1 Contents
Company snapshot 4 Macro overview 5 Redefining our strategy 8 Our growth potential 12 Financial highlights 29 H1 2020 highlights 36
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 Company snapshot Heritage transformed
TE’s incorporation
• Founded in 1854 with the first telegraph line in Egypt • Incorporated in 1998 replacing the former Arab Republic of Egypt National Telecommunication Organization (ARENTO) • Listed in 2005 on Egypt and London Stock Exchanges • Acquired a 45% stake in Vodafone Egypt in 2003 to 2006 • Rebranded the retail business to WE in 2017 with the launch of mobile services Ownership: Highly diversified solid institutional shareholder base Market Cap of USD 1.4bn | ETEL EY/ ETEL.CA (as of 31 August 2020)
Free float Breakdown of ROW South composition institutions 3% Africa 7% USA GCC 28% 15% Government, Free float, Retail, 4% 80% 20% Institutional, 16% Egypt 23% Europe 24%
4 Macro overview
5 Demographic indicators Young population to continue to drive growth
Population (mn) 100.6 Age distribution (% of population) 99.8 2% 98.2 5% 9-0 8% 25% 96.2 19-10 c2mn new customers in 29-20 10% the market every year 94.2 39-30 49-40 61% of population 15% 59-50 19% below 30 years 69-60 17% +70 H1 2020
Source: CAPMAS 2020 census Source: CAPMAS 2017 census
Educational attainment (% of population) Unemployment rate (% of population)
12.8% 12.7% 12.0% Illiterate 12% 26% 8.9% 3% 7.5% Literate Illiteracy ↓ from 30% in 2016 Primary 74% of population is literate Secondary 29% 11% High school 2014/15 2015/16 2016/17 2017/18 2018/19 University degree 19%
Source: CAPMAS 2017 census Source: Ministry of Finance 6 Macro indicators A broad set of healthy indicators across the year
Real GDP growth (%)* Average USD to EGP rate
5.6 17.8 18.1 17.8 17.8 17.7 17.8 17.9 18.0 17.6 17.1 16.6 5.3 16.2 15.8 16.0 14.8 4.3 4.1
8.9 8.9 2.8 8.1 2.0
* 2020 and 2021 growth forecasts were 5.9% and 6% respectively preceding the Covid-19 pandemic Source: Central Bank of Egypt Source: IMF
CBE discount rate Core inflation (YoY) 19.3% 31.9% 33.3% 17.3% 18.3% 17.3% 16.3% 32.3% 15.3% 14.8% 13.8% 12.3% 12.8% 25.9% 11.3% 19.9% 9.8% 13.9% 12.4% 11.6%10.9% 8.6% 8.3% 8.9% 6.4% 2.6%2.4% 1.9% 1.0%
Source: Central Bank of Egypt Source: Central Bank of Egypt 7 Redefining our strategy
8 Our leadership team Caliber from the mobile & fixed industries with local & int’l experience
Adel Hamed Mohamed Shamroukh Mohamed Abo-Taleb Antar Kandil Managing Director & Senior Vice President Vice President Vice President Chief Executive Officer Chief Financial Officer Chief Commercial Officer Chief Information Officer
Essam Abdeldayem Seif Allah Mounib Abdelsatar Elsheikh Mohamed Alfowey Vice President Vice President Vice President Vice President 9 Chief Human Resources Officer Chief International & Wholesale Officer Chief Regional Affairs Officer Chief Technology Officer Heading towards… A telco demonstrating its ability to seize new opportunities
The leading The premium Financial & ICT provider digital hub Digital WE Operational Excellence
Offering our customers best Expanding from an Embracing digital Expanding efficiency & value, data-centric value established international transformation internally to optimization measures to propositions route to an eminent regional empower our customers & enhance profitability digital hub employees
10 WE digital transformation Our strategy is built by creating a comprehensive digital ecosystem to optimize resources and boost the economic impact of ICT. Digital transformation ecosystem
Digital transformation process Capitalizing on our assets
Apps & solutions
Cloud platforms Complete digital Digital inclusion World class data center facilities market Internal digital disruption transformation Digital team & Network connectivity governance WE digital strategy & Submarine cables & fiber connectivity objectives
‘WE Digital’
Data centers Digital & cloud IOT platforms OTT
11 Our growth potential
12 Retail segment Growth drivers at a glance
Voice Data
• Growing mobile customer base • Underpenetrated data market leading to a • Growing fixed voice customer base growing fixed & mobile customer base driven by fixed broadband connectivity • Improved broadband connectivity and the EGP 9.4bn continuous demand for higher usage enhances EGP 3.6bn ARPU FY 2019 +33% YoY +16% YoY EGP 14.3bn +27% YoY Retail revenue growth ( in EGP mn)
Other 29% EGP 1.2bn CAGR +14% YoY • Protocols with government entities for digital 33% transformation: − NUCA 14,283 − Ministries i.e. schools project 8,678 − Digital transformation initiative to connect 6,616 6,541 Egyptian governorates with fiber • Digital and connectivity services provided to 2016 2019 H1 2019 H1 2020 private developers 13 Measures taken in response to the Covid-19 outbreak Keeping all members of society connected
Health Government & Education enterprises • Providing free fixed broadband • Offering free access to all e-learning • Linking Egyptian Cabinet HQs to connectivity to all quarantine hospitals websites ministries using secure solutions • Dedicating free hotline numbers to • Providing full technical support for first- • Proactively supporting SMEs and reach the Ministry of Health and year secondary school online impacted companies by extending various clinics for consultations examinations billing cycles
Customers CSR Employees
• Extending the grace period for • Participating in the #Hemaya initiative • Encouraging employees to work from customers to pay landline invoices to support the homes of the elderly home • Promoting digital platforms and and orphans to protect them against • Sterilizing all buildings and transportation providing some free transactions on Covid-19 vehicles ‘WE Pay’ • Distributing 62,500 food boxes to • Doubling fixed broadband and mobile • Increasing fixed broadband quotas needy families quotas for employees by 20% through a government • Raising security measures on TE’s intranet subsidy and VPN 14 Post Covid-19 operational indicators Positive indicators across the board
Usage KPIs
FBB data traffic FBB and mobile data traffic 2020
110%
90% 70% 23% 35% 50%
30%
10%
-10% Jan Feb Mar Apr May Jun July Jan Feb Mar Apr May Jun July
MoM YoY Mobile data traffic Fixed data traffic
Selected operational KPIs
Average internet Mbps x c speed 23 3 88% 7.5% 25% based on global * YoY growth in of collected payments -18% -10% 23% of our total fixed and Ookla-4%speed test 35%average speed made through digital mobile customer base index as of Jun. as of Jun. 2020 channels as of Jun. installed ‘WE app’ as of Jun. 2020 2020 2020
15 Widening our retail portfolio Moving beyond traditional telecom services
4G mobile Prepaid Best value license mobile recharge acquisition launch platform
Sep 2016 Sep 2017 Feb 2018
‘WE Internet’ ‘Level Up’ Fully convergent (1st FBB revamp) + PlayStation product postpaid mobile packages ‘Indigo Plus’ launch
Nov 2018 Aug 2018 Apr 2018
‘WE IPTV’ ‘WE SPACE’ ‘WE Pay’ 1st nationwide (2nd FBB revamp) WE digital wallet IPTV license
July 2019 Nov 2019 Coming next 16 WE SPACE A new shift in our fixed broadband offering
Comparison of the entry level bundle
Launch date April 2018 July 2019
Speed Up to 5 Mbps Up to 30 Mbps
Price EGP 110 EGP 120
Quota 100 GB 140 GB
17 Fixed services Growing customer base with healthy ARPU
Market fixed voice and data household penetration Market fixed broadband subscribers (in 000’s)
Fixed line TE Others 7,977 Broadband 7,296 6,535 39.7% 6,333 35.5% 5,807 32.4% 5,197 5,237 30.0% 27.7% 32.0% 4,439 29.5% 4,070 26.9% 3,382 19.0% 21.8% 1,489 1,644 1,057 1,127 1,297
FY 2016 FY 2017 FY 2018 FY 2019 H1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2020
WE fixed voice WE fixed broadband
7,000 140.0 6,333 Subscribers ( in 000's ) Subscribers ( in 000's ) 12,000 5,807 6,000 130.0
ARPU 39.0 ARPU 9,893 5,237 131.4
10,000 5,000 111.0 120.0 8,760 37.0 7,865 4,070
8,000 7,145 4,000 110.0
35.0 103.5 6,465 3,382 33.3 98.3
6,000
3,000 100.0 31.2 33.0
4,000 30.5 2,000 90.0 29.6 31.0 83.1 28.7
2,000 1,000 80.0 29.0
0 27.0 0 70.0 FY 2016 FY 2017 FY 2018 FY 2019 H1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2020 18 Fixed services (cont’d) Accelerating our fiber replacement project to grasp market opportunities
Fiber access network capacity % of households reached with fiber (in 000’ homes) (excluding the last mile)
27,715 28,117
17,567
12,608 70% 85% 100% 9,692
2018a 2019a 2020e
FY 2016 FY 2017 FY 2018 FY 2019 H1 2020
Retail revenue growth driven by data Data revenue (in EGP mn) (in EGP mn) Managed Services Other 27% 33% Broadband Data 981 Voice 36% 1,243 40% 36% 25% 1,086 33% 716 39% 571 9,429 498 779 593 8,448 741 7,085 387 438 5,049 6,030 536 6,370 3,631 4,432 5,459 4,456 3,994 3,096 3,108 3,611 2,244 2,462 1,722 2,150
FY 2016 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 19 Mobile market A growing customer base
Mobile market voice and data penetration Mobile market subscribers Voice penetration (in 000’s) Data penetration
2,300 3,861 114% 117% 5,129 6,720 102% 101% 100% 33,900 32,300 27,500 26,400 3.3 26,000 34,117 33,883 29,475 28,098 27,601 43% 43% 34% 37% 39% 39,622 44,082 39,647 40,028 39,951
FY 2016 FY 2017 FY 2018 FY 2019 Q1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2020
*Etisalat restated its customer base starting FY 2016 Source: MCIT & operators’ disclosures Source: Operators’ disclosures Mobile data market subscribers WE's mobile subscribers (in 000’s) (in 000’s)
USB Mobile data 6,720 6,181* 3,600 2,430 3,210 5,129 3,260 4,575 3,280 4,260
39,000 40,700 32,790 35,060 28,650
FY 2016 FY 2017 FY 2018 FY 2019 Q1 2020 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 20 Source: MCIT * Including c380k new data SIMs distributed among school students Projects highlights Further steps towards nation-wide digital transformation
1 Education reform program 2 1st phase of the digital transformation initiative
1 Q1 2019: Connected government service buildings in Q3 2018: Connected 2,550 schools with fiber within 2 Port Said with fiber to provide citizens with digital
months, recognizing EGP 482mn. Pilot services.
Phase 1 2 Connecting 5 more governorates with fiber (Luxor, Aswan, Provided data SIMs for 2 batches of students in their first South Sinai, Ismailia, and Suez) in addition to connecting
year of high school over 2 years starting Q1 2019. Phase
Phase other governmental access points across Egypt.
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 1.1bn 4 days 5,258 1.2mn Access points Total contract value data SIMs to distribute the SIM with due date 2020 cards
8,000 EGP 606mn further monetization further monetization TE employees Recognized revenue from service from connectivity working on the during FY 2019 and subscriptions subscriptions project H1 2020 21 Wholesale segment Growth drivers at a glance
International Cables & Domestic Networks
• Egypt’s infrastructure builder • Largest international network footprint in the • 3-10 year agreements region • Indirect play on data+39 market% YoYgrowth • Preferred East-West international route • Positioning Telecom Egypt as an eminent digital EGP 4.2bn EGP 3.0bn hub +16% YoY -15% YoY FY 2019 EGP 11.5bn Flat YoY Wholesale revenue ( in EGP mn) International Carrier Affairs 16% CAGR • Sole provider of international calls to MNOs EGP 4.4bn 2% • 4-5 year agreements Flat YoY
11,522
7,334 6,155 6,268
2016 2019 H1 2019 H1 2020 22 Our cable network offers reach and reliability
UK Germany Belgium
France Italy Portugal Greece Turkey Japan Cyprus Syria Korea Tunisia Lebanon Morocco Jordan Iraq Iran Pakistan Algeria Libya Egypt Bangladesh Taiwan Qatar China U.A.E Myanmar Saudi Arabia India Oman Philippine Sudan Eritrea Yemen Vietnam TE North Djibouti Alexandros Sri Lanka Thailand SEAMEWE-3 Ethiopia Malaysia SEAMEWE-4 Somalia Brunei IMEWE Maldives Singapore Kenya EIG ALETAR/BRYTAR Tanzania FLAG FALCON-HAWK Indonesia SEACOM Mozambique TATA Madagascar GBI Taba-Aqaba Australia AAE1 SEAMEWE -5 Trans border Terrestrial Cables with Libya & Sudan MENA Cable 23 International services Growth across the majority of our business lines
Int’l Carriers revenue breakdown in EGP Int’l Customers & Networks revenue breakdown in EGP (in mn) (in mn)
International Direct Dialing (IDD) Cable Projects 588 Transit Ancillary Services (O&M) Capacity Sales 704 International Customer Support
439 2,316 913 3,769 322 3,623 3,595 961 396 173 458 466 2,794 243 392 1,854 1,852 655 368 222 386 910 1,099 801 62 605 429 410 788 415 416 236 338 207 FY 2016 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020
Int’l Carriers revenue breakdown in USD* Int’l Customers & Networks revenue breakdown in USD* (in mn) (in mn)
Cable Projects International Direct Dialing (IDD) Ancillary Services (O&M) Capacity Sales Transit 33 International Customer Support 42
54 17 25 130 277 212 19 204 214 25 65 54 27 27 25 117 14 107 14 21 22 54 62 45 23 35 27 41 47 24 26 6 19 12 FY 2016 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 * Based on full year and 6-month average USD exchange rates * Based on full year and 6-month average USD exchange rates 24 Agreements with domestic MNOs Securing long-term revenue streams
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2028
Transmission Services 1.5bn 1.5bn 10.85bn
International Services 12bn
Transmission Services 1.5bn1.51.5bnbn 1.5bn
International Services 3bn3bn3.5bn 4bn
Transmission Services 2bn
International Services 2bn
Securing longer-term agreements with Boosting our wholesale revenue stream by Our main goals 1 domestic mobile operators 2 monetizing our infrastructure investments
25 Vodafone investment pays off in 2019
Dividends distribution
• TE reached an agreement with Vodafone Egypt to EGP 4.8bn Income from Vodafone (in EGP mn) collect EGP 5.5bn, representing +90% of its share of Vodafone Egypt’s retained earnings as of Mar 18. March 2019 62% • TE received EGP 4.8bn in March 2019 and the remaining EGP 0.7bn will be collected in July 2020. CAGR EGP bn • The proceeds received in March were used to settle 0.7 TE’s EGP denominated debt. July 2020 -11% 2,833*
1125 1005 • TE received an extraordinary dividend of EGP 668 0.5bn, representing its share of the Vodafone 2016 2019 H1 2019 H1 2020 International Services (VIS) sale to Vodafone Group. EGP 0.5bn • The proceeds were used to finance the extension * Including the EGP 0.5bn from the VIS sale to Vodafone Group. November 2019 of TE’s early retirement program (ERP).
26 Vodafone Egypt deal developments
VFE developments TE’s position
Jan 29: Vodafone Group (VFG) announced that it has signed a MoU with the Saudi Telecom Company (STC) in relation to a potential sale of Vodafone's 55% shareholding in Vodafone Egypt (VFE) to STC for a cash consideration of USD 2.4bn. TE continues to monitor developments closely given its significant interest in VFE. The company continues to work with its advisors to assess its options and enable their feasibility in light of its rights in this potential Feb 05: The FRA asserted that the potential acquisition is subject transaction, which include: to the provisions of Chapter Twelve of the Executive Regulations of • its right of first refusal granted in VFE's shareholders’ the Egyptian Capital Market Law No. 95/1992 regarding tender agreement and its articles of association; offers. • the right to accept a mandatory tender offer in accordance with the letter received from the Egyptian Financial Feb 13: VFE contacted the Egyptian Competition Authority (ECA) to determine whether Telecom Egypt’s right of first refusal granted Regulatory Authority in regards to the application of Chapter to the company in VFE’s articles of association, if exercised, would 12 of the Executive Regulations of the Egyptian Capital be compatible with the Competition Protection Law. Market Law No. 95/1992 regarding tender offers; • and any other rights guaranteed by the relevant Egyptian Feb 19: Telecom Egypt’s BoD approved to engage with EFG laws and the shareholders’ agreement. Hermes and Citi as investment advisors and Al Tamimi & Co. as its TE has strong conviction that its existing agreements and/or regulatory legal advisor to assess TE’s options in light of the announced deal. directives mean it could ultimately execute a number of strategic options, including maintaining its ownership as is, buying out VDG’s shares in VFE, or selling its shares in VFE. Telecom Egypt will act solely in the interests of its shareholders and will Jul 12: STC and VFG agreed to extend the MoU for 60 days. ultimately pursue whichever option maximizes long-term shareholder value. Shareholders will be informed as soon as any decision has been reached.
Sept 13: STC & VFG announced the expiry of the MoU but confirmed discussions are still open
27 Highlights of the main events during 2020
2020 business calendar
China Mobile International, Facebook, MTN Global Connect, Orange, STC, Telecom Egypt and Etisalat Misr signed two first of its kind agreements relating to Telecom Egypt, Vodafone, and WIOCC announced that they will partner to transmission and mobile-to-fixed interconnection. The first agreement extends build 2Africa, which will be the most comprehensive subsea cable to serve the for three and a half years with a total value of EGP 2bn, where Etisalat Misr, for
African continent and the Middle East. The consortium and Airtel also signed an the first time, signed a long-term agreement including an annual commitment. Jun May agreement with TE to provide a completely new crossing that links the Red & Additionally, the two companies have signed a mobile-to-fixed termination Mediterranean Seas. agreement.
28 Financial highlights
29 Financial highlights Robust performance in spite of heavy investments and cost cutting initiatives
Revenue EBITDA (in EGP mn) (in EGP mn) +39.0% +17.7% +12.5% +91.1% +13.3% -0.7%
25,805 5,876 5,834 22,771 5,184 5,041 18,567 14,945 12,696 2,638
FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020
Operating Profit Net profit (in EGP mn) (in EGP mn) +26.0% +138.8% +44.1% -3.1% -24.4% +33.4%
3,373 4,399
2,728 3,297 2,549 3,052 2,023 2,124 2,059 1,142
FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 30 Revenue by business unit Retail services & specifically data drive revenue growth
Home & International International Enterprise Domestic Consumer Carriers Affairs Customers & Networks
+85.0% +45.0% +25.8% -10.0% +41.7% +29.9% +36.8% +18.5% +19.8% +16.4% +13.9% -0.9% -0.1% -14.6% -12.1%
10,474 3,809 4,155 4,868 3,496 3,215 3,571 4,424 4,383 8,064 3,304 2,984 2,627 6,759 2,562 5,662 2,250 2,106 4,940 1,918 1,601 2,270 2,268 1,635 1,438
2017 2018 2019 H1 2019 H1 2020 2017 2018 2019 H1 2019 H1 2020 2017 2018 2019 H1 2019 H1 2020 2017 2018 2019 H1 2019 H1 2020 2017 2018 2019 H1 2019 H1 2020
FY 2019 performance: Retail revenue grew 27% YoY, representing 55% of top line with data revenue growing 33% YoY. Home & Consumer increased 30% YoY on the back of higher data revenue, which constituted 85% of the business unit’s total growth. Enterprise climbed 18% YoY, mainly driven by the growing demand for managed services and fixed voice revenue growth. H1 2020 H1 2019 Mobile revenue grew 61%, driving 20% of overall top line growth on a growing customer base and healthy ARPU. Wholesale landed at EGP 11.5bn, stable YoY, as domestic revenue surged (+16% YoY), neutralizing the decline in IC&N (-15% YoY) revenue due to the base effect of the Bharti deal signed in 2018. The continuing demand for data from MNO customers and our successful bitstream products that support their fixed broadband growth drove Domestic Wholesale growth. Home & Consumer Enterprise ICA came in almost flat YoY, despite the appreciation of the EGP against the USD, due to higher international Domestic International Carriers Affairs 31 incoming traffic. International Customers & Networks Historical 3 year income statement summary
Growth y/y In EGP mn FY 2017 FY 2018 FY 2019 H1 2020 H1 2019 YoY 2018 2019 Revenue 18,567 22,771 25,805 23% 13% 14,945 12,696 18% Home & Consumer 5,662 8,064 10,474 42% 30% 6,759 4,940 37% Enterprise 2,627 3,215 3,809 22% 18% 1,918 1,601 20% Domestic Wholeslae 3,304 3,571 4,155 8% 16% 2,562 2,250 14% International Carriers 4,868 4,424 4,383 -9% -1% 2,268 2,270 0% International Customers & Networks 2,106 3,496 2,984 66% -15% 1,438 1,635 -12%
Total employee cost (5,061) (5,216) (7,757) 3% 49% (3,420) (4,211) -19% Call costs (4,152) (4,295) (4,832) 3% 12% (2,799) (2,358) 19% CoGS (excl. above expenses) (3,138) (5,371) (5,206) 71% -3% (2,572) (2,370) 9% S&D (excl. salaries, D&A) (533) (1,398) (1,499) 162% 7% (796) (821) -3% G&A (excl. salaries, D&A) (499) (615) (678) 23% 10% (318) (299) 6%
EBITDA 5,184 5,876 5,834 13% -1% 5,041 2,638 91% Margin 28% 26% 23% (212 bps) (320 bps) 34% 21% 1,295 bps
Other (income)/expenses (1,056) 147 321 114% 119% (11) 62 -118%
Depreciation (1,841) (2,021) (2,908) 10% 44% (1,952) (1,222) 60% amortization (264) (629) (697) 138% 11% (350) (336) 4%
Operating profit 2,023 3,373 2,549 67% -24% 2,728 1,142 139% Margin 11% 15% 10% 391 bps (493 bps) 18% 9% 926 bps
Income from investments 2,337 2,201 2,833 -6% 29% 1,005 1,125 -11%
Net finance (cost) / income (382) (288) 1,115 -25% 487% (449) 758 -159% Net interest (expense) / income (264) (1,024) (1,001) 288% -2% (566) (448) 26%
Tax (659) (958) (1,091) 45% 14% (657) (450) 46%
Net profit 3,052 3,297 4,399 8% 33% 2,059 2,124 -3% Margin 16% 14% 17% (196 bps) 257 bps 14% 17% (296 bps)
EPS * 1.38 1.50 2.10 9% 40% 1.21 1.24 -3% Note: All financial figures reported are based on the consolidated financials under the Egyptian Accounting Standards 32 * EPS after appropriations Cash flow analysis
Net cash from operating activities FCFF (in EGP mn) (in EGP mn) 5,199 3,288
4,249 1,704* 1,258**
(246) 4,649 4,658 (1,508) ** 3,496 2,991 (2,456) 1,724 (5,075)* FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020
* Including the one-off settlement payment to Etisalat of EGP 919mn and the EGP 784mn representing the settlement of the * Including the one-off settlement payment to Etisalat of EGP 919mn and the EGP 1.78bn for the acquisition of MENA MENA cable loan cable ** Including ERP cost of EGP 1.3bn ** Including dividends received from Vodafone of EGP 5.1bn
Cash capex In-service capex (in EGP mn) (in EGP mn) Capex License Capex/sales Capex License Capex/sales 12,000 90%
14,000 12,720 70% 9,665 80% 10,000
12,000
70% 60% 8,028
8,000 60% 10,000 49% 8,499 50%
6,088 50% 8,000 7,336
6,000 5,381
37% 40% 35% 40% 37% 33% 6,000 40%
4,000 3,441 30% 29% 36% 30%
4,000 3,340 3,669
20% 2,566 27% 2,000 1,420 20%
2,000 780 748 10% 17% 73 73
- 0% - 10% FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 FY 2017 FY 2018 FY 2019 H1 2019 H1 2020
Note: All financial figures reported are based on consolidated financials under The Egyptian Accounting Standards. 33 Balance sheet highlights
FCFE Breakdown of capex in-service (in EGP mn)
Access Network 1,191
871 843 Transmission 797 747
International cable
Customer care
FY 2017 FY 2018 FY 2019 H1 2019 H1 2020 Others
Net debt Net debt/ EBITDA (in EGP mn) (Based on annualized EBITDA)
Cash Total debt 2.2x 2.1x
1.6x 1,459 1,556 1,180 638 998 1.3x -3,342 -7,293 -13,854 -16,452 -17,806 0.6x
6,656 Net debt 2,161 12,855 14,993 16,250 FY 2016 FY 2017 FY 2018 FY 2019 H1 2020 FY 2016 FY 2017 FY 2018 FY 2019 H1 2020
* Normalizing EBITDA for ERP total cost of EGP 1.3bn. 34 Dividend analysis We aim to distribute a continuous stream of dividends, balancing distribution with the reinvestment of our cash flows in CapEx, which we view as the pillar for growth
EPS before appropriations EPS after appropriations (in EGP) (in EGP)
Consolidated 3.18 Consolidated 2.79 Standalone 2.58 Standalone 2.10 1.99 1.93 1.76 1.79 1.65 1.50 1.56 1.40 1.38 1.20
0.74 0.73 0.41 0.27 0.36 (0.11)
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Dividend distribution on standalone financials (based on regulations) Payout ratio (in EGP) (%) 3.00 236% EPS Consolidated
2.50 DPS 2.79 Standalone 182%
2.00
1.50 1.65 83% 1.00 69% 60% 1.00 54% 0.50 0.75 18% 17% 12% 9% 0.41 (0.11) 0.36 0.25 0.25 - 0.25 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
(0.50) Note: All financial figures reported are based on consolidated & standalone financials under The Egyptian Accounting Standards. 35 H1 2020 highlights
36 H12020 results highlights Monetizing our infrastructure investments
Revenue Customers H1 2020: Operating performance (EGP bn) (mn) accelerates
9.9 6.3 Total revenue climbed 18% YoY on higher +20% YoY +14% YoY data revenue, which represented 65% of 14.9bn total growth, followed by increased voice and infrastructure revenues. +18% YoY 6.7 Customer base grew across the board. +58% YoY EBITDA came in at EGP 5bn with a margin of 34%. Adjusted for the EGP 1bn ERP EBITDA Net profit costs incurred in Q2 2019, EBITDA grew (EGP bn) (EGP bn) 38% YoY on a higher margin revenue mix. Operating profit grew 27% YoY (adjusted for the ERP) in spite of the 48% hike in D&A costs. Normalizing for the ERP, FX, and 5.0bn 2.1bn impairment impact, net profit grew by 4% YoY supported by strong operational +91% YoY -3% YoY growth that offset the higher D&A costs * ** Adjusted +38% YoY Adjusted +4% YoY and the 11% YoY lower investment income from Vodafone. EBITDA margin of 34%, +1,295 bps YoY Net profit margin of 14%, (296 bps) YoY 37 and a minor ERP cost in Q1 2020 Income statement (H1 2020)
In EGP mn H1 2020 H1 2019 YoY Q2 2020 Q1 2020 Q2 2019 QoQ YoY Revenue 14,945 12,696 18% 7,941 7,004 6,609 13% 20% Home 6,759 4,940 37% 3,629 3,131 2,539 16% 43% • Retail revenue grew 33% YoY driven by strong data and voice revenues Enterprise 1,918 1,601 20% 1,132 786 851 44% 33% that collectively represented 84% of the total top line growth. Domestic 2,562 2,250 14% 1,314 1,248 941 5% 40% • Wholesale revenue slightly increased by 2% YoY on higher domestic ICA 2,268 2,270 0% 1,132 1,136 1,141 0% -1%
IC&N 1,438 1,635 -12% 734 703 1,137 4% -35% Revenue revenue that softened the decline in IC&N as a result of the Q2 2019 base effect. Employee cost (3,420) (4,211) -19% (1,730) (1,690) (2,587) 2% -33% • ** Normalizing for the EGP 1bn ERP cost incurred in Q2 2019, salaries grew by Employee cost (Adj.) (3,418) (3,207) 7% (1,730) (1,688) (1,583) 2% 9% 7% YoY reflecting the annual salary raise. Call costs (2,799) (2,358) 19% (1,429) (1,370) (1,224) 4% 17% • Call costs as a % of revenue remains stable in spite growing in absolute CoGS* (2,572) (2,370) 9% (1,476) (1,096) (1,413) 35% 4% terms, in line with revenue growth. S&D* (796) (821) -3% (387) (409) (492) -5% -21% Expenses G&A* (318) (299) 6% (161) (157) (158) 3% 2% • Advertising costs declined 17% YoY, representing 2.7% of top line.
EBITDA 5,041 2,638 91% 2,758 2,283 735 21% 275% • Adjusted for the ERP, EBITDA grew 38% YoY, thanks to the high margin 213 2,361
Margin 34% 21% 1,295 bps 35% 33% 11% EBITDA revenue mix, recording a margin of 34%. bps bps EBITDA (Adj.) 5,042 3,642 38% 2,758 2,285 1,739 21% 59% 211 Margin 34% 29% 505 bps 35% 33% 26% 841 bps • D&A grew 48% YoY in line with the accelerated CapEx program bps
conducted in 2019. OPEX Other (expense) / income (11) 62 -118% (73) 62 (25) -218% -188% Other Depreciation (1,952) (1,222) 60% (1,007) (944) (576) 7% 75% Amortization (350) (336) 4% (173) (177) (167) -2% 3% • Net Interest expense grew 26% YoY on the 52% YoY increase in total debt, Operating profit 2,728 1,142 139% 1,504 1,224 (33) 23% 4594% yet the effective interest rate continues to improve, settling at 6.9% and 147 1,945 Margin 18% 9% 926 bps 19% 17% -1% declining on a YoY basis by 73bps. bps bps • Finance cost increased mainly as H1 2019 included c900mn in FX gains &
Income from investments 1,005 1,125 -11% 537 469 478 14% 12% 21mn of reversed impairments. In contrast, H1 2020 included 106mn in FX operational
Net finance (cost) / income (449) 758 -159% (770) 322 365 -339% -311% - losses due to the EGP depreciation and 187mn in one-off impairments. Net interest (exp.) / income (566) (448) 26% (267) (299) (166) -11% 61% Tax (657) (450) 46% (255) (402) (129) -37% 97% Non • VFE’s net income declined 11% YoY due to one-off costs and provisions Net Profit 2,059 2,124 -3% 746 1,312 512 -43% 46% incurred in Q1 2020. (933 Margin 14% 17% (296 bps) 9% 19% 8% 165 bps bps) • Adjusting for the ERP and excluding the FX & impairment impact, net profit Net Profit (Adj.) *** 2,287 2,191 4% 1,290 998 943 29% 37% would have increased by 4% YoY thanks to our strong operational growth 199 Margin 15% 17% (195 bps) 16% 14% 14% 197 bps that offset the D&A upsurge and lower investment income from Vodafone. bps profit Net EPS 1.21 1.24 -3% 0.44 0.77 0.30 -43% 45.7% * COGS exclude employee & call costs. S&D and G&A exclude employee costs & D&A **Adjusted for the ERP cost of EGP 1bn in Q2 2019 and minor ERP cost in Q1 2020 *** 38 Note: All financial figures reported are based on the consolidated financials under The Egyptian Accounting Standards Our performance in context
FY 2019 FY 2019 H1 2020 FY 2020 actual adjusted actual budget
Low double Revenue Growth 13% 13% 18% YoY digit
EBITDA margin (%) 23% 28% 34% Mid to high 20s
In-service: 49% In-service: 49% In-service: 17% CAPEX / sales (%) In-service: 30% Cash: 37% Cash: 37% Cash: 36%
39 * Normalizing EBITDA margin for the ERP total cost of EGP 1.3bn. Thank you
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