Buy new OTH, avoid OTMT, play Mobinil for the put

Company Update Egypt Telecom 21 December 2011

ORASCOM TELECOM DEMERGER

1 Ahmed Adel

+202 3300 5100 Ext.2203 [email protected]

Buy new OTH, avoid OTMT, play Mobinil for the put

The demerger of Orascom Telecom (OT) into Orascom Telecom

Holding (OTH) and Orascom Telecom Media & Technology

Holding (OTMT) and the subsequent listing of the companies

on the EGX is expected before year-end. We are buyers of the

OTH post demerger, as we continue to see substantial upside,

driven mainly by a favorable outcome in Algeria. Initial trading

action is likely to see the new shares adjust to implied pre-

suspension market values, from a book-value split (OTH up,

OTMT down) and thereafter towards our respective fair values

of USD3.6/GDR (EGP4.3/share) for OTH and USD0.9/GDR

(EGP1.1/share) for OTMT. The demerger will impact Mobinil

too, owing to the Sawiris put option. We upgraded Mobinil to

buy, acknowledging the impact of the put despite a gloomy

operating outlook.

► The key to OT’s fair value remains the outcome relating to its

subsidiary Djezzy in Algeria. Djezzy constitutes c. 80% of OTH’s

post-demerger value. OTMT, meanwhile, should trade as a

proxy for Mobinil shares, as c. 70% of its fair value is from this

source. The Sawiris put option over Mobinil shares should also

positively influence OTMT’s shares.

► Initially, the new shares should trade immediately towards their

implied pre-suspension “market values”, which, according to

our valuation, imply a ratio of 80:20 (vs. 58:42 on a book value

basis). The immediate moves may be rapid, although up and

down circuit–breakers may see it take several days for the

shares to trade normally at the new levels. Thereafter, expect a

gradual move towards fair values as the fundamentals assert

themselves.

► If the EFSA does not take action before end-2011 (this cannot

be ruled out given the recent decision making paralysis within

Egypt’s public bodies) or a new court cases delay the

demerger, a contingency plan outlined under the VIP-WIND

deal could be triggered, under which VIP-WIND will be

required to buy OTH’s remaining assets for USD600m, plus a

further USD170m conditional upon the Mobinil put option

being exercised.

► We are buyers of relisted OTH, downside is limited, but see

significant upside if a solution can be reached in Algeria. We

continue to argue that the best outcome for OTH is for Djezzy

to be allowed to operate normally again (including being

permitted to repatriate dividends), and that an outright

purchase of Djezzy by the Algerian government is now less

likely. Based on the last locally traded share price of OT prior to

suspension and our fair value estimates for OT’s other assets,

the market currently implies an EV for Djezzy (100%) of

USD1.6bn or just 1.5x 2012f EBITDA.

OTH

Recommendation BUY

Opening Price on EGX (EGP) 1.73

Fair Value (EGP/share) 4.34

Upside Potential (%) 151.3

Fair Value (USD/GDR) 3.60

Reuters Code ORTE.CA/ORTEq.L

Bloomberg Code ORAT EY/OTLD LI

OTMT

Recommendation HOLD

Opening Price on EGX (EGP) 1.25


Downside Potential (%) (12.3)

Fair Value (USD/GDR) 0.91

Reuters Code na

Bloomberg Code na

Mobinil

Recommendation BUY

Market Price (EGP) 86.5


Upside Potential (%) 32.7

Market Cap (EGPm) 8,646

Reuters Code EMOB.CA

Bloomberg Code EMOB EY

ORTE vs. EGX30 (rebased)

Source: Bloomberg, NAEEM Research

OT Closing price as of 27 November 2011

EMOB Closing price as of 20 December 2011

2

3

4

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Dec-1

0

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-11

Feb-1

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Ap

r-11

May-1

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Jun

-11

Jul-

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-11

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v-1

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ORTE EGX30 Rebased

Price (EGP)

2

Contents

The OT demerger ................................................................................................................................................ 3

First few days of trade ........................................................................................................................................ 4

What if the demerger was halted? .................................................................................................................... 5

OTH valuation ..................................................................................................................................................... 5

Algeria – where the juice is ................................................................................................................................ 6

OTMT valuation .................................................................................................................................................. 7

How do things differ for GDR holders? .......................................................................................................... 7

Process details for GDR holders ....................................................................................................................... 8

Implications for Mobinil – play the put ........................................................................................................... 8

Appendix 1 - OTH assets' operational and financial KPIs ........................................................................... 10

Appendix 2 - OTH's Revenue, EBITDA and Capex breakdown ................................................................ 11

Appendix 3 - OTMT assets' operational and financial KPIs ....................................................................... 12

Disclosure Appendix ........................................................................................................................................ 13

Figure 1: Abbreviations and acronyms used in the report

OT Orascom Telecom Pre-Demerger EFSA Egyptian Financial Supervisory Authority

OTH Orascom Telecom Post-Demerger OTC Over The Counter

OTMT Orascom Telecom Media & Technology

Holding NTRA

National Telecommunications Regulatory

Authority

VIP Vimpelcom ARPU Average Revenue Per User

SOTP Sum Of The Parts LSE London Stock Exchange

3

The OT demerger

Should the Egyptian Financial Supervisory Authority (EFSA) approve the OT

demerger (it likely will), local OT shareholders prior to the suspension will receive

shares in two listed companies (OTH and OTMT). The former will retain most of the

assets under the old OT, while OTMT will include OT’s stakes in Mobinil, Koryolink,

and other internet and cable assets.

Figure 2: The OT demerger

Source: Company data, NAEEM Research

Prior to the VIP-WIND merger, the key determinant of OT’s fair value was the

outcome relating to its subsidiary Djezzy in Algeria, this hasn’t changed. Djezzy

constitutes c. 80% of OTH’s post-demerger valuation. OTMT, meanwhile, will

become a proxy for Mobinil shares, as c. 70% of the fair value will come from this

source. The presence of the Sawiris put option over Mobinil shares should

influence OTMT’s share price (see below).

We value OTH and OTMT (both on an SOTP basis) at EGP4.3 and EGP1.1,

respectively, implying 151% upside potential for OTH shares and 12% downside

potential for OTMT shares (from the re-listing prices).

OT

OTMTOTH

Split

42% of Book value58% of Book value

Djezzy (Algeria)

Mobilink (Pakistan)

Bangalink (Bangladesh)

Telecel Globe (Africa)

Wind (Canada)

Mobinil Telecom (Egypt)

ECMS (Egypt)

Koryolink (North Korea)

ORABANK (North Korea)

MENA for Sea Cables

Trans World Associates

Med Cable Limited (UK)

Orascom Telecom Ventures

ARPU for

Telecommunication

Services

96.8%

100%

100%

95%

c. 95%

28.755%

20%

75%

95%

100%

51%

100%

99.99%

1%

OT shareholders to receive 1 OTH

share and 1 OTMT share

Algeria is still key to OTH’s value

OTMT will be a Mobinil proxy…just

less liquid

4


First few days of trade

Following the demerger, previous OT shareholders will be entitled to one share in

OTH and one in OTMT. In accordance with Egyptian regulations, the split will take

place based on the book values of the underlying assets, with the ratio deemed to

be 58:42. Therefore, based on the last closing price of OT (prior to the suspension

on the EGX) of EGP2.98/share, the opening price for OTH should be EGP1.73/share

and for OTMT EGP1.25/share.

Once trading commences, there should be a move towards the shares’ respective

fair values in two phases:

► Initially, the shares should move immediately towards their implied pre-

suspension “market values”, which, according to our valuation, imply a ratio of

80:20 (vs. 58:42 on a book value basis). (See Fig 3 and 4 below).

► OTH’s assets (post-demerger) will represent 80% of OT’s (pre-demerger)

group value. Therefore, based on the last closing price of OT shares prior to

the suspension on the EGX of EGP2.98/share, the first stabilization point for

OTH shares should be c. EGP2.38 (38% above the opening price of

EGP1.73/share). A strict application of the same calculation implies sharp

downside for OTMT shares. However, given that OTMT will be a close proxy

for Mobinil, expectation of a tender offer on the shares and the influence of

the Sawiris’s put option over Mobinil shares (exercisable from September

2012), we believe that OTMT shares may initially adjust downwards to our fair

value of EGP1.1/share and then to c. EGP1.17/share, on the assumption that

there is a subsequent OTMT tender offer (see OTMT valuation below).

► The immediate moves of the respective shares may be rapid, although up and

down circuit-breakers could mean that it takes several days for the shares to

trade normally at the new levels. Thereafter, we expect a more gradual move

towards our fair values as the fundamentals assert themselves.

► Our fair value for OTH of EGP4.3/share implies a 151% upside from the

opening price, while our fair value for OTMT of EGP1.1/share indicates its

shares should sink 12%.

Figure 3: New shares’ interim equilibrium price and

NAEEM’s fair values

Figure 4: Expected share price movements post-demerger

OTH OTMT

OT closing price 24 Nov (EGP/share) 2.98

Book value ratio 58% 42%

Opening prices (on book-value basis) 1.73 1.25

"Market value" ratio - based on last

done price 80% 20%

Expected equilibrium price on relisting

(EGP/share) c. 2.38 c. 1.10

Upside/Downside (initial trading days) 37.9% -12.1%

Our target price (EGP/share) 4.34 1.1

Upside/Downside (12-month view) 151.1% -12.1%

Source: NAEEM Research Source: NAEEM Research

1.73 2.38

4.34

1.251.10 1.17

0

1

2

3

4

5

0 Intial trading days 12 Months View

OTH OTMT

Price (EGP)

Immediate move to “market value”

prices, from book value listing prices

Fair value for OTH of EGP4.3, and

OTMT of EGP1.1

5

What if the demerger was halted?

We still have no official confirmation that the EFSA has approved OT’s demerger

into OTH and OTMT. Nevertheless, on 14 December, OT’s shares were split into

OTH and OTMT on the Misr for Central Clearing, Depository and Registry (MCDR);

we see this as tacit indication that the EFSA may have approved the demerger. OT

had earlier implemented all accounting adjustments recommended by the General

Authority for Investment (GAFI), and these and the split were approved by OT's

shareholders on 23 October (with >99% of the vote). The split was also earlier

approved by OT's shareholders on 17 April (again with >99% of the vote).

On 17 December, the Egyptian Administrative Court delayed deliberations over

OT’s split for the third time. The case was filed by a number of OT’s shareholders

opposing the EFSA’s approval of OT’s 17 April EGM decisions. The court has

delayed the case yet again, pending an independent report from the Board of

State Commissioners on the case.

If the EFSA does not take action before end-2011 (cannot be ruled out given the

recent decision making paralysis within Egypt’s public bodies) or the court case

delays the demerger, a contingency plan outlined under the VIP-WIND deal is set

to come into play under which VIP-WIND will be required to buy OT’s remaining

assets for USD600m, plus a further USD170m conditional upon the Mobinil put

option being exercised. Management, however, states that VIP and Weather could

simply agree to extend the deadline for the split to be concluded if the process is

at a fairly advanced stage (which it appears to be).

In the event of the contingency’s coming into play, France Telecom could exercise

its call option over OTH's stake in Mobinil at a “fair market value plus 5%

premium” (see implications for Mobinil below).

OTH valuation

We value OTH on a sum of the parts basis (SOTP) as set out in the table below.

Further details of individual company forecast KPIs is shown in Appendix 1

Figure 5: OTH Sum of the Parts Valuation

Company EV (USDm) OTH stake Value to OTH (USDm)

Djezzy (Algeria) 4,102 96.8% 3,971

Mobilink (Pakistan) 1,155 100.0% 1,155

Banglalink (Bangladesh) 400 100.0% 400

Telecel Globe (Africa) 423 100.0% 423

Globalive (Canada) 623 65.0% 405

Sum 6,354

OTH net debt (2,500)

OTH EV 3,854

Fair value (USD/GDR) 3.60

Source: NAEEM Research

Signs are EFSA will approve

demerger, but still risk of delay

VIP-WIND contingency plan

triggered, if split delayed…

…but deadline may be extended

6


Algeria – where the juice is

We recommend OTH as a BUY, as we believe downside from current levels is

limited, but see significant upside if a solution can be reached in Algeria. We

continue to argue that the best outcome for OTH is for Djezzy to be allowed to

operate normally in the country again (including being permitted to repatriate

dividends), and that an outright purchase of Djezzy by the Algerian government is

now less likely.

Based on the last locally traded share price of OT prior to suspension and our fair

value estimates for OT’s other assets, the market currently implies an EV for Djezzy

(100% stake) of USD1.6bn or just 1.5x 2012f EBITDA. Anything paid above this

price will provide upside to the new OTH shares. We comment on the various

outcomes for Algeria as follows:

► Under a scenario where Djezzy is able to operate normally and repatriate

dividends, the company is more realistically worth USD6bn-7bn (EV basis),

based on recent transactions and peer multiples

► Even with all the various hurdles currently in its way, we value Djezzy at c.

USD4bn (EV)

► Operationally, the company has been performing well despite all the

headwinds. This emphasizes just how good the Djezzy franchise is

► Relations between Egypt and Algeria have thawed since Egypt’s revolution,

and there have been some small concessions to the restrictions imposed on

Djezzy (e.g. Djezzy reached an agreement to advertise on national TV again

starting June 2011, after being banned since March 2010).

► We believe that OTH’s new management, with the help of VIP-WIND

executives, is talking with Algerian authorities, with a view to enabling Djezzy

to return to a level-playing-field operating environment (this is OTH’s

preferred outcome).

► While Shearman & Sterling (S&S) have yet to report, we believe it is highly

likely that they will produce a valuation range based on international peer

multiples (say, at >5x EBITDA), ); however, there is no guarantee that the

Algerian authorities will accept or act on S&S’s findings. If, however, the case

goes to the International Court of Arbitration, a fair value by S&S would work

in OTH’s favour.

► A low-ball offer by the Algerians would almost certainly result in OTH’s

resorting to the International Court.

► The relative silence from Algeria and the seemingly long time for S&S to

report, could indicate that S&S has shown an initial valuation indication to the

Algerians and that they have baulked at the price tag and so are now looking

for other options (e.g. a negotiated settlement).

► The advent of 3G licenses in Algeria could also be trigger point for a

negotiated settlement. We believe Djezzy will seek and be granted a 3G

license. But, for it to operate the license, it would need to be free to import

equipment. This would call into question the current import restrictions for

the 2G network.

► Djezzy has paid nearly all the tax demanded under various tax reassessments

(this amounts to c. USD1bn). One neat solution, in our view, would be to trade

the disputed tax amount for a stake in Djezzy, i.e. the tax demands cancelled,

and in return, the Algerian government is given a stake in Djezzy. (Assuming

S&S values Djezzy at say USD6bn, the tax amount would give it a stake of c.

15-16%).

Market implied EV for Djezzy just

USD1.6bn, only 1.5x 2012f EBITDA

Relations with Algeria have

thawed a bit

Algeria may not buy out Djezzy

completely, but could still take a

stake

A return to normal operating

conditions is best outcome for OTH

share price

7

OTMT valuation

According to Weather Investments II (a Sawiris family investment vehicle that will

become a 51.7% majority owner of OTMT), within a fairly short time after OTMT is

listed, it will launch a tender offer for the minority shares. OTMT shareholders will

be offered a combination of cash plus shares in Mobinil.

Until the tender offer is made, we will not know the exact mix of cash and Mobinil

shares. For now, we have assumed that the ratio will be close to 1 Mobinil share

for 151 shares in OTMT and EGP0.6/per OTMT share in cash (the ballpark number

intimated by Weather at the time of the VIP-WIND deal). Based on Mobinil’s

closing price yesterday of EGP86.46/share, this combination indicates that the

buyback offer for OTMT shares could be at c. EGP1.17/share, 7% above

EGP1.1/share (our fair value for OTMT).

Assuming the tender offer comes in roughly as noted above, we recommend that

OTMT shareholders accept the tender offer. This would give them cash

immediately, while offering upside potential from the impact of the exercise of the

Sawiris put option over their Mobinil shares. This is preferable to ending up as

small minority holders in a very illiquid stock.

We currently value OTMT at EGP1.1/share.

How do things differ for GDR holders?

As a reminder, the demerger process, from the point of view of OT GDR holders, is

more complex. The risk of owning OTH (OTLD) now is higher than waiting to buy

the new OTH shares on the EGX or GDRs on the London Stock Exchange (LSE) post

the demerger.

As part of the demerger transaction, current GDR shareholders will, for a time

(possibly into 1Q12) end up owning GDR shares in OTMT that are not listed on the

LSE and may only trade OTC, if at all. This increases the risk of owning OT GDRs

now. Further, as we approach a point when the demerger becomes final, OTH

shares may trade lower if GDR shareholders are unwilling to end up holding

illiquid OTMT GDR shares for a lengthy period (some mandates may prevent it).

Since the suspension of OT shares on the EGX, the GDR has traded at a higher-

than-average premium to the local share. We believe this will revert to the mean

as the demerger approaches. We do not recommend entering the GDR shares at

this juncture.

OTMT may be short-lived

Weather II to cause OTMT to make

tender offer

Demerger is more complex for GDRs

8


Process details for GDR holders:

► Trading in OTH's GDRs on the LSE is unlikely to be suspended during the

demerger process

► The record date for GDR holders to be eligible to receive OTMT GDRs is

currently planned to be one day prior to the resumption of trading of ordinary

shares on the EGX

► The OTH GDRs (post-demerger) will continue to be listed on the LSE under

the symbol "OTLD".

► OT GDR holders who do not provide the requisite certification to the

depositary will not receive OTMT GDRs

► Instead, the underlying OTMT ordinary shares will be sold and the proceeds

(net of the depositary's fees and any applicable taxes and expenses)

distributed to the shareholders by the Depositary in accordance with the

applicable GDR deposit agreement.

As for OTMT GDSs,

Following the demerger, OTMT intends to apply to list its GDRs on the London

Stock Exchange. Until such listing is effective, the OTMT GDR holders' ability to sell

OTMT GDRs could be limited. The Company currently anticipates such a listing

process to be completed during the 1Q 2012.

Implications for Mobinil – play the put

Mobinil continues to face a difficult operating environment. Although 4Q11 results

may recover from a seasonally weak and Twitter-incident-impacted 3Q11, we see

strong competition hampering Mobinil’s strategy of focusing on customer

profitability rather than additions. In 3Q11, Mobinil was forced to sacrifice its ARPU

and margins to defend market share (down 4.3pps YoY by end-September). We

expect further market share loss in early-2012 and ARPU to remain pressured.

Despite this gloomy backdrop, investors should recognise the influence that the

Sawiris put option would have on Mobinil’s shares in 2012. If the OTH/OTMT

demerger goes through, the scene will be set for Mobinil’s share price to arbitrage

towards the put strike price of EGP239.6/share on the first exercise date (15

September 2012).

We have upgraded our Mobinil call to BUY in the expectation that the demerger

will take place on time and avoid implementing the contingency plan.

Nevertheless, even if this was not the case, FT’s call option (which would be

triggered by the contingency plan) still indicates a price 24% higher than Mobinil’s

closing price yesterday.

OT’s demerger would shift OTH’s stake in Mobinil to the newly-formed entity

OTMT (51.7% owned by Sawiris’s Weather Investments II), which is subsequently to

be taken private. This means that OT’s stake in Mobinil, which carries the put

option, would end up in the hands of the Sawiris family. The put option enables

the holder to put the entire holdings (34.66%) in Mobinil to France Telecom at a

price between EGP221.7 and EGP248.5/share for the first time between 15

September (at this date, the strike price would be EGP239.6/share) and 15

November 2012 and at any time until 15 November 2013, in a limited number of

deadlock situations.

However, even if the put is in the money at the exercise date, there is no guarantee

that the Sawiris family would exercise the option. Nevertheless, as we move into

2012, we believe the looming exercise date will still positively influence Mobinil’s

share price, as the exercise of the put (according to EFSA rules) would trigger a

mandatory tender offer by FT at the exercise price.

GDR still trading and unlikely to be

suspended

Owning GDR now risks being trapped

in OTMT GDRs not listed on LSE

Mobinil faces a difficult operating

environment

Put option exercisable from 15 Sept

2012 at first strike price of

EGP239.6/share

Put exercise would trigger mandatory

tender offer by FT

9

While the operating environment for Mobinil is undoubtedly gloomy, there

are a few chinks in the clouds;

► Data revenue as a percentage of revenue is growing. Although Mobinil has

not disclosed details, we estimate that mobile data revenue currently

constitutes c. 4-5% of mobile revenue. We expect this to increase to over 10%

within five years. More data volumes should help bolster flagging ARPU.

► Subsidiary LINKdotNET (LDN) is a bright spot. LDN's 3Q11 revenue was up

16.8% YoY and 1.3% QoQ. LDN holds an estimated 35% share in Egypt’s retail

ADSL market, and we expect continued strong subscriber and revenue growth

in this market. LDN should break even at the EBITDA level by 2013.

► Roaming recovery. Mobinil’s roaming revenue has been hurt by a lack of

tourists post the revolution, but is showing signs of recovery on a QoQ basis.

3Q11 roaming revenue was down 50% YoY but up 27.8% QoQ and accounted

for 1.9% of total revenue (up from 2Q11’s 1.5% but still well below the 3.7%

reported in 3Q10). While the Maspero events on 9 October may have had a

negative impact on tourists’ arrivals, the fact that elections have so far been

conducted peacefully, gives hope of a stronger recovery in arrivals next year,

which would feed through into stronger roaming revenues.

► Wholesale deal with Telecom Egypt (ETEL) still on the cards. Mobinil is in

discussions with Telecom Egypt (ETEL) over a comprehensive longer-term

wholesale deal, which may possibly cover IGW access, leased-line rates, and

interconnect charges. The successful conclusion of such a deal would be

positive for Mobinil and should improve margins.

► More than 10% EPS growth forecasted in 2012, given the base-year effect

from a weak 2011.

Some positives for Mobinil

10


Appendix 1

OTH assets' operational and financial KPIs

Figure 6: Djezzy (Algeria) - Solid performance given the headwinds

Financial KPIs (USDm) 2009a 2010a 2011e 2012f 2013f

Revenue 1,868 1,747 1,893 2,030 2,085

EBITDA 1,067 982 1,115 1,190 1,225

EBITDA margin 57.1% 56.2% 58.9% 58.6% 58.8%

Capex 261 90 28 41 42

Operational KPIs

Subscribers (m) 14.618 15.087 16.693 17.390 18.094

Market share 59.4% 57.6% 57.9% 58.0% 58.0%

ARPU (USD) 10.5 9.5 9.8 9.7 9.6


Figure 7: Mobilink (Pakistan) - Showing recovery


Revenue 1,058 1,107 1,148 1,313 1,490

EBITDA 385 438 465 530 600

EBITDA margin 36.4% 39.6% 40.5% 40.4% 40.3%

Capex 157 143 195 118 119

Operational KPIs

Subscribers (m) 30.800 31.794 34.382 36.101 37.906

Market share 31.5% 31.4% 31.0% 32.0% 33.0%

ARPU (USD) 2.9 2.9 2.8 2.7 2.7


Figure 8: Banglalink (Bangladesh) - Reduction in SIM tax to help


Revenue 351 457 513 569 608

EBITDA 117 128 195 222 243

EBITDA margin 33.3% 28.0% 38.0% 39.0% 40.0%

Capex 122 235 118 171 152

Operational KPIs

Subscribers (m) 13.89 19.33 23.10 26.79 27.86

Market share 26.8% 28.5% 26.5% 28.0% 29.0%

ARPU (USD) 2.3 2.2 1.9 1.8 1.8


11

Appendix 2

OTH's Revenue, EBITDA and Capex breakdown

Figure 9: OTH’s revenue breakdown

Figure 10: OTH’s EBITDA breakdown

Figure 11: OTH’s capex breakdown

Source: NAEEM Research

Djezzy47.0%

Mobilink28.5%

Banglalink12.7%

others11.8%

2011e

Djezzy45.8%

Mobilink29.6%

Banglalink12.8%

others11.7% 2012f

Djezzy62.7%

Mobilink26.1%

Banglalink10.9%

others0.2%

2011e

Djezzy60.7%

Mobilink27.0%

Banglalink11.4%

others0.8%

2012f

Djezzy6.2%

Mobilink43.2%

Banglalink26.2%

others24.4%

2011e

Djezzy8.4%

Mobilink24.1%

Banglalink34.9%

others32.7%

2012f

12


Appendix 3

OTMT assets' operational and financial KPIs

Figure 12: Mobinil (Egypt) - Undoubtedly gloomy, but we see a few chinks in the cloud


Revenue 1,790 1,752 1,695 1,623 1,646

EBITDA 848 711 598 608 616

EBITDA margin 47.4% 40.6% 35.3% 37.5% 37.4%

Capex 433 346 331 298 282

Operational KPIs

Subscribers (m) 25.354 30.225 32.376 35.376 38.376

Market share 45.8% 42.8% 39.2% 38.0% 37.0%

ARPU (USD) 6.5 5.1 4.1 3.6 3.3


Figure 13: Koryolink (North Korea) - Full marks. Well done!


Revenue 26 66 140 206 293

EBITDA 17 58 115 155 205

EBITDA margin 65.4% 87.9% 82.1% 75.2% 70.0%

Capex 27 47 56 82 88

Operational KPIs

Subscribers (m) 0.092 0.432 0.096 1.672 2.648

Market share 100.0% 100.0% 100.0% 95.0% 90.0%

ARPU (USD) 12.2 14.0 13.2 11.8 10.5


13

Disclosure Appendix

Disclaimer

This report is based on publicly available information. It is not intended as an offer to buy or sell, nor is it a solicitation of an offer to buy or sell

the securities mentioned. The information and opinions in this report were prepared by the NAEEM Research Department (“NAEEM”) from

sources it believed to be reliable at the time of publication. NAEEM accepts no liability or legal responsibility for losses or damages incurred from

the use of this publication or its contents. NAEEM has the right to change opinions expressed in this report without prior notice.

This research report (including all appendices) contains information that is intended to be conveyed only to the intended recipients, which insofar

as the United Sates is concerned, are “major U.S. institutional investors” (i.e., U.S. institutional investors having total assets under management in

excess of USD100 million, or investment advisers that are registered with the U.S. Securities and Exchange Commission and have total assets

under management in excess of USD100 million). If the reader or recipient of this research report is not the intended recipient, please notify

NAEEM immediately, and promptly destroy this research report without retaining any portion in any manner. The unauthorized use,

dissemination, distribution or reproduction of this research report by any person other than the intended recipient is strictly prohibited.

Analyst Certification

The primary research analyst/analysts covering the company (or companies) mentioned in this report certify that their views about the company

(or companies) and their securities are accurately expressed. Further, no part of their compensation, whether pecuniary or in-kind, was, is, or will

be, directly or indirectly related to the recommendations or views expressed in this research report. Unless otherwise stated, individuals listed on

the front cover/page of the report are the research analysts.

Stock Ratings

NAAEM believes that an investor’s decision to buy or sell a stock should depend on individual circumstances (including, but not limited to the

investor’s existing holdings and financial standing) and other considerations. Different securities firms use a range of rating terms and rating

systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each report. In addition, since

NAEEM’s research reports contain complete information about the analyst’s views, investors should read NAEEM reports in their entirety, and not

infer the contents from the ratings alone. Ratings (and/or research) should not be relied upon as an investment advice.

NAEEM assigns ratings to stocks on the following basis:

Rating Upside/Downside potential 21 December 2011 Rating distribution as of

BUY >20% 65%

ACCUMULATE >10% to 20% 23%

HOLD +10% to -10% 12%

REDUCE <-10% to -20% 0%

SELL < -20% 0%

Research Contacts

Mike Millar, CA Regional Head of Research +202 3300 5100 ext. 2215 [email protected]

May El Haggar Deputy Head of Research +202 3300 5100 ext. 2220 [email protected]

Hisham Halaldeen Sales Research +202 3300 5100 ext. 2221 [email protected]

Sales and Trading Contacts

Sherine Ezzat Regional Director,

MENA Trading, Foreign Markets & GDRs +202 33042263 [email protected]

Teymour El Derini Director of MENA Sales & Trading +202 33005107 [email protected]

Tarek Abaza Head of Trading Desk - Egypt +202 33037766/677 [email protected]

Mohamed Shoula Head of Trading Desk - UAE +971 43824778 [email protected]

mailto:[email protected]







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