17
Investor Presentation
Investor
Presentation
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
H1 2019 results highlightsStrong topline performance
12.7bn+25% YoY
2.6bn-20% YoY
Normalized 3.6bn
+11% YoY
2.1bn+4% YoY
Normalized 2.9bn
+41% YoY
Revenue (EGP bn)
EBITDA (EGP bn)
Customers (mn)
Net profit(EGP bn)
Fixed
Mobile
Voice Data
EBITDA margin of 21%Normalized margin of 29%
Net profit margin of 17%Normalized margin 23%
8.2+11% YoY
5.5+19% YoY
4.3+29% YoY
Consolidated revenue grew mainly on
increased data and cable projects revenue,
which represent 41% and 22% of total growth.
Customers grew across all segments.
Wholesale mainly grew on the +73% YoY IC&N
revenues mostly coming from the recognition of
PEACE cable revenues followed by the 14%
YoY increase in domestic revenue.
TE successfully completed the early
retirement program (ERP) with c2000
employees signing up, accounting for a total
expense of EGP 1bn to be paid to the
employees in Q3.
TE intends to finance c50% of the ERP
through an extraordinary dividend expected to
be paid by Vodafone Egypt in Q3.
EBITDA margin came in at 21% weighed on by
the recording of the ERP. Normalized, EBITDA
grew by 11% and recorded a margin of 29%.
Net profit slightly increased in absolute terms.
Normalized net profit grew 41% YoY reaching
EGP 2.9bn on a FX gain of EGP 850mn,
EBITDA growth and the rebound in investment
income from Vodafone Egypt.
H1 2019: normalized net profit +41% YoY
4
Q2 2019 results highlightsHigh data and cable revenues drive growth
6.6bn+24% YoY / +9% QoQ
0.7bn-59% YoY / -61% QoQ
Normalized 1.7bn
-3% YoY / -9% QoQ
0.5bn-60% YoY / -68% QoQ
Normalized 1.3bn
+1% YoY / -20% QoQ
Revenue (EGP bn)
EBITDA (EGP bn)
Customers (mn)
Net profit(EGP bn)
Fixed
Mobile
Voice Data
EBITDA margin of 11%Normalized margin of 26%
Net profit margin of 8%Normalized margin of 20%
8.2+11% YoY
5.5+19% YoY
4.3+29% YoY
Consolidated revenue mainly grew on home
data revenue followed by IC&N cable projects
revenue growth especially the high margin
PEACE cable crossing.
Customer base continued its growth across
the board. Mobile revenue grew 15% QoQ in
spite of a stable customer base due to the
increase of high value customers.
Wholesale witnessed a 16% YoY increase
mainly due to the recognition of two cable
projects.
EBITDA margin came in at 11%. Excluding the
ERP, the margin would have come at 26%
weighed on by cost inflation and lower margin
cable revenue.
Net profit recorded EGP 0.5bn with a margin of
8%. Normalized net profit stood at EGP 1.3bn
supported by a FX gain, offsetting the decline in
investment income from Vodafone.
Q2 2019: Healthy P&L in spite of ERP
completion
5
Highlights of the main events of the quarter
Events in the quarter
Subsequent to the quarter
27 Apr: Telecom Egypt announces that it has signed a landing partyagreement 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-neutralservices for its customers. TE also signed a binding letter of intent withPEACE & HENGTONG OPTIC-ELECTRIC offering PEACE redundancy inexchange for competitive pricing on fibre optic cables.
14 Jun: The EMEA Finance Magazine announced Telecom Egypt asthe winner of the ‘best structured finance deal in North Africa’ in its2018 refinancing, repricing and restructuring awards. The award wasgranted for Telecom Egypt’s USD 500mn medium-term syndicatedloan signed in October 2018.
4 Jul: Telecom Egypt and Banque Misr signed an agreement tolaunch the WE mobile wallet. The service is designed to enablecustomers to safely and securely send, receive and store money usinga smartphone application. The mobile wallet will allow customers todeposit and withdraw cash from WE stores and link their Banque Misrdebit/ credit cards to the wallet.
1 Jul: Telecom Egypt announces a new shift in its fixed broadbandoffering in line with its large project to develop its network capabilitiesand improve the quality of internet services in Egypt. TE raised themaximum speed of its internet bundles to start at 30Mbps instead of5Mbp and increased the packages’ quota to cater to the increasedusage.
14 Jul: Telecom Egypt and Etisalat Misr signed two virtual fixed voiceagreements that enable Etisalat Misr to provide fixed voice services toits customers through utilizing part of Telecom Egypt’s network. Theparties also signed two bitstream agreements to enable Etisalat Misr toprovide the new VDSL technology to its customers.
22 Jul: Telecom Egypt signed a strategic partnership agreement withCable Network Egypt (CNE) to provide Telecom Egypt’s customerswith Internet Protocol television services (IPTV) in collaboration withvarious content providers.
6
WE SPACEA new shift in fixed broadband offerings
Up to 30 Mbps Up to 5 Mbps
EGP 120 EGP 110
140 GB 100 GB
Comparison of the
entry level bundle
July 2019 April 2018
Speed
Price
Quota
Launch
Date
7
1,284
1,615
516
2,058 2,131
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
-59.8%
-68.1%
+3.6%
Revenue (EGP mn)
EBITDA (EGP mn)
Net profit(EGP mn)
Operating Profit(EGP mn)
Financial highlights
5,3436,087
6,609
10,125
12,696
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
+23.7%
+8.6%
+25.4%
1,787 1,903
735
3,293
2,637
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
-58.9%
-61.4%
-19.9%
1,2491,179
-30
2,197
1,149
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
-102.4%
-102.6%
-47.7%
8
Customer base remains on an uptrendwith a healthy ARPU
Fixed broadband( In 000’s)
Fixed line( In 000’s)
Mobile( In 000’s)
7,402
7,589
7,865
8,093 8,213
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
4,643
4,968
5,237
5,535 5,536
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
3,305 3,589
3,861 4,247 4,260
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
30.50 30.19 30.73 31.34 31.07
101.90 102.27 104.00 106.90
109.95
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
Fixed line ARPU Fixed data ARPU
ARPU(In EGP)
9
39%
13%14%
17%
17%
Q2 2019
Revenue by business unitData revenue continues to lead growth
Home &
Consumer DomesticEnterprise
International
Carriers Affairs
International
Customers & Networks
H1 2019 performance:
Retail grew 31% YoY, representing 61% of total top line growth driven by strong data performance.
Home & Consumer up 31% YoY, representing 76% of total retail revenue.
Mobile revenue grew 68% YoY, contributing a low double digit to retail revenue and mid single digit to top line.
Enterprise Solutions climbed 32% YoY on the recognition of Port Said connectivity project revenues, NUCA projects
and managed services.
Wholesale increased 20% YoY on IC&N revenue growth, which represents almost two-thirds of the segment’s growth,
thanks to the recognition of high cable projects’ revenue.
Domestic wholesale witnessed a 14% YoY rise as a result of higher infrastructure and transmission revenues that
softened the decline in outgoing international calls.
ICA is almost flat with the revenue mix skewed towards the high margin incoming international calls revenue, the latter
constituting 82% of the total business unit’s revenue.
IC&N grew 73% on the recognition of several cable projects including the USD 20mn PEACE cable crossing.
1,140 1,128 1,141
2,236 2,270
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
+0.2%
+1.2%
+1.5%
1,935
2,401 2,539
3,764
4,940
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
+31.2%
+5.7%
+31.2%
629750
851
1,212
1,601
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
+35.4%
+13.5%
+32.1%
1,085
1,309
941
1,965
2,250
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
-13.3%
-28.1%
+14.5%
554 498
1,137
947
1,635
Q2 2018 Q1 2019 Q2 2019 H1 2018 H1 2019
+105.2%
+128.2%
+72.7%
39%
12%18%
18%
13%
H1 2019
10
• Employee costs include EGP 1bn related to the ERP, which will be paid in Q3.
Normalized employee costs rose 22% (excl. the ERP, the pension fund and the one-
off bonus paid in Q1).
• Advertising grew on seasonality as last year the seasonality hike was in H2.
• Call costs as a % of revenue dropped to 19% from 21% on enhanced revenue mix.
Income statement (H1 2019)
Reve
nu
e
EB
ITD
AO
the
r
OP
EX
Net p
rofit
• Home data revenue rose 37% YoY, representing 39% of total growth.
• IC&N contributed 27% to total growth, thanks to EGP 605mn from cable projects
revenues including the recognition of USD 20mn PEACE cable revenue.
Exp
en
se
s
Non-o
pera
tio
nal
• EBITDA came in at EGP 2.6bn, declining 20% YoY. Normalizing for the ERP,
EBITDA would have increased by 11% YoY reaching EGP 3.6bn and recording a
margin of 29%.
• Amortization and depreciation rose 25% YoY in line with our increased CapEx
rollout.
• The effective interest rate reached 7.6% compared to 10.6% in H1 2018 as a
result of settling our EGP denominated debt using Vodafone dividends.
• Net finance cost included a FX gain resulting from the appreciation of EGP vs
USD and relates to the revaluation of the USD denominated facilities.
• Normalized operating profit came in almost flat YoY.
• Investment income from VFE grew 29% as a result of the base effect due to
provisions taken in Q1 2018.
• Net profit slightly increased reaching EGP 2.1bn due to the FX gain. Excluding the
ERP cost, net profit would have come in at EGP 2.9bn growing 41% YoY supported
by the FX gain, EBITDA growth & rebound of investment income from Vodafone.
Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards
In EGP mn H1 2019 H1 2018 YoY Q2 2019 Q1 2019 Q2 2018 QoQ YoYRevenue 12,696 10,125 25% 6,609 6,087 5,343 9% 24%Home & Consumer 4,940 3,764 31% 2,539 2,401 1,935 6% 31%Enterprise Solutions 1,601 1,212 32% 851 750 629 13% 35%Domestic Wholesale 2,250 1,965 14% 941 1,309 1,085 -28% -13%International Carriers Affairs 2,270 2,236 2% 1,141 1,128 1,140 1% 0%International Customers & Networks 1,635 947 73% 1,137 498 554 128% 105%
Total employee cost (4,211) (2,375) 77% (2,587) (1,624) (1,173) 59% 121%Total employee cost (Normalized) (3,207) (2,375) 35% (1,583) (1,624) (1,173) -3% 35%Call costs (2,358) (2,093) 13% (1,224) (1,134) (1,079) 8% 13%CoGS (excl. above expenses) (2,370) (1,581) 50% (1,413) (957) (828) 48% 71%S&D (excl. salaries, D&A) (821) (563) 46% (492) (329) (362) 50% 36%G&A (excl. salaries, D&A) (299) (220) 36% (158) (141) (115) 12% 38%
EBITDA 2,637 3,293 -20% 735 1,903 1,787 -61% -59%Margin 21% 33% (1,175 bps) 11% 31% 33% (2,014 bps) (2,232 bps)EBITDA (Normalized) 3,641 3,293 11% 1,739 1,903 1,787 -9% -3%Margin 29% 33% (384 bps) 26% 31% 33% (495 bps) (713 bps)
Other (expense) / income 62 142 -56% (25) 88 106 -129% -124%Depreciation (1,224) (937) 31% (577) (647) (494) -11% 17%Amortization (326) (300) 9% (162) (164) (149) -1% 9%Operating profit 1,149 2,197 -48% (30) 1,179 1,249 -103% -102%Margin 9% 22% (1,265 bps) 0% 19% 23% (1,983 bps) (2,384 bps)
Income from investments 1,125 874 29% 478 647 587 -26% -19%
Net finance (cost) / income 758 (159) 578% 365 394 (71) -7% 614%Net interest (expense) / income (448) (404) 11% (166) (283) (200) -41% -17%
Tax (450) (447) 1% (129) (321) (279) -60% -54%
Net Profit 2,131 2,058 4% 516 1,615 1,284 -68% -60%Margin 17% 20% (354 bps) 8% 27% 24% (1,874 bps) (1,623 bps)Net profit (Normalized) 2,909 2,058 41% 1,294 1,615 1,284 -20% 1%
Margin 23% 20% 259 bps 20% 27% 24% (696 bps) (445 bps)
EPS 1.25 1.21 4% 0.30 0.95 0.75 -68% -59.8%
11
• Normalized employee costs (excl. the ERP and pension fund contribution) came in at
23% of revenue compared to 22% in Q2 2018.
• Call costs declined to 18.5% from 20% last year due to the enhanced revenue mix.
• Advertising expenses rose due to seasonality in Q2.
• COGS rose on the recognition of a low margin cable project other than PEACE.
Income statement (Q2 2019)
Reve
nu
e
EB
ITD
AO
the
r
OP
EX
Net p
rofit
Exp
en
se
s
Non-o
pera
tio
nal
• Adjusting for the ERP, EBITDA would come in at EGP 1.7bn declining slightly by
3% and recording a margin of 26%. Margin is lower than Q1 due to the absence of
domestic IRU sales and the lower margin revenue of one of the two cable projects.
• Amortization and depreciation rose 15% YoY in line with our increased CapEx
rollout.
• Interest expense declined 17% YoY and 41% QoQ due to the restructuring of our
USD facilities and settling our EGP denominated facilities, which took place at the
end of Q1 2019. The effective interest rate in the quarter fell to 6.9% compared to
10.3% in Q2 2018.
• Net finance cost included a FX gain for the second quarter in a row as a result of
the appreciation of EGP vs USD related to the USD denominated facilities.
• Net profit came in at EGP 0.5bn with a margin of 8%. Normalized net profit stands at
EGP 1.3bn, flat YoY supported by the FX gain in spite of lower investment income
from Vodafone Egypt.
Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards
• Data revenue grew 36% YoY and represented 43% of total top line growth.
• IC&N revenue more than doubled YoY due to the hike in cable projects revenue,
which amounted to EGP 605mn on two cable projects, one of which is the USD 20mn
PEACE cable crossing.
In EGP mn H1 2019 H1 2018 YoY Q2 2019 Q1 2019 Q2 2018 QoQ YoYRevenue 12,696 10,125 25% 6,609 6,087 5,343 9% 24%Home & Consumer 4,940 3,764 31% 2,539 2,401 1,935 6% 31%Enterprise Solutions 1,601 1,212 32% 851 750 629 13% 35%Domestic Wholesale 2,250 1,965 14% 941 1,309 1,085 -28% -13%International Carriers Affairs 2,270 2,236 2% 1,141 1,128 1,140 1% 0%International Customers & Networks 1,635 947 73% 1,137 498 554 128% 105%
Total employee cost (4,211) (2,375) 77% (2,587) (1,624) (1,173) 59% 121%Total employee cost (Normalized) (3,207) (2,375) 35% (1,583) (1,624) (1,173) -3% 35%Call costs (2,358) (2,093) 13% (1,224) (1,134) (1,079) 8% 13%CoGS (excl. above expenses) (2,370) (1,581) 50% (1,413) (957) (828) 48% 71%S&D (excl. salaries, D&A) (821) (563) 46% (492) (329) (362) 50% 36%G&A (excl. salaries, D&A) (299) (220) 36% (158) (141) (115) 12% 38%
EBITDA 2,637 3,293 -20% 735 1,903 1,787 -61% -59%Margin 21% 33% (1,175 bps) 11% 31% 33% (2,014 bps) (2,232 bps)EBITDA (Normalized) 3,641 3,293 11% 1,739 1,903 1,787 -9% -3%Margin 29% 33% (384 bps) 26% 31% 33% (495 bps) (713 bps)
Other (expense) / income 62 142 -56% (25) 88 106 -129% -124%Depreciation (1,224) (937) 31% (577) (647) (494) -11% 17%Amortization (326) (300) 9% (162) (164) (149) -1% 9%Operating profit 1,149 2,197 -48% (30) 1,179 1,249 -103% -102%Margin 9% 22% (1,265 bps) 0% 19% 23% (1,983 bps) (2,384 bps)
Income from investments 1,125 874 29% 478 647 587 -26% -19%
Net finance (cost) / income 758 (159) 578% 365 394 (71) -7% 614%Net interest (expense) / income (448) (404) 11% (166) (283) (200) -41% -17%
Tax (450) (447) 1% (129) (321) (279) -60% -54%
Net Profit 2,131 2,058 4% 516 1,615 1,284 -68% -60%Margin 17% 20% (354 bps) 8% 27% 24% (1,874 bps) (1,623 bps)Net profit (Normalized) 2,909 2,058 41% 1,294 1,615 1,284 -20% 1%
Margin 23% 20% 259 bps 20% 27% 24% (696 bps) (445 bps)
EPS 1.25 1.21 4% 0.30 0.95 0.75 -68% -59.8%
12
Operating ProfitH1 2019 YoY
2,197
1,149
2,153
2,571
1,053
832
1,004
337
3131,00429
H1 18 Opearting
Profit
Revenue ERPEmployeeCosts
COGS SG&A Provisions Depr & Amort.
51
Other Income/Expense
H1 19 Operating
Profit
ERP H1 2019 Normalized operating
profit
-48%
Note: All financial figures are in EGP million
-2% YoY
13
1,249974
1,267
731
410
1,004
174
Operating ProfitQ2 2019 (YoY)
COGS SG&AQ2 18 Opearting
Profit
29
Q2 19 Normalize Operating
Profit
Revenue EmployeeCosts
ERP Provisions
96
Other Income/Expense
Depr & Amort.
102 30Q2 19
Operating Loss
1,004
ERP
-102%
Note: All financial figures are in EGP million
-22% YoY
14
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)
* including the one-off settlement payment to Etisalat of EGP 919 mn
*
* Including Vodafone dividends collected of EGP 4.8bn
*
321
2,484
2,165
1,638 1,724
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019(395)
1,748
(883) (947)
3,288
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
1,007 1,002
1,786 1,672
3,669
17%16%
20%
17%
29%
6%
11%
16%
21%
26%
31%
-
500
1,00 0
1,50 0
2,00 0
2,50 0
3,00 0
3,50 0
4,00 0
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
Capex Capex/sales
1,324 1,571
2,878 2,918
3,465
269 73 49
23% 25%33% 29%
27%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
-
500
1,00 0
1,50 0
2,00 0
2,50 0
3,00 0
3,50 0
4,00 0
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
Capex License Capex/sales
15
2,484 2,977 2,273 925 1,522
-412 -391
-7,026 -9,242
-11,681
-2,072 -2,586 4,753 8,317 10,158
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
Net debt
Total debt Cash
Balance sheet highlights
FCFE(EGP mn)
Net debt(EGP mn)
Net debt/ EBITDA(Based on annualized EBITDA)
Breakdown of capex in-service
69%
24%
1%
5%
1%
H1 2019
Access Network
Transmission
Internationalcable
Customer care
Others
(438)
1,694
2,767
673 843
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
-0.7x -0.6x
0.9x
1.3x
1.6x
H1 2015 H1 2016 H1 2017 H1 2018 H1 2019
16
Our performance in contextNormalized KPI’s meet our guidance
Revenue Growth YoY
EBITDA margin (%)
CAPEX / sales (%)
H1 2019
Actual
25%
21%
In-service: 29%
Cash: 27%
Mid to high single
digit
Mid to high 20s
In-service: 30%
H1 2019
Normalized
25%
29%
In-service: 29%
Cash: 27%
FY 2019
Guidance
*
* Excluding the early retirement program one- off of EGP 1bn
