.8%
+60.0%
393450
498
Q1 2018 Q4 2018 Q1 2019
+26.8%
+10.7%
583
852
750
Q1 2018 Q4 2018 Q1 2019
+28.5%
-12.0%
Q1 2019 performance:
Retail grew 31% YoY, representing 57% of total top line growth driven by strong data performance.
Data revenue (fixed & mobile) reported +35% YoY, resulting from our growing customer base with the mix shifting
towards data subscribers.
Home & Consumer rose by 31% YoY and represents 76% of total retail revenue.
Mobile revenue grew, contributing a low double digit to total retail revenue and mid single digit to top line.
Enterprise Solutions witnessed a 29% YoY increase mainly driven by the recognition of the Port Said connectivity
project along with project revenue from NUCA.
Wholesale grew on the back of 49% YoY growth in the domestic business unit mainly driven by IRU sales which is
volatile in nature. Excluding the IRU sales, domestic would have grown by 20% YoY on increased data consumption in
the Egyptian market.
ICA slightly increased as growth in incoming international revenue (+7% YoY) compensated for the decrease in low
margin transit revenue.
39%
12%
22%
19%
8%
Q1 2019
38%
12%19%
23%
8%
Q1 2018
8
• Employee costs rose as a result of the annual salary increase and the one off bonus
of EGP 175mn.
• Total call costs as a percentage of revenue dropped 260bps YoY on enhanced
revenue mix, increased mobile traffic hosted over our network and the revision of the
national roaming agreement.
Income statement (Q1 2019)
Reve
nu
e
EB
ITD
AO
the
r
OP
EX
Net p
rofit
• Enterprise included EGP 86mn from the Port Said digital transformation project and
EGP 93mn from other infrastructure projects (including NUCA).
• The hike in domestic revenue includes EGP 400mn of IRU sales (EGP 126mn Q1
2018). Although the IRU sales are volatile on QoQ basis, it is stable on a YoY basis.
Exp
en
se
s
Non-o
pera
tio
nal
• EBITDA came in at EGP 1.9bn, rising 26%YoY, recording a margin of 31%.
Excluding the IRU sales and the one-off bonus, EBITDA would have increased by
21% YoY, recording a margin of 29%.
• Amortization and depreciation rose 37% YoY in line with our increased CapEx
rollout.
• The normalized effective interest rate reached 8.6% compared to 9.3% in Q4 2018
and 11.7% in Q1 2018 (Vodafone dividend proceeds were used to settle EGP debt
on the last day of the quarter).
• FX gain from the appreciation of EGP vs USD is related to the revaluation of the
USD denominated facilities.
• Net profit came in at EGP 1.6bn supported by the revaluation of USD facilities,
EBITDA growth and the rebound in Vodafone’s investment income.
Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards
In EGP mn Q1 2019 Q4 2018 Q1 2018 QoQ YoYRevenue 6,087 5,413 4,782 12% 27%Home & Consumer 2,401 2,215 1,829 8% 31%Enterprise Solutions 750 852 583 -12% 29%Domestic Wholesale 1,309 818 880 60% 49%International Carriers Affairs 1,128 1,077 1,096 5% 3%International Customers & Networks 498 450 393 11% 27%
Total employee cost (1,624) (1,578) (1,202) 3% 35%Call costs (1,134) (1,123) (1,015) 1% 12%CoGS (excl. above expenses) (957) (1,309) (753) -27% 27%S&D (excl. salaries, D&A) (329) (370) (201) -11% 63%G&A (excl. salaries, D&A) (141) (230) (105) -39% 34%
EBITDA 1,903 802 1,506 137% 26%Margin 31% 15% 31% 1,645 bps (24 bps)
Other (expense) / income 88 (79) 36 211% 144%
Depreciation (647) (582) (443) 11% 46%Amortization (164) (174) (151) -6% 8%
Operating profit 1,179 (32) 948 3733% 24%Margin 19% -1% 20% 1,997 bps (45 bps)
Income from investments 647 650 287 0% 126%
Net finance (cost) / income 394 2 (88) 16592% 549%Net interest (expense) / income (283) (439) (204) -36% 39%
Tax (321) (200) (168) 60% 91%
Net Profit 1,615 (22) 774 7472% 109%Margin 27% 0% 16% 2,694 bps 1,036 bps
EPS 0.95 -0.12 0.45 888% 108.7%
9
Operating ProfitQ1 2019 (YoY)
9481,179
1,305
322
422
164
217
EmployeeCosts
Other Income/Expense
ProvisionsQ1 18 Opearting Profit
COGS
51
Revenue
0
SG&A Depr & Amort. Q1 19 Operating Profit
+24%
Note: All financial figures are in EGP million
10
Cash flow analysis
Cash capex(EGP mn)
Net cash from operating activities (EGP mn)
Note: All financial figures reported are based on Consolidated financials under The Egyptian Accounting Standards.
FCFF(EGP mn)
In-service capex
(EGP mn)
938
1,313
1,824
1,280
1,977
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019
457 681 135 293
4,709
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019
440 353
501 533
1,399 16%
12% 12% 11%
23%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
-
200
400
600
800
1,00 0
1,20 0
1,40 0
1,60 0
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019
Capex Capex/sales
719 827
1,663
1,172
2,110
97 25
26% 27%
40%
25%35%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
-
500
1,00 0
1,50 0
2,00 0
2,50 0
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019
Capex License Capex/sales
* including a portion of the one-off settlement payment to Etisalat of EGP 847mn
*
* Including Vodafone proceeds collected of EGP 4.8bn
*
11
410
642
340
578
306
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2019
Balance sheet highlights
FCFE(EGP mn)
Net debt(EGP mn)
Net debt/ EBITDA(Based on annualized EBITDA)
Breakdown of capex in-service
76%
13%
3%
7%
1%
CAPEX
Access Network
Transmission
International cable
Customer care
Others
-1.3x
-0.7x
0.4x
1.1x
2.1x
1.1x
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q4 2018 Q1 2019
4,033 3,083 1,556 1,291 1,207 1,535
-411 -413 -3,546
-7,772
-13,854
-9,655
-3,622 -2,669 1,989 6,481 12,647 8,120
Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q4 2018 Q1 2019
Net debt
Total debt Cash
12
Our performance in contextExceeding our guidance across KPIs
Revenue Growth
YoY
EBITDA margin (%)
CAPEX / sales (%)
Q1 2019
Actual
27%
31%
In-service: 23%
Cash: 35%
FY 2019
guidance
Mid to high single
digit
Mid to high 20s
In-service: 30%
