Investor Presentation
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
FY 2018 results highlights
Closing the year in line with our full year guidance
22.8bn+23% YoY
6.1bn+18% YoY
3.5bn+14% YoY
Revenue
(EGP bn)
EBITDA
(EGP bn)
Customers
(mn)
Net profit
(EGP bn)
Full year revenue hit 22.8bn with a 23% growth
YoY. Fixed and mobile data services represented
46% of the topline growth.
Our customer base broadly increased whereas
mobile subscribers closed at 3.9mn, fixed voice
and data subscribers noted a YoY growth of 10%
and 29% respectively.
EBITDA margin came in at 27% as high
margin revenues and the lower call & employee
costs-to-revenue offset the c4.7x increase in
advertising & marketing expenses.
Operating profit grew 76% YoY. Normalizing
Etisalat Misr provisions in 2017, operating profit grew
by +14% YoY.
Net profit rose 14% YoY. Normalizing for dispute
settlement impact on 2017, net profit for 2018
would have declined by 15% on the 2x higher net
interest and finance cost and the 6% decline in our
share in Vodafone’s income. EBITDA margin of 27% Net profit margin of 15%
FY 2018: Data growth and large projects boost
the bottom line
Fixed
Mobile
Voice Data
7.9+10% YoY
5.2+29% YoY
3.9+1.6 million net additions ytd
4
Q4 2018 results highlights
Retail upside softened the volatility of some wholesale streams
5.4bn-0.5% YoY / -25% QoQ
0.8bn-36% YoY / -61% QoQ
0.02bnVs 0.43bn in Q4 2017
Revenue
(EGP bn)
EBITDA
(EGP bn)
Customers
( mn)
Net Loss
(EGP bn)
Fixed
Mobile
Voice Data
Q4 2018 topline was stable YoY :
Retail revenue grew 20% on the continuous
growth of both fixed & mobile data services
+37%YoY.
Wholesale reported a 19% YoY decline due to
the absence of cable projects and the lower
capacity sales.
We note that some cable projects and
complimentary access services (part of
enterprise revenue) were pushed to Q1 2019.
EBITDA came in at a margin of 15%, with a
decline of 36%YoY. We note that Q4 2018 EBITDA is
traditionally lower due to the seasonality of some
costs. This quarter, the decline is sharper mainly due
to lower high-margin revenue and one-off costs
mentioned earlier.
Net profit and operating profit barely
breakeven, again, due to the projects’ revenue
pushed to Q1 2019 and the 2x higher net interest
expense.EBITDA margin of 15%, -837bps YoY, -1,334bps QoQ Net profit margin of -0.4%, 751bps YoY, -2,043 bps QoQ
Q4 2018: shift of project revenue to Q1 2019
weighs on margins
7.9+10% YoY
5.2+29% YoY
3.9+1.6 million net additions ytd
5
Vodafone Egypt infrastructure agreements and
dividends distribution
International Services 12bn
Transmission Services 1.5bn 10.85bn
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2028
EGP 4.8bn EGP 0.7bn
June 2020March 2019
EGP 5.5bn in dividends
Deleveraging EGP debt
Cost cutting initiatives
Usa
ge
o
f p
roc
ee
ds
1
2
Investments for expansion3
Interest savings of EGP 490mn in 2019
Reactivating early retirement program
Enabling 2019 CapEx intensity guidance of 30%
12.9
9.2
2.11.5
Current Post dividends
Net debt (bn) Net debt/ EBITDA (x)
18 February 2019
6
Q3 strategic partnership with Airtel & schools project
showcase our ability to rapidly monetize our investments
One time revenue of
USD90mn
USD54mn
Securing recurring revenue
through ancillary services
over the IRUs life time.
Granting IRUs (indefeasible right of use)
along with capacities on long term basis
to Bharti Airtel on some of Telecom Egypt
cables(MENA,TE North,SMW4,&AAE1).
Schools connectivity project stems out from Telecom Egypt ’s national
played role in the initiative of reforming the education system in
Egypt.
Bharti Airtel deal Schools connectivity project
(EGP 1.6bn)
EBITDA margin in early 30s
2,550 schools connected
Initial revenue of
EGP482mn for infrastructure connectivity
Remaining capacity of MENA Cable at higher
margins
FBB subscriptions Further
monetization
High margin as the corresponding
costs is mainly CapEx
7
Highlights of the main events of the quarter
Strategic moves, paving the way for the future
Events in the quarter Subsequent to the quarter
8 Dec: TE and Liquid Telecom, the leading pan-African telecoms
group, announce the signing of a Memorandum of Understanding
(MoU) whereby both parties will explore collaboration opportunities in
three fields: data centre deployment, financial investment in
infrastructure and the development of financial inclusion applications.
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.
18 Oct: TE signed a USD 500mn medium-term syndicated loan,
which will be used to support its capital and operational expenditure,
and refinance existing short-term facilities. First Abu Dhabi Bank PJSC
(FAB) and Mashreq Bank PSC (Mashreq) were the Joint Bookrunners
and Mandated Lead Arrangers of the facility.
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.
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
8
Revenue
(EGP mn)
EBITDA
(EGP mn)
Net profit
(EGP mn)
Operating Profit
(EGP mn)
Financial highlights
Double digit EBITDA growth helps maintain net profit in spite of heavy investment
1,261
2,036
802
5,184
6,130
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
-36.5%
-60.6%
+18.3%
-431
1,448
-22
3,052
3,484
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
+94.9%
-101.5%
+14.2%
-593
1,395
-32
2,023
3,560
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
+94.5%
-102.3%
+76.0%
5,442
7,233
5,413
18,567
22,771
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
-0.5%
-25.2%
+22.6%
9
41%
16%
15%
20%
8%
Q4 2018
Revenue by business unit
Retail services & specifically data drive revenue growth
Home &
Consumer DomesticEnterprise
International
Carriers Affairs
International
Customers & Networks
1,073 1,111 1,077
4,868
4,424
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
+0.4%
-3.0%
-9.1%
1,654
2,085 2,215
5,662
8,064
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
+33.9%
+6.2%
+42.4%
903
1,151
852
2,627
3,215
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
-5.7%
-25.9%
+22.4%
855 788 818
3,304
3,571
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
-4.3%
+3.9%
+8.1%
956
2,099
450
2,106
3,496
Q4 2017 Q3 2018 Q4 2018 FY 2017 FY 2018
-52.9%
-78.6%
+66.0%
35%
14%16%
20%
15%
FY 2018
FY 2018 performance:
Retail revenue grew 36% YoY relying heavily on strong data performance and higher ARPU.
Home & Consumer noted a growth of 42% YoY driven by the 45% higher data revenue.
Mobile revenue preserved almost the same pace across the year contributing a low single digit to the top line and a
high single digit to the retail revenue.
Enterprise Solutions witnessed a 22% increase driven by the inflow of EGP 482mn in revenues from the schools’
connectivity project and the stable growth of fixed services of 13%YoY.
Wholesale increased 12%. The Bharti Airtel agreement that contributed EGP 1.6bn into our financials and the growth in
infrastructure revenues were the key drivers.
Domestic wholesale rose 8% YoY on the continuing demand for infrastructure leasing by the domestic mobile
operators.
ICA declined 9% YoY in line with the global trend on lower international voice traffic.
IC&N revenue grew 66% on the completion of the Bharti deal in Q3 2018.
10
• Total call & employee costs to the normalized revenue declined by 2.1% and 2.6%
respectively, offsetting the 4.7x higher advertising expenses. The decrease in call cost to
revenue was driven by the revision of the national roaming agreement and the
wholesale team efforts in Q4 2017 to decrease illegal bypass. The decline in employee
costs is a result of the absence of the employee loyalty fund in 2018.
Income statement (FY 2018)
Re
ve
nue
EBITD
AO
the
r
OPEX
Ne
t p
rofit
• Total 2018 revenue reported a 23% YoY increase.
• Fixed and mobile data services grew 43% YoY contributing 46% of overall growth with
the Bharti Airtel agreement (EGP 1.6bn) and the schools’ connectivity project (c0.5bn)
contributing almost the remaining growth.
• Normalized revenue excluding the Bharti Airtel deal grew by 14% YoY.
Exp
ense
s
No
n-o
pe
ratio
na
l
Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards
* EPS includes employees & BOD profit share
• EBITDA margin recorded 27% (-100bps YoY) mainly as a result of higher advertising
expenses.
• D&A increased 29% YoY due to the full year impact of the 4G license amortization in
2018 versus only one quarter in 2017 and the continued investment in our fixed and
mobile networks.
• Our full year income from direct investments reported a 6% decline based on the
one-offs taken by Vodafone in Q1 2018.
• Net interest rose c3.9x YoY. Our effective interest rate, excluding the syndicated
loan administrative fees, reached 9.1% due to the successful restructuring of a
large portion of our debt into a lower interest USD facilities.
• NPAT closed at EGP 3.5bn, higher 14% YoY, and reported a net profit margin of
15%. Normalizing for dispute settlement impact on 2017, net profit for 2018 would
have declined by 15% on the higher interest and finance cost.
In EGP mn FY 2018 FY 2017 YoY Q4 2018 Q3 2018 Q4 2017 QoQ YoY
Revenue 22,771 18,567 23% 5,413 7,233 5,442 -25% -1%Home & Consumer 8,064 5,662 42% 2,215 2,085 1,654 6% 34%Enterprise Solutions 3,215 2,627 22% 852 1,151 903 -26% -6%Domestic Wholesale 3,571 3,304 8% 818 788 855 4% -4%International Carriers Affairs 4,424 4,868 -9% 1,077 1,111 1,073 -3% 0%International Customers & Networks 3,496 2,106 66% 450 2,099 956 -79% -53%
Total employee cost (5,216) (5,061) 3% (1,578) (1,263) (1,772) 25% -11%Call costs (4,295) (4,152) 3% (1,123) (1,079) (1,039) 4% 8%CoGS (excl. above expenses) (5,116) (3,138) 63% (1,309) (2,226) (972) -41% 35%S&D (excl. salaries, D&A) (1,388) (533) 161% (370) (455) (238) -19% 56%G&A (excl. salaries, D&A) (624) (499) 25% (230) (174) (159) 32% 45%
EBITDA 6,130 5,184 18% 802 2,036 1,261 -61% -36%Margin 27% 28% (100 bps) 15% 28% 23% (1,334 bps) (837 bps)
Other (expense) / income 147 (1,056) -114% (79) 84 (1,066) -194% 93%
Depreciation (2,096) (1,841) 14% (582) (578) (626) 1% -7%Amortization (620) (264) 135% (174) (146) (162) 19% 7%
Operating profit 3,560 2,023 76% (32) 1,395 (593) -102% 95%Margin 16% 11% 474 bps -1% 19% -11% (1,989 bps) 1,029 bps
Income from investments 2,201 2,337 -6% 650 677 561 -4% 16%
Net finance (cost) / income (288) (382) 25% 2 (132) (190) 102% 101%Net interest (expense) / income (1,024) (264) -288% (439) (181) (216) -143% -104%
Tax (958) (659) 45% (200) (311) 8 -36% -2506%
Net Profit 3,484 3,052 14% (22) 1,448 (431) -102% 95%Margin 15% 16% (114 bps) 0% 20% -8% (2,043 bps) 751 bps
EPS 1.61 1.38 17% -0.12 0.74 -0.36 -116% 66.2%
11
• Employee costs declined 11% YoY as Q4 2017 included the annual pension fund
contribution (EGP 260mn), which was absent in 2018. Pension fund contribution will
be resumed on a quarterly basis in 2019.
• Call costs increased by 8% proportionate to the increase in mobile revenues.
Income statement (Q4 2018)
Re
ve
nue
EBITD
AO
the
r
OPEX
Ne
t p
rofit
• Retail revenue growth + 20% YoY, driven by the rise in data revenue +37% YoY,
was offset by the drop in IC&N revenues -53%, the latter declined as a result of the
absence of cable projects and lower capacity sales.
Exp
ense
s
No
n-o
pe
ratio
na
l
• EBITDA came in at EGP 0.8bn, declining 36%YoY, recording a margin of 15%. Q4
margin is traditionally lower due to the expenses seasonality. Nevertheless, this
quarter saw less high-margin revenue and higher advertising costs.
• Amortization and depreciation slightly declined 4% YoY as a result of revising the
useful life of fixed assets..
• Net interest increased c2x, mainly due to the payment of EGP 135mn
administrative fees related to the USD 500mn syndicated loan and the expenses
associated with financing our network expansion.
• Normalized effective interest rate for Q4 2018 reached 9.3%, improving from
13.4% in Q4 2017.
• Operating and net profit barely broke even. Our 16% higher share in Vodafone's
income was weighed down on by the hike in interest cost.
In EGP mn FY 2018 FY 2017 YoY Q4 2018 Q3 2018 Q4 2017 QoQ YoY
Revenue 22,771 18,567 23% 5,413 7,233 5,442 -25% -1%Home & Consumer 8,064 5,662 42% 2,215 2,085 1,654 6% 34%Enterprise Solutions 3,215 2,627 22% 852 1,151 903 -26% -6%Domestic Wholesale 3,571 3,304 8% 818 788 855 4% -4%International Carriers Affairs 4,424 4,868 -9% 1,077 1,111 1,073 -3% 0%International Customers & Networks 3,496 2,106 66% 450 2,099 956 -79% -53%
Total employee cost (5,216) (5,061) 3% (1,578) (1,263) (1,772) 25% -11%Call costs (4,295) (4,152) 3% (1,123) (1,079) (1,039) 4% 8%CoGS (excl. above expenses) (5,116) (3,138) 63% (1,309) (2,226) (972) -41% 35%S&D (excl. salaries, D&A) (1,388) (533) 161% (370) (455) (238) -19% 56%G&A (excl. salaries, D&A) (624) (499) 25% (230) (174) (159) 32% 45%
EBITDA 6,130 5,184 18% 802 2,036 1,261 -61% -36%Margin 27% 28% (100 bps) 15% 28% 23% (1,334 bps) (837 bps)
Other (expense) / income 147 (1,056) -114% (79) 84 (1,066) -194% -93%
Depreciation (2,096) (1,841) 14% (582) (578) (626) 1% -7%Amortization (620) (264) 135% (174) (146) (162) 19% 7%
Operating profit 3,560 2,023 76% (32) 1,395 (593) -102% 95%Margin 16% 11% 474 bps -1% 19% -11% (1,989 bps) 1,029 bps
Income from investments 2,201 2,337 -6% 650 677 561 -4% 16%
Net finance (cost) / income (288) (382) 25% 2 (132) (190) 102% 101%Net interest (expense) / income (1,024) (264) -288% (439) (181) (216) -143% -104%
Tax (958) (659) 45% (200) (311) 8 -36% -2506%
Net Profit 3,484 3,052 14% (22) 1,448 (431) -102% 95%Margin 15% 16% (114 bps) 0% 20% -8% (2,043 bps) 751 bps
EPS 1.61 1.38 17% -0.12 0.74 -0.36 -116% 66.2%
Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards
* EPS includes employees & BOD profit share
12
Operating Profit
Variance Analysis FY 2018 (YoY)
2,023
3,560
4,203
2,121
981 1,113
612
Employee
Costs
FY 17
Opearting
Profit
Revenue COGS Provisions
155
SG&A Depr & Amort.
90
Other
Income/Expense
FY 18
Operating
Profit
+76%
Note: All financial figures are in EGP million
13
Operating Profit
Variance Analysis Q4 2018 (YoY)
COGS
420
593
Q4 17
Opearting
Profit
Depr & Amort.
194
29
Revenue Employee
Costs
204
SG&A
1,085
Provisions
33
Other
Income/Expense
Q4 18
Operating
Profit
3298
+95%
Note: All financial figures are in EGP million
14
1,584
2,609
3,312
6,088
8,028
-
5,294
1,420
780
13%
21%
24%
33%35%
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
8,00 0
9,00 0
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Capex License Capex/sales
2,523
3,159
4,731
7,376
8,499
- -
5,294
3,340
-
21%
26%
34%
40%
37%
10%
15%
20%
25%
30%
35%
40%
45%
-
1,00 0
2,00 0
3,00 0
4,00 0
5,00 0
6,00 0
7,00 0
8,00 0
9,00 0
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Capex License Capex/sales
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)
* Normalizing for one-off settlement payment to Etisalat of EGP 919mn * Normalizing for one-off settlement payment to Etisalat of EGP 919mn
(500)
147
(2,603)(2,456)
(5,075)
(4,156)
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Nor FY 2018
1,796 1,597
4,338
4,649
3,496
4,415
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Nor.FY 2018
15
-0.9x
-0.6x
0.6x
1.3x
2.1x
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
(591)
62
(97)
1,191
797
1,716
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Nor FY 2018
Balance sheet highlights
FCFE
(EGP mn)
Net debt
(EGP mn)
Net debt/ EBITDA
(Based on annualized EBITDA)
Breakdown of capex in-service
* Normalizing for one-off settlement payment to Etisalat of EGP 919mn
69%
16%
5%
5%
4%1%Access Network
Transmission
International cable
Customer care
IT
Others
3,810 2,587 1,180 638 998
-466 -389 -3,342
-7,293
-13,854
-3,344 -2,197 2,161 6,656 12,855
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Net debt
Total debt Cash
16
Our performance in context
Healthy operational performance in light of heavy investments
Revenue Growth
YoY
EBITDA margin (%)
CAPEX / sales (%)
FY 2018
Actual
23%
27%
In-service: 37%
Cash: 35%
FY 2018
guidance
High single to low
double digit
Mid to high 20s
In-service: 30-35%
Mid to high
single digit
Mid to high 20s
In-service: 30%
FY 2019
guidance
Thank you
Investor relations team
Check our newly revamped website
www.ir.te.eg