Eye on 2017
Investor Presentation
2
FY 2017 financial highlights
18.6bn+ 33.1% YoY
5.2bn+ 36.4% YoY
3.2bn+ 18.0% YoY
Revenue (EGP bn)
EBITDA (EGP mn)
Customers ( In mn )
Net profit (EGP bn)
Fixed
Mobile
Voice Data
7.1 4.1
2.3
Revenue growth on higher wholesale revenue
(+50% yoy) due to the currency floatation and
higher home services revenue.
On a normalized basis revenue grew by 12.5% yoy
mainly on the growth of the home segment (+34%
yoy) driven by growth in data services as customers
grew by 21% and ARPU by 19%.
EBITDA grew 36% recording a margin of 28%
+(67bps yoy) within our guidance. Excluding one-
offs the EBITDA margin declined c116bps yoy on
higher international interconnection costs, where
call costs increased by 61% yoy to represent 22%
of revenue up from 19% in FY 16.
Although this year was the kick off of our mobile
services, there is no material impact on FY 17
EBITDA or its margin.
Operating profit margin declined c200 bps
( Excluding Provisions ) on a 31% rise in D&A as a
result of the mobile license amortization and our
increased network investments.
Net profit grew 18% yoy aided by a hike in
investment income from Vodafone, yet it was
weighed on by the settlements impact. Excluding
one-offs net profit would have reached 4.8bn
reflecting a growth of 31% YoY.
EBITDA margin of 27.9% (+67bps)
*Excl. one-offs margin of 28.9% (-116bps YoY)
Net profit margin of 17% (-217bps)
*Excl. one-offs net profit of EGP 4.8bn with
a margin of 26% (-39bps YoY)
FY 17: Double digit growth across the P&L
3
Operational highlights
Mobile service
launch in September
2017
Reaching
2.3m mobile
customers
Increasing
minimum speed
for FBB to 4 Mbps
for 60% of
customers
4 wholesale agreements with
the 3 local mobile operators
to secure long-term revenue
Sealed a site
sharing
agreement
with Etisalat
Completed a national
roaming agreement
with Etisalat and MoU
with Orange
Customer care focus yielding
results: mobile NPS above int’l
benchmark & significant
improvement in fixed
broadband NPS
Fixed broadband
customers grew
20%
reaching 4m & a
market share of
78% Fixed voice revenue
resuming growth on
11% increase in
customers
Fixed
data
revenue
grew
42%
Home
data ARPU
growth of
19%
Enterprise
data ARPU
growth of
11%
Launching “WE”
complete mobile
recharge
platform
Int ’l capacity
mega deals
with PCCW and
STC
4
No more legal overhangs
To clean its balance sheet Telecom Egypt took the hit of a 10 year
conflict settlement in one quarter
Dispute duration:
Services under
dispute:
Cash flow impact:
Local interconnection, transmission
and international services
Orange to pay EGP 74m
Sep. 2008 to Dec. 2015
Interconnection rates International services
Vodafone to distribute
cash of which telecom
Egypt received EGP1.5bn
Sep. 2008 to 2017
Litigation started June 2015 for
claims dated back from 2007
to 2017
TE to pay USD 47m
Orange financial Impact
Income statement Balance Sheet Cash flows
Revenues 49
Provisions 250
NPBT 201
Receivables 670
Impairments 648
Revenue 49
Orange payment 25
Income statement
Provisions EGP 1,020mn
NPBT EGP 1,020mn
Etisalat financial Impact
Receivables EGP 95mn
Provisions EGP 1,020mn
Balance Sheet Cash flows 2018
TE payment USD 48mn
TE avoids a USD 92m
court case
5
Rebirth of the customer care
Our new brand identity & values revolves around customer focus
5
HistoryOrganization driven by technicians
April 2017
Adoption of customer centric approach
July 2017New mobile centre creation
Sep. 2017New brand with new customer focus
Ongoing
Extending transformation strategy to fixed
segments
Operational
excellence
Human Capital
New era of
customer focus
Digital Support
boost
Sep-17 Oct-17 Nov-17 Dec-17
Mobile NPS
Global benchmark
Customer care strategic pillars
Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18
Fixed broadband NPS
Global benchmark
NPS = % of Promoters - % of Detractors
6
Remodeling our CAPEX spending
Access
&
Core
2016 2017
US$ 469 million US$ 415 million 5%
- MSANs Expansion: 2,916
- IP Core Upgrade: 16 Terabyte
- IPT Upgrade : 1.2 Terabyte
- RAN Deployment: 927 nodes
- Mobile Core & VAS: 5 million customers
US$ 271 million US$ 303 million
- MSANs Expansion: 4,512
- IP Core Upgrade: 9.6 Terabyte
- IPT Upgrade: 900 Gigabyte
Transmission
NetworkUpgrade the Network Capacity by 10
Terabyte
US$ 97 million US$ 42 million
Upgrade the Network Capacity by 16 Terabyte
International
Network SMW4 Upgrade 5, AAE 1, IRU capacitiesMesh Network, AAE1, EIG Upgrade 3, TE north,
SMW5, IRU capacities
US$ 37 million` US$ 19 million
IT & Customer
Care- KAM Solution
- Outlets Renovation (37 outlets)
- Mobile Pre Paid & Post Paid Services (BSS)
- Outlets Renovation (150 outlets)
- Fixed Billing Upgrade
- Enterprise CRM for Data services
- Call Center & IVR Expansion
US$ 55 million US$ 45 million
7
Revenue
(EGP mn)
EBITDA
(EGP mn)
Net profit (LOSS)
(EGP mn )
Operating Profit (LOSS)
(EGP mn)
7
4,431 4,389
5,442
13,950
18,567
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+22.8%
24.0%
+33.1%
-511
1,008
-396
2,670
3,150
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
-22.4%
-139.3%
+18.0%
758
1,1451,261
3,801
5,184
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+66.5%
+10.1%
+36.4%
-187
680
-558
1,9912,122
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+198.9%
-182.1%
+6.6%
Key FY 2017 highlights
Double digit growth across the P&L
8
8
Revenue by business unit
Retail leading normalized growth
36%
18%
20%
18%
8%
Normalized
31%
15%
18%
26%
10%
Actual
FY 2017
Home DomesticEnterprise
International
Carriers Affairs
International
Customers & Networks
1,1401,418
1,654
4,228
5,662
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+45.1%
+16.6%
+33.9%
772
579
944
2,389
2,791
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+22.3%
+63.0%
+16.9%
827 776855
3,004
3,304
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+3.3%
10.2%
+10.0%
1,1291,283
1,073
3,203
4,868
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
-4.9%
-16.3%
+52.0%
563333
916
1,126
1,942
Q4 2016 Q3 2017 Q4 2017 FY 2016 FY 2017
+62.8%
+174.8%
+72.4%
Home revenue growth in FY 17 supported by higher data services, customers grew 21% yoy &
ARPU 19%.
Enterprise revenue growth in FY 17across all segments but mainly due to growth in managed
access services. On a quarterly basis, the jump in Q4 17 relates to the completion of infrastructure
projects in new urban communities.
Domestic wholesale continues to grow on increased demand for infrastructure leasing services.
ICA in FY 17 grew on the currency floatation, on a normalized basis it declined by 13% yoy. On a
quarterly basis, ICA declined 16% qoq, which is attributable to the continuation of traffic decline
relating to illegal bypass and the increase of the impact of OTT players.
ICN in the year grew by 72% on the currency floatation and the recognition of a cable project in
Q4 2017. On a quarterly basis, in addition to the cable project, there was a hike in capacity sales.
9
In EGP mn FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016
S&D -1,763 -1,384 -1,627 -1,201 136 183
EBITDA 5,184 3,801 5,184 3,801 - -
Margin 27.72% 26.90% 27.92% 27.25% 20 bps 35 bps
International Customers & Networks 1,126 1,942 - -1,1261,942
Domestic Wholesale 3,168 3,304 -122 -1633,0043,426
International Carriers Affairs 3,203 4,868 - -3,2034,868
Home Services 4,240 5,662 -9 -134,2285,671
Enterprise Solutions 2,395 2,791 -5 -72,3892,796
VarianceBefore Restatement After Restatement
Revenue 14,133 18,567 13,950 -136 -18318,703
Accounting restatement
to discounts implemented in Q4 2017
Re
ve
nue
S&
DEBIT
DA
Revenue is now recorded net of discounts, the segment that is most
affected is domestic wholesale.
The discounts were previously recorded in Selling and distribution
expenses under discount allowed, which have now be removed.
As such EBITDA in absolute terms was not affected, however the margin
slightly improved.
10
Q4 2017 results highlights
5.4bn+ 23% YoY/ +24% QoQ
1.3bn+ 66% YoY/ +10% QoQ
0.4bnvs. 0.5bn in Q4 16
Revenue (EGP bn)
EBITDA (EGP mn)
Customers ( In mn )
Net loss(EGP bn)
Fixed
Mobile
Voice Data
7.1 4.1
2.3
Revenue growth on 1) higher home services
revenue (+45% yoy) and 2) higher wholesale
revenue wholesale revenue (+50% yoy).
Wholesale is driven by the recognition of an
additional c250m in cable projects.
On a normalized basis revenue grew by 16% yoy.
EBITDA grew 66% recording a margin of 23%.
Excluding one-offs the EBITDA margin would have
increased slightly by c60bps yoy to record 26.5%.
One-offs in the quarter include 1) EGP 150m in
salaries related to a bonus for the mobile launch
and 2) EGP 260m related to the employee pension
fund, the latter compares to EGP 400m in Q4 2016.
Total employee costs as % of revenue declined to
32.6% from 35.4% last year.
Total call costs including national & international
interconnection and national roaming increased
4% yoy, yet declined 4% qoq declining as a % of
revenue from 23% last year and 24% last quarter to
19% this quarter.
This is the first quarter where the full impact of the
amortization is visible on the P&L.
Net loss narrowed compared to Q4 16. Excluding
one-offs related to fx and the settlements net profit
would have grown 42% yoy.
EBITDA margin of 23.2% (+292bps)
*Excl. one-offs margin of 29.7% (+357bps YoY)
Net loss margin of 7%
*Excl. one-offs net profit of EGP 1.4bn with
a margin of 25% (+321bps YoY)
Q4 2017: Profitability weighed on by one-offs
11
• Investment income from VFE rose given that FY 16 included fx losses, but also
because VFE’s operating profit expanded by 28% in FY 17.
• Finance costs include fx gain (losses) and the adjustment of the present value
related to the license renewal. FY 16 included an fx gain of 888m vs. 136m in
losses in FY 17.
• Interest expense rose as a result of the higher net debt level, Q4 17 witnessed the
first full impact of interest expense, which prior to that was capitalized.
• Other expenses include the impairments and provisions relating to the settlements
amounting to EGP 1.27bn in total.
• Depreciation rose as a result of our increased investments and amortization on
the back of the mobile license. Q4 is the first quarter with the full amortization
impact.
• In spite of the rising costs EBITDA margin improved yoy by 67bps thanks to the
revenue growth. On a qoq basis EBITDA margin was pressured due to the one-off
bonus related to the mobile launch, the contribution to the pension fund and the
annual bonus, adjusting for the first two Q4 EBITDA would have reached 30%
boosted by high margin enterprise and cable revenue.
Income statement
Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards
Re
ve
nue
EBITD
AO
the
r
Op
ex
Ne
t
pro
fit
• Revenue growth on across all business units, especially in home services mainly
on fixed data, enterprise solutions and ICN.
In EGP mn FY 2017 FY 2016 YoY Q4 2017 Q3 2017 Q4 2016 QoQ YoY
Revenue 18,567 13,950 33% 5,442 4,389 4,431 24% 23%
Home Services 5,662 4,228 34% 1,654 1,418 1,140 17% 45%
Enterprise Solutions 2,791 2,389 17% 944 579 772 63% 22%
Domestic Wholesale 3,304 3,004 10% 855 776 827 10% 3%
International Carriers Affairs 4,868 3,203 52% 1,073 1,283 1,129 -16% -5%
International Customers & Networks 1,942 1,126 72% 916 333 563 175% 63%
Total employee cost (5,061) (4,629) 9% (1,772) (1,121) (1,570) 58% 13%
Call costs (4,152) (2,587) 60% (1,039) (1,082) (998) -4% 4%
CoGS (excl. above expenses) (3,138) (2,229) 41% (972) (809) (821) 20% 18%
S&D (excl. salaries, D&A) (533) (300) 77% (238) (133) (121) 79% 97%
G&A (excl. salaries, D&A) (499) (403) 24% (159) (98) (163) 62% -3%
EBITDA 5,184 3,801 36% 1,261 1,145 758 10% 66%
Margin 28% 27% 67 bps 23% 26% 17% (292 bps) 608 bps
Other (expense) / income (1,056) (275) 284% (1,066) (12) (397) 8637% 169%
Depreciation (1,743) (1,458) 20% (591) (407) (525) 45% 13%
Amortization (264) (77) 243% (162) (46) (23) 253% 618%
Operating profit 2,122 1,991 7% (558) 680 (187) -182% 199%
Margin 11% 14% (285 bps) -10% 16% -4% n/m (605 bps)
Income from investments 2,337 668 250% 561 602 (469) -7% n/m
Net finance (cost) / income (350) 665 -153% (183) (39) 190 374% -196%
Net interest (expense) / income (296) 28 -1157% (222) (85) (0) 162% n/m
Tax (659) (680) -3% 8 (150) (45) n/m n/m
Net Profit 3,150 2,670 18% (396) 1,008 (511) n/m 22%
Margin 17% 19% (217 bps) -7% 23% -12% n/m 424 bps
EPS 1.43 1.20 19% (0.34) 0.49 (0.39) n/m 22%
Exp
ense
s
• Employee expenses are higher on a qoq basis as a result of a one-off bonus
related to the mobile launch (c150m), the contribution to the employee
pension fund (c260m), in addition to the annual bonus.
• Call costs increased y-o-y on the currency floatation, Q4 witnessed a change in
trend where outgoing international call costs were significantly reduced.
• The increase in CoGs relates to higher cost of devices plus higher fuel & power
costs and the rise in S&D is a function of advertising costs.
No
n-o
pe
ratio
na
l
• Net profit grew 18% yoy to reach 3.15bn, excluding the one-offs net profit would
have reached EGP 4.8bn.
12
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.12
FCFF
(EGP mn)
In-service capex
(EGP mn)
2,083
1,796
1,597
4,338
4,649
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
1,682
(500)
147
(2,603)(2,456)
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
756
1,584
2,609
3,312
6,088
5,294
1,420
7%
13%
21%
62%
40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
-
1,00 0
2,00 0
3,00 0
4,00 0
5,00 0
6,00 0
7,00 0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Capex License Capex/sales
756
2,523
3,159
4,731
7,376
- - -
5,294
3,340
7%
21%
26%
72%
58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
-
1,00 0
2,00 0
3,00 0
4,00 0
5,00 0
6,00 0
7,00 0
8,00 0
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Capex License Capex/sales
13
Balance sheet highlights
13
FCFE
(EGP mn)
Net debt
(EGP mn)
Net debt/ EBITDA
(EGP mn)
Breakdown of capex in-service
1,541
(591)
62
(97)
1,191
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
73%
10%
5%
11%1%
FY 2017
Access Network Transmission International cable Customer care Others
5,762
3,810
2,587
1,180 638
-582 -466 -389
-3,342
-7,293
-5,179 -3,344 -2,197 2,161 6,656
FY 2013 FY 2014 FY 2015 FY 2016 9M 2017
Net debt
Total debt Cash
-1.4x
-0.9x
-0.6x
0.6x
1.3x
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
14
Our performance in context
Delivering on guidance, normalized double digit growth
Revenue Growth y/y
EBITDA margin (%)
CAPEX / sales (%)
FY 2017
actual
FY 2017
guidance
33% High 20s
28%High 20s to early
30s
In-service: 40%
Cash: 32%40%
FY 2017
normalized
%13
27%
In service: 26%
Cash: 22%
2018
guidance
high single to
low double digit
Mid to high 20s
30-35%
Thank you
Investor relations team
Check our newly revamped website
www.ir.te.eg