| TELECOMS

January 22, 2012

Orascom Telecom and Orascom Orascom Telecom Telecom Media & Technology STRONG BUY (UPGRADED) LTFV: EGP4.8 | USD4.0 TP: EGP3.9 | USD3.2 Who wins and who loses?

After two months, Orascom Telecom Holding [ORTE] ordinary shares will Orascom Tel. Media & Tech. resume trading on Sunday, Jan. 22, 2012, after the company secured HOLD (INITIATED) approvals of the regulator and the Egyptian Exchange (EGX). Trading of ordinary shares of Orascom Telecom Media & Technology Holding (OTMT), LTFV: EGP1.6 | USD1.3 which demerged from ORTE, will commence on the EGX on the same day. TP: EGP1.6 | USD1.3 Each ORTE ordinary share held as of Nov. 24, 2011 will receive one OTMT ordinary share, with a price tag of EGP1.73 and EGP1.25 based on a 58%- ORTE (POST-DEMERGER) VS. 'S VALUATION

42% split ratio off Nov. 24, 2011 closing price of EGP2.98, respectively. 2.50

Meanwhile, GDS record date was Friday, Jan. 20, 2012 with the same 1-to-1 2.00 ratio for eligible1 ORTE GDS holders. Meanwhile, conversion of ORTE 1.50 shares into GDSs and vice versa will resume on Monday, Jan. 23, 2012. This SD U 1.00 week, we expect volatility in trading both ORTE and OTMT ordinary shares 0.50 and GDSs as they adjust to reach parity. Since Nov. 24, 2011, ORTE GDS has jumped 39%, implying a split of USD1.89 for ORTE (post-demerger) and - USD1.37 for OTMT. In this note, we update our forecasts and valuation for ORTE (post-demerger) and OTMT shares and lay out different potential scenarios for . We also spell out what we think both OTH and OTMT Djezzy's EV/EBITDA & its implied 100% equity valuation shares will likely behave when they start trading on Sunday. Source: CI Capital Research

OTMT VS. MOBINIL'S STOCK PRICE Orascom Telecom Holding 2.00 We believe recent negotiations between VimpelCom and the Algerian government 1.80 1.60 over Djezzy, coinciding with the final phase of the ORTE-OTMT demerger 1.40 1.20 process, would continue to act as a catalyst for ORTE's local shares. We have SD U 1.00 updated our forecasts for ORTE (pre-demerger), pending more disclosure from 0.80 OTMT and the issuance of pro forma financials. Post-demerger, we upgrade our 0.60 0.40 rating for ORTE from Buy to Strong Buy on potential upside from a resolution of 0.20 its 2-year-long problem in Algeria. Our target price of EGP3.9/share, a 125% - upside (USD3.2/GDS, a 72% upside) is based on a probability-weighted scenario analysis given different valuation points for Djezzy. We calculate that each 0.5x Mobinil's market price (EGP/share) change in Djezzy's EV/EBITDA equates to c.USD0.50/ORTE GDS. Source: CI Capital Research

Orascom Telecom Media & Technology Holding OTH GDS (PRE-DEMERGER) 1-YR PERFORMANCE Volume ORTE EGX 30 - rebased

New to the market, OTMT will likely exhibit some trading volatility along with some USD mn GDS liquidity risk for GDS holders until its GDS program is finalized. We believe 8.0 12 7.0 Mobinil's [EMOB] market price will be OTMT's main driver for the time being until 10 6.0 more visibility is provided on the new company's strategy (e.g. will OTMT seek 8 other GSM licenses?). While we see potential in OTMT's non-GSM operations, 5.0 Mobinil's recent price weakness would likely mar OTMT's stock performance 4.0 6 3.0 4

through its first few days of trading. Later in 2012, we expect the stock to be 2.0 supported by OTMT's put option to sell its stake in Mobinil to France Telecom 2 1.0 starting September 15, 2012 for a two-month period at more than 2.5x its recent 0.0 - price. We initiate coverage on OTMT with a Hold recommendation based on a 12- Jan- Mar- Jun- Aug- Oct- Jan- Mar- Jun- Aug- Oct- Dec- month time horizon over which our target price is EGP1.6/share, a 29% upside 10 10 10 10 10 11 11 11 11 11 11 (USD1.3/GDS, a 2% downside). We note, nonetheless, that over the very short term, there could be some sell-off (c.-7%) to EGP1.17/share, given Mobinil's stock Source: Bloomberg weakness over the past two months (-14%) and potential oversupply of shares in the market. We calculate that each EGP10 change in Mobinil's stock price equates to USD0.06/OTMT GDS. Amr Hussein Elalfy, CFA +(202) 333 1 8349 [email protected]

Yehia El-Sherbiny 1 Those not qualifying as eligible GDS holders will have their underlying OTMT ordinary +(202) 333 1 8368 shares sold and proceeds distributed to them. [email protected]

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January 22, 2012

Table of Contents

Orascom Telecom Holding (OTH) ...... 3 Valuation and Recommendation...... 4

Scenario analysis ...... 4 VimpelCom close to reaching an agreement on Djezzy ...... 5 Sum-of-the-parts valuation ...... 5 Investment Rationale...... 6 Risks to our recommendation ...... 6 What’s in the market price? ...... 7

Four different views with implied valuation ...... 7 Will VimpelCom consider buying out ORTE's minorities? ...... 9 Preview & change of estimates ...... 10

4Q11 preview ...... 10 Change in estimates ...... 10 Financial forecasts ...... 12

Orascom Telecom Media & Technology Holding (OTMT) ...... 16 Valuation and Recommendation...... 17

Sum-of-the-parts valuation ...... 17 Investment Rationale...... 18 Risks to our recommendation ...... 18 The Demerger ...... 19

Procedures ...... 19 Corporate structure ...... 19 OTMT's share buyback ...... 21

OTMT's Mobinil put option...... 22

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January 22, 2012

Orascom Telecom Holding (OTH) STRONG BUY (UPGRADED) LTFV: EGP4.8 | USD4.0 It's all about Algeria…for now TP: EGP3.9 | USD3.2

In this note, we update our forecasts and valuation for ORTE’ shares (post- COMPANY SYNOPSIS demerger). We believe recent negotiations between VimpelCom and the Orascom Telecom Holding (OTH) is a leading regional Algerian government over Djezzy, coinciding with the ORTE-OTMT mobile operators and among the largest in the Middle East and Africa. ORTE’s GSM networks cover 10 main countries demerger, would act as a catalyst for ORTE's ordinary shares once they with a total population of around 490mn. OTH operates GSM start trading on the EGX on Sunday, Jan. 22, 2012. Post-demerger, we used operations in Egypt, , Algeria, and . In December 2005, OTH had acquired 19.3% of Hutchison four different probability-weighted scenarios for the final outcome of Telecom International Limited (HTIL) for USD1.3bn. After VimpelCom's negotiations with the Algerian government. Our weighted receiving USD793mn in special dividends from HTIL's sale of Hutch Essar, OTH sold its entire stake in HTIL for a total scenario-based valuation is EGP3.9/share (USD3.2/GDS), which we set as value of USD1.3 bn. Historically, OTH had restructured its our target price. Thus, we upgrade ORTE from Buy to Strong Buy on operation with a wave of divestiture, selling its stakes in the Jordanian mobile operator, Fastlink and nine GSM mobile potential upside from a resolution of its 2-year-long problem in Algeria. operators in Africa, in addition to Loteny (Ivory Coast), Oasis Telecom (DRC), and Libertis Telecom (Congo Brazzaville). Will a Djezzy sale entice VimpelCom to buy out ORTE minorities? Resolving In December 2007, OTH sold its GSM operator in Iraq to Zain for USD1.2bn and in 4Q10 OTH sold its stake in Djezzy’s dispute remains the catalyst for ORTE’s share performance. Indeed, the Tunisiana (Tunisia) for USD1.2bn. Early 2008, OTH has GDS has jumped 16% since Jan. 6, 2012, on the back of news that negotiations been granted the first 25-year commercial license to provide are currently taking place between VimpelCom and the Algerian government to mobile services in the , with an exclusivity period of four years. In partnership with Canada-based Globalive, sell 51% of Djezzy to the latter, albeit with no price or timeline given. This is in line OTH won an AWS spectrum in Canada which started with our most likely scenario dated Nov. 2, 2010 where we suggested ORTE could operations at end of 2009 under the brand name WIND sell a sizable stake in Djezzy to the Algerian government to secure its support Mobile. In 2010, Russia’s VimpelCom signed an agreement with (shareholder of OTH) to merge their going forward while maintaining management of the operation. If a deal is struck, telecom assets, creating the world’s sixth-largest mobile we believe VimpelCom would rather opt for a debt pay-down by ORTE, thus company by subs. As per the agreement, OTH will spin off a releasing some USD2.3bn net of tax. This suggests a further potential upside for number of its assets, not intended to form part of the ORTE down the line if VimpelCom decides to buy out ORTE's minorities. VimpelCom-Wind Telecom group, into a new company, Orascom Telecom Media & Technology Holding (OTMT). ORTE-OTMT demerger implemented: The VimpelCom-Algeria negotiations SHAREHOLDER STRUCTURE coincide with the final phase of the ORTE-OTMT demerger process, which could Wind Telecom (100% owned by VimpelCom) 51.7% act as yet another catalyst for ORTE's ordinary shares with the resumption of Free Float 48.3% trading on EGX. However, current ORTE's GDS holders could be subject to Total 100.0% liquidity risk related to their OTMT GDSs until a GDS program is established STOCK DATA Reuters; Bloomberg ORTE.CA/ORTEq.L; ORTE EY (expected in 1Q12). Recent price as of 20-Jan-12 USD 1.89 No. of O/S GDRs 1,049 mn Valuation and recommendation: We revised our consolidated estimates for Market cap USD 1,983.7 mn ORTE (pre-demerger) in view of 9M11 performance, valuing ORTE (post- 52-wk high / low USD4.21/ USD0.64 Avg. daily volume / turnover 1.58 mn / USD 3.91 mn demerger) using on a DCF-based sum-of-the-parts model. We reached a post- demerger long-term fair value (LTFV) of EGP4.8/share (USD4.0/GDS) versus STOCK PERFORMANCE | 52 WEEKS

EGP5.4/share (USD4.6/GDS), adjusted for ORTE's post-demerger structure. Our Volume ORTE EGX 30 - rebased target price (TP), however, is now based on four different probability-weighted USD mn GDS scenarios for Djezzy, suggesting an almost-unchanged TP for ORTE’s shares 4.5 12 4.0 (post-demerger) of EGP3.9/share (USD3.2/GDS) versus from EGP3.8/share 10 3.5 (USD3.2/GDS). All in all, we upgrade ORTE from Buy to Strong Buy on potential 3.0 8 upside from a partial sale of Djezzy and resolution of the 2-year-long dispute with 2.5 6 the Algerian government. 2.0 1.5 4 1.0 USD mn 2009 a 2010 a 2011 e 2012 e 2013 e 2 0.5

Revenues 5,065 3,826 3,981 4,027 4,139 0.0 - Growth rate -4.9% -24.5% 4.1% 1.2% 2.8% Jan- Mar- Jun- Aug- Oct- Jan- Mar- Jun- Aug- Oct- Dec- 10 10 10 10 10 11 11 11 11 11 11 EBITDA 2,172 1,584 1,874 1,866 1,915 Growth rate -8.8% -27.1% 18.3% -0.4% 2.6% EBITDA margin 42.9% 41.4% 47.1% 46.3% 46.3% Source: Bloomberg Net income 318 743 835 343 409 Growth rate -25.7% 133.6% 12.3% -58.9% 19.1% Net margin 6.3% 19.4% 21.0% 8.5% 9.9% Amr Hussein Elalfy, CFA PER 10.7x 4.6x 4.1x 9.9x 8.3x +(202) 333 1 8349 P/BV 2.7x 1.3x 0.9x 0.9x 0.8x [email protected] Prop. EV/EBITDA 4.7x 4.9x 3.4x 3.3x 2.9x Prop. net debt/EBITDA 2.9x 2.9x 1.6x 1.4x 1.0x Yehia El-Sherbiny Dividend yield 2.7% 0.0% 0.0% 0.0% 0.0% +(202) 333 1 8368 Source: Company reports and CI Capital Research estimates – Pre-demerger figures [email protected]

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January 22, 2012 Valuation and Recommendation

Scenario analysis

Djezzy continues to be the catalyst for ORTE’s stock performance. The recently- signed non-binding memorandum of understanding (MoU) between VimpelCom Sale of 51% of Djezzy and the Algerian government to sell a 51% stake in Djezzy to the latter can be is our most probable viewed as a potential end to a 2-year-long dispute that dates back to late 2009. scenario Instead of simply using a multiple-based sum-of-the-parts valuation model, we used a probability-weighted scenario analysis, given four different scenarios for the sale of Djezzy to the Algerian government at different valuation points. Our most likely scenario is the sale of 51% to the Algerian government with ORTE retaining management and consolidation of operations within its financials. For each scenario, we used the following:

(i) Djezzy valued according to each scenario (please read below), (ii) We estimate Djezzy has so far accumulated a net cash position of around USD1bn, (iii) 4.5x EV/EBITDA multiple for all other GSM operations, (iv) A holding-level net debt of USD2.7bn.

We reached a target price for ORTE of EGP3.9/share (USD3.2/GDS). This represents a 125% (72%) upside potential for the ordinary shares (GDSs).

Scenario 1: Selling 96.8% of Djezzy (100% @ USD6.5bn), a 5% probability In the first scenario, we assume the sale of ORTE’s entire 96.8% stake in Djezzy at an equity value of USD6.5bn. This implies a 2012e EV/EBITDA multiple of 5.1x and translates into EGP6.0/share (USD5.0/GDS) for ORTE.

Scenario 2: Selling 51% of Djezzy (100% @ USD5.5bn), a 45% probability Our most-likely scenario (Scenario 2) is the sale of a majority stake or 51% in Djezzy to the Algerian government at an equity value of USD5.5bn, with ORTE retaining management and consolidation of the operation in its financials. This implies a 2012e EV/EBITDA multiple of 4.2x. We valued the remaining 45.8% (96.8% less 51%) stake at USD2.3bn based on our 100% DCF-based valuation today of USD5bn. This translates into EGP5.3/share (USD4.5/GDS) for ORTE.

Scenario 3: Status quo: No sale, 100% of Djezzy @ USD3bn (1.8x EV/EBITDA), a 20% probability In the third scenario, we assume VimpelCom fails to reach an agreement with the Algerian government. This, in our opinion, will push VimpelCom to seek arbitration to resolve the dispute once and for all. This would mean that Djezzy would continue to be pressured (operationally) by Algerian government throughout the arbitration process. Under our third scenario, we value Djezzy at USD3bn, implying a 2012 EV/EBITDA multiple of 1.8x, which translates into EGP3.3/share (USD2.8/GDS) for ORTE.

Scenario 4: Status quo: No sale, Djezzy as implied by ORTE's market price prior to the negotiations news, a 30% probability In the fourth scenario, we assume failure of the agreement as in the third scenario. Our assumption is for ORTE's market price to revert to levels seen prior to the announcement of the negotiations between VimpelCom and the Algerian government (i.e. market price as of Jan. 6, 2012 or USD2.8/GDS). This would imply a 2012e EV/EBITDA multiple of 0.5x for Djezzy or USD1.57bn for 100% of Djezzy.

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January 22, 2012 Figure 1| Summary of Djezzy possible scenarios Post demerger ORTE's Weighted price value/scena Djezzy for each Algeria ORTE's Net Implied Net ORTE's remaining cash ORTE's EV/ EGP/ USD/ Prob- EGP/ USD/ ORTE's Stake capital remaining stake from ORTE's equity Scenario EBITDA share GDS ability share GDS Equity stake sold gain stake value* sale stub value (1) (2) (3) (1) x (3) (2) x (3)

1. 96.8% sold, 100% equity valued at USD6.5bn. 5.1x 6.01 5.01 5% 0.30 0.25 6,500 6,293 96.8% 4,209 0.0% - 5,240 1,408 6,649

2. 51% sold, 100% equity valued USD5.5bn. 4.2x 5.34 4.45 45% 2.40 2.00 5,500 5,325 51.0% 1,809 45.8% 2,306 2,353 1,408 6,067

3. Status quo: No sale, go for arbitration (at 1.8x EV/EBITDA). 1.8x 3.33 2.78 20% 0.67 0.56 3,000 2,904 0.0% - 96.8% 2,904 - 1,408 4,312

4. Status quo: No sale, go for arbitration (at Jan. 6, 2012 price). 0.5x 1.74 1.45 30% 0.52 0.44 1,570 1,520 0.0% - 96.8% 1,520 - 1,408 2,928 100% 3.89 3.25

* For Scenarios 1 & 2, remaining stake in Djezzy is valued at our DCF valuation today. EGP USD Old TP 3.8 3.2 New TP 3.9 3.2 % change 2% 1% Mkt price 1.73 1.89 % up/(dn) 125% 72% Source: CI Capital Research estimates

VimpelCom close to reaching an agreement on Djezzy

Since 2010, the Algerian government had been repeatedly expressing its interest MoU still considers to acquire Djezzy. Finally, it signed an MoU with VimpelCom to explore the althernative acquisition possibility of acquiring a majority stake (c.51%) while considering alternative acquisition scenarios that could be mutually beneficial to both parties: VimpelCom scenarios and the Algerian government. While the price and timeline of the transaction were not yet disclosed, the agreement is for VimpelCom (and consequently ORTE) to retain management and consolidation of Djezzy in their financials under International Financial Reporting Standards (IFRS).

Sum-of-the-parts valuation

We revised our consolidated estimates for ORTE in view of 9M11 performance, LTFV downgraded; yet valuing ORTE (post-demerger) using our usual DCF-based sum-of-the-parts market price still offers model to reach an LTFV. We reached a post-demerger LTFV of EGP4.8/share (USD4.0/GDS) versus the old EGP5.4/share (USD4.6/GDS), adjusted for ORTE's huge upside post-demerger structure. The main changes in our LTFV versus our note dated April 18, 2011 are as follows:

. Algeria: Up 30% from USD4.3bn to USD5.6bn. . Pakistan: Down 29% from USD1.5bn to USD1.1bn. . Canada: Cut from USD766mn to a negative USD461bn.

Although we have not used it to reach our TP, we note that a multiple-based sum- of-the-parts valuation would imply valuation of EGP5.9/share (USD4.9/GDS) versus the old EGP3.8/share (USD3.2/GDS), adjusted for ORTE's post-demerger

structure. Please see Figure 3.

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January 22, 2012 Figure 2| DCF-based sum-of-the-parts valuation

Orascom Telecom Holding (OTH) USD In 12 months Avg. Attrib. Equity Equity WACC (Net Equity Equity Equity equity per per Equity Valuation Account- (2012e- debt)/ (at beg. (as of (in 12 (in 12 % ex- share GDR Company Country stake % method ing method 2020e) EV Net cash of 2012) today) months) months) ND (EGP) (USD)

Djezzy - Algeria 96.8% DCF Full cons. 17.2% 3,934 1,056 4,991 5,035 5,800 5,615 82% 6.41 5.37 Mobilink - Pakistan 100.0% DCF Full cons. 15.4% 1,601 (667) 934 943 1,093 1,093 16% 1.25 1.04 - Bangladesh 100.0% DCF Full cons. 13.3% 758 (286) 472 475 529 529 8% 0.60 0.51 WIND Mobile - Canada 65.4% DCF Equity 8.6% (29) (615) (644) (648) (704) (461) -7% (0.53) (0.44) Telecel Globe (1) - Sub Saharan Africa 100.0% DCF Full cons. 19.8% 93 - 93 94 112 112 2% 0.13 0.11 Sub-total investments 6,889 100% 7.86 6.59 OTH's separate net debt (2) 100.0% (2,666) (2,666) (2,666) (2,666) (3.04) (2.55) OTH group 4,223 4.82 4.04

No. of outstanding local shares (mn) 5,229 EGP USD No. of outstanding GDRs (mn) 1,046 Old LTFV 5.4 4.6 New LTFV 4.8 4.0 Note: All figures are in million except for share data; OT's local share and GDR prices as of April 18, 2011. % change -11% -12% (1) CAR, , and . Recent price 1.73 1.89 (2) As of Sep. 30, 2011. % up/(dn) 179% 114% Source: Company reports, Bloomberg, and CI Capital Research estimates

Figure 3| Multiple-based sum-of-the-parts valuation USD

Equity Equity Net per per Equity EBITDA EV debt Attrib. % of total share GDR Company Country Valuation method stake % 2012e 2012e 2012e Equity Equity GSM (EGP) (USD)

Orascom Telecom Holding (OTH) Djezzy - Algeria EV/EBITDA @ 4x 96.8% 1,069 4,275 1,056 5,331 5,161 66% 5.89 4.93 Mobilink - Pakistan EV/EBITDA @ 4.5x 100.0% 433 1,948 (493) 1,455 1,455 19% 1.66 1.39 Banglalink - Bangladesh EV/EBITDA @ 4.5x 100.0% 205 921 (192) 729 729 9% 0.83 0.70 WIND Mobile (1) - Canada @ net debt 65.4% (108) N/A (550) 550 360 5% 0.41 0.34 Telecel Globe (2) - Sub Saharan Africa EV/EBITDA @ 4.5x 100.0% 27 121 - 121 121 2% 0.14 0.12 Sub-total investments 7,826 100% 8.93 7.48 OT's separate net debt (3) 100.0% (2,666) (2,666) (2,666) (3.04) (2.55) OTH group 5,160 5.89 4.93

No. of outstanding local shares (mn) 5,229 EGP USD No. of outstanding GDRs (mn) 1,046 Old TP 3.8 3.2 New TP 5.9 4.9 Note: All figures are in million except for share data; OT's local share and GDR prices as of April 18, 2011. % change 55% 54% (1) We used the lower end of OT's suggested range of investment there as a minimum required return of capital. Mkt price 1.79 1.14 (2) CAR, , Burundi, and Zimbabwe. % up/(dn) 230% 334% Source: Company reports, Bloomberg, and CI Capital Research estimates

Investment Rationale

. Leading positions in core markets (Algeria and Pakistan). . The Algerian government's tax claims of USD230mn already priced in. . ORTE (post-demerger) should not be affected by developments in Egypt. . Algeria remains to be the single key driver of ORTE's stock performance. . Potential long-term growth to come from value-added services (VASs). . Possible buyout of minorities by VimpelCom, provided a Djezzy partial sale. Risks to our recommendation

. Failure of current negotiations between VimpelCom and the Algerian government over Djezzy. . Global recession may result in further deterioration of ORTE markets. . Worse-than-expected ARPU erosion may dent revenue growth. . Macroeconomic slowdown, FX fluctuations, and political instability in core markets.

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January 22, 2012 What’s in the market price?

Four different views with implied valuation

One can take as many views as anyone can imagine, slice it and dice it, etc. But we believe it will all boil down to a few important views, which we highlight below. We start with what's implied given ORTE's last traded GDS price of USD3.26. Applying the 58%-42% split for ORTE and OTMT, respectively, we get USD1.89/GDS for ORTE and USD1.37/GDS for OTMT. This translates into EGP2.27/share for ORTE and EGP1.64/share for OTMT. Now, the question is which one is undervalued and which is overvalued. The answer is short and simple: It depends!

Figure 4| What's in the price – First view First View: Based on OTH & Mobinil mkt price (Djezzy and other operations implied)

Per GDS (USD) (3) Per local share "LS" (EGP) 24-Nov-11 19-Jan-12 % chg. 24-Nov-11 19-Jan-12 % chg. 19-Jan-12 % chg. (1) (1) (1) (2) (3)

ORTE (pre-demerger) 2.34 3.26 39% 2.98 3.91 31% 3.91 31%

ORTE (post-demerger) 1.36 1.89 39% 1.73 2.27 31% 2.75 59% …of which Djezzy 1.36 1.89 39% 1.73 2.75 59% Djezzy 100% equity (USD bn) 1.5 2.0 39% 1.6 2.5 59% Implying a 2012e EV/EBITDA 0.4x 0.9x 0.5x 1.3x …of which other opcos 2.55 2.55 3.06 3.06 …and holding's net debt (2.55) (2.55) (3.06) (3.06)

OTMT (post-demerger) 0.98 1.37 40% 1.25 1.64 32% 1.17 -7% …of which EMOB 0.51 0.44 -14% 0.62 0.53 -14% 0.53 -14% Given EMOB price of … 92.88 80.10 92.88 80.10 -14% 80.10 -14% …of which North Korea + others 0.47 0.93 99% 0.63 1.11 75% 0.63 0%

(1) Assuming a split ratio of 58% ORTE (post-demerger) and 42% OTMT. (2) Based on GDS-equivalent value for local shares.

(3) - ORTE (pre-demerger) local share price is implied from recent GDS market price. - OTMT (post-demerger) share price is implied from Mobinil's lower share price. - ORTE (post-demerger) = ORTE (pre-demerger) - OTMT (post-demerger). Source: Bloomberg and CI Capital Research estimates

First view: Both ORTE and Mobinil taken at market price

. Given ORTE’s recent GDS price of USD3.26 and Mobinil's recent share price of EGP80.1, we calculate OTH's local shares could shoot as high as 59% to EGP2.75, whereas OTMT local shares could drop by as much as 7% to EGP1.17. We reach this by taking Mobinil at market price, North Korea & others at their implied valuation as of Nov. 24, 2011 and backing it out from ORTE's implied pre-demerger local share price.

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Figure 5| What's in the price – Second, Third, and Fourth views Second View: Djezzy @ our Third View: Mobinil @ our Fourth View: Djezzy & Mobinil target price target price @ our target price GDS LS GDS LS GDS LS (USD) Up/ (EGP) Up/ (USD) Up/ (EGP) Up/ (USD) Up/ (EGP) Up/ FV (dn) FV (dn) FV (dn) FV (dn) FV (dn) FV (dn) 19-Jan-12 19-Jan-12

ORTE (pre-demerger) 6.12 88% 7.34 146% 3.23 -1% 3.88 30% 6.28 93% 7.53 153%

ORTE (post-demerger) 4.93 161% 5.92 242% 1.89 0% 2.27 31% 4.93 161% 5.92 242% …of which Djezzy 4.93 5.92 1.89 2.27 4.93 5.92 Djezzy 100% equity (USD bn) 5.3 161% 5.3 115% 2.0 0% 2.0 -17% 5.3 161% 5.3 115% Implying a 2012e EV/EBITDA 4.0x 4.0x 0.9x 0.9x 4.0x 4.0x …of which other opcos 2.55 3.06 2.55 3.06 2.55 3.06 …and holding's net debt (2.55) (3.06) (2.55) (3.06) (2.55) (3.06)

OTMT (post-demerger) 1.18 -14% 1.42 14% 1.34 -2% 1.61 29% 1.34 -2% 1.61 29% …of which EMOB 0.44 0.53 0.60 0.72 0.60 0.72 Given EMOB price of … 80.10 80.10 109.00 109.00 109.00 109.00 …of which North Korea + others 0.74 0.89 0.74 0.89 0.74 0.89

Source: Bloomberg and CI Capital Research estimates

Second view: Djezzy valued @ our target price, Mobinil @ market price, North Korea & Others @ our target price

. Valuing Djezzy at a 2012e EV/EBITDA of 4x and taking Mobinil's recent share price of EGP80.1, we calculate OTH's local shares could shoot as high as 242% to EGP5.92, whereas OTMT local shares could increase by 14% to EGP1.42, considering our target price for North Korea & others.

Third view: Djezzy valued @ market-implied valuation, Mobinil @ our target price, North Korea & Others @ our target price

. Using Djezzy's implied valuation from ORTE's recent GDS price and valuing Mobinil at our target price of EGP109, we calculate OTH's local shares could shoot as high as 31% to EGP2.27, whereas OTMT local shares could increase by 29% to EGP1.61, again considering our target price for North Korea & others.

Fourth view: Djezzy valued @ our target price, Mobinil @ our target price,

North Korea & Others @ our target price

. Valuing all Djezzy, Mobinil, and North Korea & others at our target prices, we calculate OTH's local shares could shoot as high as 242% to EGP5.92, whereas OTMT local shares could increase by 29% to EGP1.61.

In a nutshell, the fact that ORTE's GDSs have been traded freely over the past two months meant that OTMT's GDSs have implicitly gone up by the same percentage when in essence it should have been only OTH's GDS in view of positive news coming from Algeria. When we also take into account that Mobinil's share price has actually come down by 14% since Nov. 24, 2011 to-date, we realize that OTMT GDSs should have actually traded lower as a result but rather they were inflated by OTMT's 42% split ratio as a percentage of ORTE's recent GDS price.

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January 22, 2012 Will VimpelCom consider buying out ORTE's minorities?

In our most-likely scenario (Scenario 2, a 45% probability), we expect ORTE to We expect no special book an after-tax net capital gain of around USD1.8bn. We do not expect ORTE to dividends from ORTE, distribute any dividends to its shareholders before 2014. Instead, we believe sale but an improved credit proceeds (which we estimate at USD2.3bn, net of tax) will probably be used to pay down ORTE’s outstanding debt, mainly due to VimpelCom, ORTE's holding profile; yet opening the company. That would, however, mean an improved credit profile for ORTE with its door for an ORTE net debt reduced from USD2.7bn to only c.USD300mn, pushing net debt/EBITDA minorities buyout by lower from 1.4x to just 0.2x. Thus, a debt pay-down would bring that cash amount VimpelCom? back up to VimpelCom's coffers, raising yet another question: What will VimpelCom do with that cash? We think it can either pay out a special dividend to its own shareholders or potentially invest it back into ORTE by buying out ORTE minorities. We calculate that USD2.3bn translates into a share price of USD4.66/ post-demerger ORTE GDS or a whopping 146% upside off post-demerger adjusted market price of USD1.98/GDS. This implies VimpelCom would have room to put a respectable premium that all minorities cannot resist. It all depends on when (if at all) VimpelCom will make such a move. In Figure 7, we show different assumed premiums for ORTE's post-demerger GDS and how they will reflect on VimpelCom's net debt/EBITDA ratio. For example, a 30% premium to ORTE's implied post-demerger market price of USD1.89, will reduce VimpelCom's net debt/EBITDA from a current 2.42x to 2.30x and would only use around 50% of sale proceeds or USD1.2bn.

Figure 6| Implied post-demerger ORTE GDS price given USD2.3bn cash

No. of shares Implied (mn) Value price Upside Wind Telecom (VIP) 51.70% 541 Minorities 48.30% 505 2,353 4.66 146%

Total 100.00% 1,046 Source: CI Capital Research estimates

Figure 7| VimpelCom's net debt/EBITDA given different premiums paid to ORTE's minorities VIP's adj. VIP's adj. VIP's adj. VIP's adj. ND/EBITDA ND/EBITDA VIP's Cash VIP's adj. ND/EBITDA ND/EBITDA (ORTE @ (ORTE @ VIP's net debt EBITDA VIP's net proceeds VIP's adj. net (ORTE @ (ORTE @ 108% 146% 2011e 2011e debt/EBITDA (Scenario 2) net debt debt/EBITDA 30% prem.) 69% prem.) prem.) prem.)

22,017 9,095 2.42x 2,353 19,664 2.16x 2.30x 2.34x 2.38x 2.42x

Cash value paid to ORTE's minorities (48.3%) 955 1,241 1,612 1,982 2,353 % of cash used 41% 53% 69% 84% 100% Assumed ORTE's post-demerger valuation (USD/post-demerger ORTE) 1.89 2.46 3.19 3.92 4.66

Assumed premium to ORTE's post-demerger market price 0% 30% 69% 108% 146% Figures are in USD million, except per GDS. Source: Bloomberg and CI Capital Research estimates

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January 22, 2012 Preview & change of estimates

4Q11 preview

For 4Q11, we expect ORTE to continue its healthy operational performance, GSM EBITDA to ending the quarter with 77.2mn consolidated subscribers (excluding Mobinil, Wind support the group’s Mobile, and Namibia), up 2% QoQ and 10% YoY. On the ARPU front, we expect a slight drop of 1% QoQ in 4Q11 ARPU to USD4.2, which continues to be supported 47.1% 4Q11 EBITDA by Djezzy’s stable ARPU of USD9.8. Algeria is expected to remain the main driver for revenues and EBITDA, 4Q11 consolidated revenues are expected stabilize QoQ at USD1bn, still driven by Algeria’s 48% share of revenues. Consolidated EBITDA margin is likely to witness a minor decline QoQ to record 47.1%. Still, we believe it is a very healthy level, supported by GSM EBITDA margin of 50%. Net earnings, after minority interest, are expected to reach USD81mn, compared to a net loss of USD1mn in 3Q11 and a net loss of USD179mn in 4Q10.

Change in estimates

We have slightly trimmed down our estimates for ORTE’s revenues over 2011e- Revenues trimed by 13e by an average of 4% p.a., mainly due to downgrading our estimates for North 4% p.a. vs. previous Korea’s, Telecel's, and non-GSM revenues by an average of 27%, 20%, and 48% p.a., respectively, over the same period, while upgrading our revenue estimates estimates for Algeria and Pakistan by 6% and 4% p.a., respectively.

Maintaining our positive view on ORTE’s future operational performance, we EBITDA margin upgraded our EBITDA margin estimates for 2011e-13e by an average of 6.3pp upgraded on the back p.a. to reach 46.3% by 2013. Such an upgrade comes on the back of upgrading Algeria’s EBITDA margin estimates by an average 3.9pp p.a. to 57.1% by 2013. of Algeria’s

We have upgraded our consolidated capex estimates for ORTE over 2011e-13e, Capex to increase in increasing from USD536mn in 2011 to USD867mn in 2012 and reaching 2012-13e on the back USD744mn by 2013. This comes on the back of our scenario of resolving the company’s dispute with the Algerian government. Over all, ORTE’s consolidated of resolving the capex will average 17.7% as a percentage of revenues over 2011e-13e. Algerian dispute

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January 22, 2012 Figure 8| Change in CICRe forecasts (2011e-13e)

2011 e 2012 e 2013 e Old New Chg. Old New Chg. Old New Chg.

EOP subs (mn)* 109.7 109.1 0% 116.4 116.4 0% 123.1 123.2 0% Djezzy 15.7 16.5 5% 16.4 17.0 4% 17.0 17.6 3% Mobilink 33.3 33.5 1% 34.2 33.6 -2% 35.3 33.7 -4% Mobinil 33.2 31.4 -5% 35.2 32.9 -7% 37.1 34.4 -7% Banglalink 22.2 23.4 6% 23.5 26.5 13% 24.6 29.3 19% Koryolink 0.6 0.9 45% 1.4 1.1 -21% 2.6 1.4 -47% WIND Mobile 0.9 0.6 -30% 1.4 1.6 11% 1.8 2.5 40% Telecel Globe 4.0 3.0 -25% 4.3 3.6 -16% 4.7 4.3 -9%

USD Total ARPU 4.1 4.3 3% 4.0 4.0 -1% 4.0 3.9 -3% Djezzy 9.3 9.8 5% 9.0 9.1 0% 8.9 9.1 2% Mobilink 2.6 2.7 4% 2.5 2.7 5% 2.4 2.6 7% Banglalink 2.2 1.9 -10% 2.1 1.8 -11% 2.0 1.7 -13% Koryolink 16.1 13.9 -14% 14.4 11.7 -19% 12.6 10.0 -21% Telecel Globe 5.6 5.8 4% 5.5 6.2 13% 5.5 5.5 0%

USD mn Consolidated revenues 4,000 3,981 0% 4,220 4,027 -5% 4,494 4,139 -8% Djezzy 1,757 1,893 8% 1,785 1,854 4% 1,822 1,925 6% Mobilink 1,067 1,128 6% 1,062 1,110 5% 1,052 1,077 2% Banglalink 548 519 -5% 573 585 2% 581 625 8% Koryolink 141 150 6% 269 189 -30% 471 203 -57% Telecel Globe 119 90 -24% 138 90 -35% 105 104 -1% Total GSM 3,632 3,779 4% 3,827 3,828 0% 4,075 3,934 -3% Non GSM 367 203 -45% 393 199 -49% 418 205 -51%

Consolidated EBITDA 1,608 1,874 17% 1,697 1,866 10% 1,818 1,915 5% Djezzy 966 1,115 15% 964 1,069 11% 966 1,100 14% Mobilink 408 456 12% 398 433 9% 395 420 6% Banglalink 165 189 14% 187 205 9% 204 219 7% Koryolink 78 123 58% 148 151 2% 250 162 -35% Telecel Globe 32 19 -41% 38 27 -30% 43 31 -28% Total GSM 1,649 1,902 15% 1,736 1,885 9% 1,857 1,932 4% Non GSM (41) (27) -34% (39) (19) -53% (39) (17) -56%

Consolidated EBITDA margin 40.2% 47.1% 6.9pp 40.2% 46.3% 6.1pp 40.5% 46.3% 5.8pp Djezzy 55.0% 58.9% 3.9pp 54.0% 57.6% 3.6pp 53.0% 57.1% 4.1pp Mobilink 38.2% 40.4% 2.2pp 37.5% 39.0% 1.5pp 37.5% 39.0% 1.5pp Banglalink 30.1% 36.4% 6.3pp 32.7% 35.0% 2.3pp 35.1% 35.0% -0.1pp Koryolink 55.0% 81.8% 26.8pp 55.0% 80.0% 25.0pp 53.1% 80.0% 27.0pp Telecel Globe 27.0% 21.2% -5.8pp 28.0% 30.0% 2.0pp 41.0% 30.0% -11.0pp Total GSM 45.4% 50.3% 4.9pp 45.4% 49.2% 3.9pp 45.6% 49.1% 3.5pp Non GSM -11.2% -13.4% -2.2pp -10.0% -9.4% 0.6pp -9.3% -8.4% 0.9pp

Net earnings 1,002 835 -17% 305 343 12% 391 409 5% Normalized net earnings** 278 388 40% 305 343 12% 391 409 5%

Consolidated capex 707 536 -24% 674 867 29% 711 744 5% Djezzy 219 34 -85% 214 371 73% 219 289 32% Mobilink 128 207 61% 106 189 78% 105 172 64% Banglalink 191 132 -31% 143 146 2% 116 125 8%

Koryolink 71 57 -19% 121 66 -45% 188 61 -68% Telecel Globe 18 20 12% 17 15 -7% 18 17 -8% Total GSM 627 449 -28% 602 787 31% 646 664 3% Non GSM 80 86 8% 72 80 11% 65 80 23%

Consolidated capex/rev. 17.7% 13.5% -4.2pp 16.0% 21.5% 5.6pp 15.8% 18.0% 2.1pp Djezzy 12.5% 1.8% -10.7pp 12.0% 20.0% 8.0pp 12.0% 15.0% 3.0pp Mobilink 12.0% 18.3% 6.3pp 10.0% 17.0% 7.0pp 10.0% 16.0% 6.0pp Banglalink 34.9% 25.4% -9.6pp 25.0% 25.0% 0.0pp 20.0% 20.0% 0.0pp Koryolink 50.0% 38.2% -11.8pp 45.0% 35.0% -10.0pp 39.9% 30.0% -9.9pp Telecel Globe 15.0% 22.2% 7.2pp 12.0% 17.0% 5.0pp 17.1% 16.0% -1.1pp Total GSM 17.3% 11.9% -5.4pp 15.7% 20.6% 4.8pp 15.9% 16.9% 1.0pp Non GSM 21.8% 42.7% 20.9pp 18.3% 40.2% 21.9pp 15.6% 39.0% 23.5pp

Consolidated simple FCF 901 1,339 49% 1,023 999 -2% 1,107 1,171 6% * Including Mobinil subs. ** Adjusted for XO items & FX. Source: Company reports, Bloomberg, and CI Capital Research estimates

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January 22, 2012 Financial forecasts

Summary Income Statement 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Consolidated revenues 5,327 5,065 3,826 949 1,002 1,010 1,020 3,981 1,015 1,012 1,005 995 4,027 4,139 4,250 Djezzy 2,041 1,868 1,747 439 477 487 490 1,893 476 468 460 451 1,854 1,925 1,882 Mobilink 1,208 1,058 1,107 275 292 281 279 1,128 281 279 276 274 1,110 1,077 1,063 Mobinil 891 944 ------Tunisiana 326 357 ------Banglalink 288 351 457 126 127 129 136 519 143 145 147 150 585 625 633 Koryolink 0 26 66 26 35 41 47 150 48 47 47 47 189 203 345 Telecel Globe 25 81 102 25 24 21 20 90 21 22 23 24 90 104 115 GSM revenues 4,779 4,685 3,479 891 956 960 972 3,779 968 962 954 945 3,828 3,934 4,038 Telecom services revenues 472 291 261 50 34 37 38 159 38 38 38 38 151 152 153 Internet services revenues 76 89 86 9 12 12 11 44 10 13 14 12 48 53 58

Opex (2,946) (2,893) (2,241) (513) (525) (529) (540) (2,107) (538) (541) (542) (540) (2,161) (2,224) (2,287)

Consolidated EBITDA 2,381 2,172 1,584 437 476 481 481 1,874 477 471 463 455 1,866 1,915 1,963 Djezzy 1,290 1,067 982 261 283 288 284 1,115 278 271 264 256 1,069 1,100 1,035 Mobilink 492 385 438 111 118 116 112 456 110 109 108 107 433 420 415 Mobinil 430 460 ------Tunisiana 189 192 ------Banglalink 14 117 128 45 55 43 46 189 50 51 52 52 205 219 222 Koryolink (2) 17 58 23 29 33 38 123 38 38 38 38 151 162 276 Telecel Globe 2 (0) 24 4 2 7 6 19 6 7 7 7 27 31 34 GSM EBITDA 2,413 2,239 1,629 444 486 487 486 1,902 482 475 468 460 1,885 1,932 1,982 Telecom services EBITDA 31 (10) 15 1 1 5 6 14 6 6 6 6 26 27 27 Internet services EBITDA (0) 10 12 1 1 1 1 4 1 1 1 1 4 4 5 OT Holding & Others (63) (67) (72) (8) (12) (12) (12) (44) (12) (12) (12) (12) (48) (48) (50)

Depreciation and amortization (912) (984) (792) (195) (199) (203) (196) (792) (195) (197) (198) (199) (788) (791) (776) Impairment losses (39) (38) (123) (1) (2) (2) - (5) ------EBIT 1,430 1,150 669 241 275 276 285 1,077 282 274 265 256 1,078 1,124 1,187 Net interest income / (expense) (415) (416) (411) (93) (220) (69) (72) (454) (75) (73) (73) (72) (293) (267) (139) (Loss) / Gain from currency revaluation (201) 27 (78) 33 (17) (113) - (97) ------Invest. inc. and inc. from sale of subsidiaries 93 42 (20) 754 (58) (2) - 695 ------Share of loss of associates (net) (3) (47) (119) (41) (43) (37) (69) (190) (52) (51) (44) (43) (189) (157) (29) Net other income - (15) 980 (11) 59 0 - 49 ------Profit for the year before income tax 904 740 1,021 883 (3) 56 143 1,080 155 150 149 141 596 699 1,018 Income tax expense (403) (361) (239) (62) (45) (46) (50) (202) (54) (53) (52) (50) (208) (245) (326) Profit for the period 500 379 781 822 (48) 10 93 877 101 98 97 92 387 455 692

Attributable to: Shareholders of the Parent Company 428 318 743 813 (58) (1) 81 835 90 86 86 82 343 409 644 Non-controlling interests 72 61 38 9 11 11 12 43 11 11 11 10 44 46 48 Profit for the period 500 379 781 822 (48) 10 93 877 101 98 97 92 387 455 692 Note: All figures are in USD mn; 2010 figures are adjusted by CICR to exclude Tunisiana and Mobinil. Source: Company reports and CICR estimates

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January 22, 2012

Summary Balance Sheet 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e ASSETS Cash and bank balances 652 760 824 774 925 1,153 2,008 2,008 1,990 2,064 2,157 2,189 2,189 2,581 661 Trade and other receivables 328 332 259 269 265 295 298 298 303 299 294 291 291 302 310 Other current assets 705 641 1,514 1,401 1,411 1,350 1,363 1,363 1,357 1,352 1,343 1,329 1,329 1,381 1,418 Total current assets 1,685 1,732 2,596 2,444 2,600 2,798 3,670 3,670 3,650 3,715 3,794 3,809 3,809 4,264 2,389

Property and equipment 5,053 5,032 3,763 3,676 3,593 3,475 3,431 3,431 3,455 3,476 3,494 3,510 3,510 3,463 3,379 Investment in associates 80 110 1,029 936 899 889 272 272 324 345 353 361 361 432 364 Intangible assets 2,384 2,261 1,487 1,469 1,444 1,429 1,429 1,429 1,429 1,429 1,429 1,429 1,429 1,429 1,429 Other non-current assets 727 964 1,105 1,304 1,226 1,206 1,408 1,408 1,349 1,313 1,273 1,248 1,248 1,118 1,119 Total non-current assets 8,244 8,367 7,384 7,385 7,162 6,999 6,540 6,540 6,557 6,563 6,550 6,548 6,548 6,443 6,291

Total assets 9,929 10,099 9,980 9,829 9,762 9,797 10,210 10,210 10,207 10,279 10,344 10,356 10,356 10,707 8,680

LIABILITIES AND EQUITY Due to banks 530 998 973 670 491 465 376 376 273 270 268 208 208 25 121 Trade and other payables 1,186 1,043 811 777 756 751 758 758 771 760 747 739 739 768 789 Other current liabilities 1,282 1,428 1,181 1,157 1,134 1,179 1,191 1,191 1,185 1,181 1,173 1,161 1,161 1,206 1,239 Total current liabilities 2,999 3,469 2,966 2,605 2,381 2,394 2,325 2,325 2,229 2,212 2,188 2,108 2,108 1,999 2,148

Due to banks 5,205 4,874 3,859 3,181 3,317 3,354 3,744 3,744 3,736 3,727 3,719 3,720 3,720 3,724 857 Other non-current liabilities 524 340 354 377 412 426 426 426 426 426 426 426 426 426 772 Total non-current liabilities 5,729 5,214 4,214 3,558 3,730 3,780 4,171 4,171 4,162 4,153 4,145 4,146 4,146 4,150 1,629

Total equity (parent company's shareholders) 1,080 1,276 2,725 3,576 3,548 3,511 3,592 3,592 3,682 3,768 3,854 3,936 3,936 4,345 4,643 Non-controlling interests 121 140 76 90 103 111 123 123 134 146 156 167 167 212 261 Total equity 1,201 1,416 2,801 3,666 3,652 3,622 3,715 3,715 3,816 3,914 4,010 4,102 4,102 4,557 4,903

Total Liabilities and Equity 9,929 10,099 9,980 9,829 9,762 9,797 10,210 10,210 10,207 10,279 10,344 10,356 10,356 10,707 8,680

Summary Cash Flow Statement 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Operating profit before WC changes 2,372 2,199 1,651 438 472 634 481 2,025 477 471 463 455 1,866 1,915 1,963 Working capital changes (40) 82 (471) (313) 45 (5) 3 (270) 9 (6) (7) (3) (7) 11 8 Cash generated from operations 2,332 2,280 1,180 125 518 630 483 1,755 486 465 456 452 1,859 1,926 1,971 Income tax and interest paid (909) (1,094) (657) (120) (214) (3) (143) (480) (149) (146) (145) (142) (582) (593) (546) Net cash provided by operating activities 1,423 1,186 523 4 304 627 341 1,276 337 319 311 310 1,277 1,333 1,425 Net cash used in investing activities (66) (1,220) (828) (242) (44) (185) (132) (603) (185) (197) (167) (194) (744) (633) (574) Net cash from financing activities (1,902) 164 219 (1,003) (101) (41) 503 (641) (170) (47) (51) (85) (353) (308) (2,771)

Net incr./(decr.) in cash & equivalents (545) 130 (86) (1,241) 160 401 712 31 (18) 74 93 32 180 392 (1,920) Cash & equivalents at beg. of period 1,239 652 760 824 774 925 1,297 824 2,008 1,990 2,064 2,157 2,008 2,189 2,581 Others (42) (22) 151 1,191 (9) (29) - 1,153 ------Cash and cash equivalents at end of period 652 760 824 774 925 1,297 2,008 2,008 1,990 2,064 2,157 2,189 2,189 2,581 661 Note: All figures are in USD mn. Source: Company reports and CICR estimates

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January 22, 2012

Operating KPIs 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Total subscribers 78.2 91.8 106.4 102.8 103.9 107.4 109.1 109.1 110.9 112.8 114.6 116.4 116.4 123.2 129.9 Djezzy 14.1 14.6 15.1 15.5 16.0 16.3 16.5 16.5 16.6 16.8 16.9 17.0 17.0 17.6 17.9 Mobilink 28.5 30.8 31.8 32.7 33.4 33.4 33.5 33.5 33.5 33.5 33.6 33.6 33.6 33.7 35.1 Mobinil 20.1 25.4 30.2 30.4 30.5 31.6 31.4 31.4 31.7 32.0 32.5 32.9 32.9 34.4 35.7 Tunisiana 4.3 5.2 5.9 ------Banglalink 10.3 13.9 19.3 20.1 20.2 22.1 23.4 23.4 24.2 25.0 25.8 26.5 26.5 29.3 29.0 Koryolink 0.0 0.1 0.4 0.5 0.7 0.8 0.9 0.9 0.9 1.0 1.1 1.1 1.1 1.4 4.8 Wind Mobile - 0.0 0.2 0.3 0.3 0.4 0.6 0.6 0.8 1.1 1.3 1.6 1.6 2.5 2.8 Telecel Globe 0.9 1.8 3.4 3.3 2.9 2.8 3.0 3.0 3.2 3.3 3.5 3.6 3.6 4.3 4.6 Global ARPU (USD/month) - consolidated 6.5 5.8 4.0 4.2 4.3 4.3 4.2 4.3 4.1 4.0 4.0 3.9 4.0 3.9 3.8 Djezzy 12.1 10.4 9.5 9.4 9.9 9.9 9.8 9.8 9.4 9.2 8.9 8.7 9.1 9.1 8.7 Mobilink 3.3 2.9 2.8 2.8 2.8 2.7 2.7 2.7 2.7 2.7 2.6 2.6 2.7 2.6 2.5 Mobinil 8.2 7.0 5.5 4.2 4.5 4.3 4.2 4.3 4.0 4.0 4.0 3.9 4.0 3.7 3.9 Tunisiana 13.9 12.1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Banglalink 2.5 2.5 2.3 2.0 2.0 1.9 1.9 1.9 1.9 1.8 1.8 1.8 1.8 1.7 1.7 Koryolink 15.0 23.3 16.8 12.7 14.7 13.9 13.9 13.9 13.0 12.2 11.3 10.6 11.7 10.0 6.9 Wind Mobile N/A 40.0 32.1 27.4 28.5 25.9 25.3 26.5 26.1 25.6 25.3 25.2 25.5 26.1 25.5 Telecel Globe 7.0 7.6 5.7 5.6 5.6 6.0 6.0 5.8 6.1 6.2 6.3 6.3 6.2 5.5 5.6 Revenue - proportionate 4,517 4,199 3,776 931 981 989 1,000 3,902 998 998 995 988 3,931 4,040 4,120 EBITDA - proportionate 2,103 1,887 1,689 437 483 481 483 1,883 493 487 485 477 1,828 1,873 1,901 EBITDA Margin - consolidated 44.7% 42.9% 41.4% 46.0% 47.6% 47.6% 47.1% 47.1% 47.0% 46.5% 46.1% 45.7% 46.3% 46.3% 46.2% Djezzy 63.2% 57.1% 56.2% 59.4% 59.2% 59.1% 58.0% 58.9% 58.5% 57.9% 57.3% 56.8% 57.6% 57.1% 55.0% Mobilink 40.7% 36.4% 39.6% 40.3% 40.4% 41.0% 40.0% 40.4% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% 39.0% Mobinil 48.2% 48.8% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Tunisiana 57.9% 53.9% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Banglalink 4.7% 33.4% 27.9% 35.7% 42.8% 33.4% 34.0% 36.4% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% Koryolink -540.4% 66.1% 87.0% 87.6% 82.0% 80.0% 80.0% 81.8% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% 80.0% Telecel Globe 7.4% -0.2% 23.1% 17.4% 7.4% 32.8% 30.0% 21.2% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0% GSM EBITDA margin 50.5% 47.8% 46.8% 49.8% 50.8% 50.7% 50.0% 50.3% 49.8% 49.4% 49.0% 48.6% 49.2% 49.1% 49.1% Telecom services EBITDA margin 6.6% -3.5% 5.8% 1.1% 4.2% 14.4% 16.7% 8.6% 17.1% 17.1% 17.1% 17.1% 17.1% 17.5% 17.4% Internet services EBITDA margin -0.1% 11.7% 13.8% 9.2% 11.1% 6.1% 6.1% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% 8.1% EBIT Margin 26.8% 22.7% 17.5% 25.4% 27.5% 27.3% 27.9% 27.1% 27.8% 27.1% 26.4% 25.8% 26.8% 27.2% 27.9% Effective tax rate 44.7% 48.7% 23.4% 7.0% -1613.4% 81.8% 35.0% 18.8% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 32.0% Net Margin 9.4% 7.5% 20.4% 86.6% -4.8% 1.0% 9.1% 22.0% 9.9% 9.6% 9.6% 9.2% 9.6% 11.0% 16.3%

YoY growth rates 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Total subscribers 11.6% 17.4% 15.9% 8.8% 6.1% 5.2% 2.6% 2.6% 7.8% 8.5% 6.7% 6.6% 6.6% 5.9% 5.4% Global ARPU (USD per month) -7.1% -9.8% -31.0% -18.0% -15.4% -10.1% -11.5% 5.6% -1.4% -6.8% -7.1% -7.6% -5.8% -3.0% -3.0% Consolidated revenues 6.1% -4.9% -24.5% 5.3% 3.4% 3.5% 4.1% 4.1% 7.0% 1.0% -0.5% -2.5% 1.2% 2.8% 2.7% Consolidated EBITDA 16.0% -8.8% -27.1% 11.9% 20.9% 21.0% 19.5% 18.3% 9.3% -1.2% -3.7% -5.3% -0.4% 2.6% 2.5% Total subscribers - recurring 16.0% 15.4% 12.5% 11.6% 8.7% 8.7% 7.8% 8.5% 6.7% 6.6% 6.6% 5.9% 5.4% Consolidated revenues - recurring 1.6% 5.3% 3.4% 3.5% 4.1% 4.1% 7.0% 1.0% -0.5% -2.5% 1.2% 2.8% 2.7% Consolidated EBITDA - recurring 4.3% 11.9% 20.9% 21.0% 19.5% 18.3% 9.3% -1.2% -3.7% -5.3% -0.4% 2.6% 2.5% EBIT 11.5% -19.6% -41.8% 28.7% 69.3% 47.3% 230.6% 60.9% 17.1% -0.5% -3.9% -9.9% 0.1% 4.3% 5.6% Net earnings, net of minority interest -77.3% -25.7% 133.6% 3237.9% -35.0% -100.1% -145.5% 12.3% -89.0% -247.9% -8932.2% 0.2% -58.9% 19.1% 57.5%

Liquidity 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Current Ratio 0.6x 0.5x 0.9x 0.9x 1.1x 1.2x 1.6x 1.6x 1.6x 1.7x 1.7x 1.8x 1.8x 2.1x 1.1x Acid Test Ratio 0.5x 0.4x 0.8x 0.8x 1.0x 1.0x 1.5x 1.5x 1.5x 1.5x 1.6x 1.7x 1.7x 2.0x 1.0x Days' Sales Outstanding 23 24 25 26 24 27 27 27 27 27 27 27 26 27 27 Creditor Days Outstanding 81 75 77 74 69 68 68 70 68 68 68 68 67 68 68

Per share ratios and multiples 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Weighted avg. outstanding shares then (mn) 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 Weighted avg. outstanding shares (mn) 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 1,046 Adjusted EPS (USD per GDR) 0.41 0.30 0.71 0.78 (0.06) (0.00) 0.08 0.80 0.09 0.08 0.08 0.08 0.33 0.39 0.62 Adjusted DPS (USD per GDR) 0.16 0.09 ------0.33 Stock price (USD per GDR) 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 3.26 PER 8.0x 10.7x 4.6x 1.0x NM NM 10.5x 4.1x 9.5x 9.9x 9.9x 10.5x 9.9x 8.3x 5.3x Dividend yield 4.9% 2.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 10.2% EV / Revenues - consolidated 1.6x 1.7x 1.9x 1.7x 1.6x 1.5x 1.4x 1.4x 1.3x 1.3x 1.3x 1.3x 1.3x 1.1x 0.9x EV / Revenues - proportionate 1.8x 2.1x 2.2x 2.0x 1.8x 1.8x 1.6x 1.6x 1.6x 1.5x 1.5x 1.5x 1.5x 1.3x 1.1x EV / EBITDA - consolidated 3.6x 3.9x 4.7x 3.7x 3.3x 3.2x 2.9x 2.9x 2.8x 2.8x 2.8x 2.8x 2.8x 2.4x 1.9x EV / EBITDA - proportionate 3.9x 4.7x 4.9x 4.2x 3.7x 3.6x 3.3x 3.4x 3.2x 3.1x 3.1x 3.1x 3.3x 2.9x 2.3x Net debt / EBITDA - consolidated 2.1x 2.4x 2.5x 1.8x 1.5x 1.4x 1.1x 1.1x 1.1x 1.0x 1.0x 1.0x 0.9x 0.6x 0.2x Net debt / EBITDA - proportionate 2.2x 2.9x 2.9x 2.2x 2.0x 1.9x 1.5x 1.6x 1.4x 1.4x 1.3x 1.3x 1.4x 1.0x 0.6x P / BV 3.2x 2.7x 1.3x 1.0x 1.0x 1.0x 0.9x 0.9x 0.9x 0.9x 0.9x 0.9x 0.9x 0.8x 0.7x Note: All figures are in USD mn, except for margins and per-share data. Source: Company reports and CICR estimates

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January 22, 2012

Other ratios & KPIs 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Return on Equity (beg.) 15.4% 31.6% 55.2% 117.3% -5.2% 1.1% 10.3% 31.3% 10.9% 10.2% 9.9% 9.2% 10.4% 11.1% 15.2% Return on Assets (beg.) 4.4% 3.8% 7.7% 32.9% -1.9% 0.4% 3.8% 8.8% 4.0% 3.8% 3.8% 3.6% 3.8% 4.4% 6.5% Asset Turnover 0.54x 0.50x 0.38x 0.39x 0.41x 0.41x 0.40x 0.39x 0.40x 0.39x 0.39x 0.38x 0.39x 0.39x 0.49x Financial Leverage: TA/TE 8.27x 7.13x 3.56x 2.68x 2.67x 2.70x 2.75x 2.75x 2.67x 2.63x 2.58x 2.52x 2.52x 2.35x 1.77x Return on Invested Capital (beg.) 12.1% 11.4% 5.9% 9.4% 12.3% 12.3% 12.6% 11.5% 11.6% 11.3% 10.8% 10.3% 11.1% 10.9% 10.4% Working Capital / Revenue -24.7% -34.3% -9.7% -4.2% 5.5% 10.0% 33.0% 33.8% 35.0% 37.2% 39.9% 42.7% 42.2% 54.7% 5.7%

Capex - consolidated 1,595 1,038 660 91 122 170 153 536 219 218 216 215 867 744 692 Capex / revenues 29.9% 20.5% 17.3% 9.6% 12.2% 16.8% 15.0% 13.5% 21.6% 21.5% 21.5% 21.6% 21.5% 18.0% 16.3% Djezzy 167 261 90 4 10 5 15 34 95 94 92 90 371 289 226 Mobilink 537 157 143 45 52 55 55 207 48 47 47 47 189 172 159 Mobinil 275 232 ------Tunisiana 50 46 ------Banglalink 407 122 235 13 14 64 41 132 36 36 37 37 146 125 114 Koryolink - 27 47 8 13 17 19 57 17 17 17 16 66 61 104 Telecel Globe 32 39 29 4 7 6 3 20 4 4 4 4 15 17 17 Others 128 155 116 17 26 23 20 86 20 20 20 20 80 80 72 Depreciation and amortization (D&A) 951 1,022 915 196 201 205 196 798 195 197 198 199 788 791 776 D&A/Revenue 17.9% 20.2% 23.9% 20.6% 20.1% 20.3% 19.2% 20.0% 19.2% 19.4% 19.7% 20.0% 19.6% 19.1% 18.3% Consolidated free cash flow (FCF) 1,357 (34) (305) (238) 260 442 208 672 152 121 144 116 533 700 851

Debt & enterprise value 2008 a 2009 a 2010 a 1Q11 a 2Q11 a 3Q11 a 4Q11 e 2011 e 1Q12 e 2Q12 e 3Q12 e 4Q12 e 2012 e 2013 e 2014 e Total Debt - consolidated 5,735 5,872 4,833 3,852 3,809 3,819 4,120 4,120 4,008 3,998 3,987 3,928 3,928 3,749 977 Net Debt - consolidated 5,084 5,113 4,009 3,078 2,884 2,666 2,112 2,112 2,019 1,934 1,830 1,739 1,739 1,168 316 Net Debt - proportionate 4,729 5,437 4,833 3,924 3,799 3,564 2,945 2,941 2,842 2,716 2,563 2,439 2,563 1,956 1,054 Market cap 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 3,410 Enterprise value - consolidated 8,494 8,523 7,419 6,488 6,294 6,076 5,522 5,522 5,429 5,344 5,240 5,149 5,149 4,578 3,727 Enterprise value - proportionate 8,139 8,847 8,243 7,334 7,209 6,974 6,355 6,351 6,252 6,126 5,973 5,849 5,973 5,366 4,464 Debt Ratio D/A 0.58x 0.58x 0.48x 0.39x 0.39x 0.39x 0.40x 0.40x 0.39x 0.39x 0.39x 0.38x 0.38x 0.35x 0.11x Debt to Equity 4.77x 4.15x 1.73x 1.05x 1.04x 1.05x 1.11x 1.11x 1.05x 1.02x 0.99x 0.96x 0.96x 0.82x 0.20x Capitalization Ratio: D/(D+E) 83% 81% 63% 51% 51% 51% 53% 53% 51% 51% 50% 49% 49% 45% 17% EBIT / Interest 3.4x 2.8x 1.6x 2.6x 1.3x 4.0x 3.9x 2.4x 3.8x 3.7x 3.6x 3.6x 3.7x 4.2x 8.5x EBITDA / Interest 5.7x 5.2x 3.9x 4.7x 2.2x 7.0x 6.6x 4.1x 6.4x 6.4x 6.4x 6.3x 6.4x 7.2x 14.1x Note: All figures are in USD mn, except for margins and per-share data. Source: Company reports and CICR estimates

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January 22, 2012

Orascom Telecom Media & HOLD (INITIATED) Technology Holding (OTMT) LTFV: EGP1.6 | USD1.3 TP: EGP1.6 | USD1.3

A newcomer with hopes and fears COMPANY SYNOPSIS

Orascom Telecom Media & Technology Holding (OTMT) is a In this note, we set our valuation and target price for OTMT shares (post- media and telecommunication holding company, created as demerger). OTMT was created as a result of the shareholder agreement a result of the shareholders agreement between Russian telecom operator VimpelCom and Wind Telecom between Russian telecom operator VimpelCom and Wind Telecom shareholders (Owners of Orascom Telecom Holding shareholders (owners of Orascom Telecom Holding [ORTE]). The operators [ORTE]). According to the agreement, the operators are to merged their telecom assets, with the exception of a number of assets, merge their telecom assets, with the exception of a number of assets that are not intended to form part of the which were spun off in a new entity, thus creating OTMT. The demerger's VimpelCom-Wind Telecom group, which will be spun off in a last step will be taken on Jan. 22, 2012 by splitting ORTE’s (pre-demerger) new entity, thus creating OTMT. Such assets include OTH’s interests in EMOB, Koryolink in North Korea, OT Ventures ordinary shares and GDSs into ORTE (post-demerger) 58% and OTMT 42%. (formerly InTouch Communication Services), as well as other Our 12-month target price is EGP1.6/share, a 29% upside (USD1.3/GDS, a investments in the media and technology sectors, including undersea cable assets. OTMT shares had been successfully 2% downside). We note that over the very short term, however, there could list on EGX as of Jan. 3, 2012, holding the same be some sell-off in the stock, given Mobinil's stock weakness over the past shareholders structure as ORTE as of the end of EGX Nov. 24, 2011, trading session; representing 5.245bn shares at a two months and potential oversupply of shares in the market. Thus, we par value of EGP0.42/ share.

assign a Hold recommendation for OTMT based on our valuation and as supported by a put option on its Mobinil stake at more than 2.5x the latter's SHAREHOLDER STRUCTURE market price. Weather Investments shareholders 51.7% Free Float 48.3% Total 100.0% The Demerger: The demerger took place according to the Egyptian General Authority for Investment’s (GAFI) report by splitting ORTE’s (pre-demerger) STOCK DATA issued capital of EGP5.245bn into ORTE 58%, with an issued capital of Reuters; Bloomberg OTMT.CA; OTMT EY EGP3.042bn, at a par value of EGP0.58/ORTE share and OTMT with an issued Recent price as of 20-Jan-12 USD 1.37 capital of EGP2.203bn, at a par value of EGP0.42/OTMT share. Following the No. of O/S GDRs 1,049 mn Market cap USD 1,436.5 mn trading suspension, shares of both companies post-demerger were successfully 52-wk high / low USD3.05/ USD0.46 listed on EGX according to their new respective trading prices of EGP1.73/share Avg. daily volume / turnover 1.58 mn / USD 2.82 mn and EGP1.25/share. Trading will resume on Sunday, Jan. 22, 2012. STOCK PERFORMANCE | 52 WEEKS OTMT's share buyback and Mobinil's put option: We do not expect the optional share buyback program, which was said to be considered by OTMT to Volume OTMT EGX 30 - rebased USD mn GDS buy out its own minorities, to take place as the previous terms given current 3.5 12

market conditions and Mobinil's now-lower market price. The program had valued 3.0 10 OTMT at EGP1.5/share, assuming an average price for Mobinil of 2.5 8 EGP140/share. However, if the same offer were to take place today at Mobinil's 2.0 current market price, this would value OTMT at only EGP1.13/share, a discount 6 1.5 of 10% compared to its open price of EGP1.25. That said, OTMT may still 4 exercise its put option to sell its stake in Mobinil to France Telecom according to 1.0 2 their shareholder agreement signed back in April 2010. We believe this may act 0.5 as a catalyst for the stock as we approach the exercise window, even if the 0.0 - Jan- Mar- Jun- Aug- Nov- Jan- Mar- Jun- Aug- Oct- Jan- probability of an imminent exercise of the option is dim. 10 10 10 10 10 11 11 11 11 11 12

Valuation and recommendation: Our DCF-based LTFV for OTMT is EGP1.6/share (USD1.3/GDS), while our multiples-based TP is also Source: Bloomberg EGP1.6/share (USD1.3/GDS). This is a 29% upside for OTMT's local shares and a slight downside for its GDSs. We note that (1) OTMT's shares face short-term selling pressure on debut to adjust for Mobinil's now-lower stock price (c.-7% to EGP1.17/share), (2) potential oversupply of shares in the market as investors sell off "unwanted" OTMT shares, and (3) OTMT still lacks visibility of its future strategies. That said, we would rather assign OTMT a Hold from a pure valuation point of view and considering its put option to sell its Mobinil stake at more than 2.5x the latter's market price. Thus, we think OTMT's share price will be mainly Amr Hussein Elalfy, CFA driven by Mobinil's share price, for which there is price transparency. +(202) 333 1 8349 [email protected]

Yehia El-Sherbiny +(202) 333 1 8368 [email protected]

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January 22, 2012 Valuation and Recommendation

Sum-of-the-parts valuation

We revised our consolidated estimates for ORTE in view of 9M11 performance, LTFV downgraded; yet valuing OTMT using our usual DCF-based sum-of-the-parts model to reach LTFV. market price still offers We reached a post-demerger LTFV of EGP1.6/share (USD1.3/GDS) versus EGP2.0/share (USD1.6/GDS), adjusted for OTMT's post-demerger structure. The huge upside main changes in our LTFV versus our note dated April 18, 2011 is as follows:

. Mobinil: Down 27% from USD849mn to USD617mn. . North Korea: Down 4% from USD534mn to USD514mn.

Going forward, the demerger should unlock the value of OTMT, which historically, had been assigned either book value or no value by analysts at all. However, post the spin-off, we believe OTMT would disclose more information that would allow for more market-based valuation of its assets. OTMT is expected to have a high- growth profile with a clean balance sheet (i.e. zero leverage). For the purpose of setting a target price, we applied the following:

(i) Mobinil at our TP (dated Nov. 10, 2011) of EGP109/share. (ii) Koryolink at a 4.5x 2012e EV/EBITDA. (iii) Non-GSM businesses under OTMT at book value, and

We compare our valuation/target price to an open price of EGP1.25/share (USD1.37/GDS). Given a target price of EGP1.6/share (USD1.3/GDS), this implies a 29% upside for local shares and a small downside of 2% for GDSs. We would assign OTMT a Hold rating given expected upside from the local shares.

Figure 9| DCF-based sum-of-the-parts valuation Orascom Telecom Media & Technology Holding (OTMT) USD In 12 months Avg. Attrib. Equity Equity WACC (Net Equity Equity Equity equity per per Equity Valuation Account- (2012e- debt)/ (at beg. (as of (in 12 (in 12 share GDR Company Country stake % method ing method 2020e) EV Net cash of 2012) today) months) months) % ex-ND (EGP) (USD)

Mobinil (1) - Egypt 34.7% DCF Equity 14.0% 2,521 (1,173) 1,348 1,532 1,778 617 45% 0.70 0.59 Koryolink - North Korea 75.0% DCF Full cons. 21.3% 547 11 559 565 685 514 37% 0.59 0.49 Non GSM (2) - Various 100.0% Book value Equity 242 242 242 242 18% 0.28 0.23 OTMT group 1,372 100% 1.57 1.31

No. of outstanding local shares (mn) 5,229 EGP USD No. of outstanding GDRs (mn) 1,046 Old LTFV 2.0 1.6 New LTFV 1.6 1.3 % change -22% -18% Recent price 1.25 1.37 % up/(dn) 25% -4% Note: All figures are in million except for share data; OT's local share and GDR prices as of April 18, 2011. (1) Mobinil's long-term fair value EGP106/share. (2) Includes book values as of Sep 30, 2010 for: InTouch Communications, MENA Cables, Med Cable, Oracap, and Transworld Association. Source: Company reports, Bloomberg, and CI Capital Research estimates

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January 22, 2012

Figure 10| Multiple-based sum-of-the-parts valuation USD

Equity Equity Net per per Equity EBITDA EV/ EV debt Attrib. % of total share GDR Company Country Valuation method stake % 2012e EBITDA 2012e 2012e Equity Equity GSM (EGP) (USD)

Orascom Telecom Media & Technology Holding (OTMT) Mobinil (1) - Egypt EV/EBITDA @ 4.5x 34.7% 630 4.5x 2,834 (1,004) 1,830 635 45% 0.72 0.61 Koryolink - North Korea EV/EBITDA @ 4.5x 75.0% 151 4.5x 681 29 710 533 38% 0.61 0.51 Non GSM (2) - Various Book value 100.0% 242 242 17% 0.28 0.23 OTMT group 1,409 100% 1.61 1.35

No. of outstanding local shares (mn) 5,229 EGP USD No. of outstanding GDRs (mn) 1,046 Old TP 1.60 1.40 New TP 1.61 1.35 Note: All figures are in million except for share data; OT's local share and GDR prices as of April 18, 2011. % change 1% -4% (1) Mobinil's target price is based on 2012e EV/EBITDA or EGP109/share. Mkt price 1.25 1.37 (2) Includes book values as of Sep 30, 2010 for: InTouch Communications, MENA Cables, Med Cable, Oracap, % up/(dn) 29% -2% and Transworld Association. Source: Company reports, Bloomberg, and CI Capital Research estimates

Investment Rationale

. Regionally diversified investment portfolio in the media and telecom sector (Egypt, North Korea & Pakistan). . Although OTMT is a new company, it has an experienced management staff. . OTMT’s mobile license in North Korea offers an exclusivity period up to 2014. . Potential long-term growth to come from value-added services (VASs). . The demerger should unlock the value of OTMT’s investment portfolio.

Risks to our recommendation

. Optional share buyback, at its announced price, would value OTMT at a discount to open price. . A number of OTMT’s regional investments (North Korea & Lebanon) exist in high-risk markets. . Global recession may result in further deterioration of OTMT markets. . Macroeconomic slowdown and FX fluctuations in core markets and political instability in Egypt, Pakistan and North Korea.

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January 22, 2012 The Demerger

Procedures

Following the ORTE’s Extraordinary General Meetings’ (EGMs) held on Apr. 14 and Oct. 23, 2011 approval of the demerger plan and the valuation differences according to Egyptian General Authority for Investment’s (GAFI) report by splitting ORTE’s issued capital of EGP5.245bn into: . EGP3.042bn, distributed over 5.245bn shares at a par value of EGP0.58/ORTE share, . EGP2.203bn distributed over 5.245bn shares at a par value of EGP0.42/OTMT share. For the purpose of the demerger, trading on ORTE’s local shares was suspended starting after the end of Nov. 24, 2011, trading session. Both shares of Orascom Telecom Holding (OTH) and Orascom Telecom Media & Technology Holding (OTMT) were successfully listed on EGX according to their new respective trading prices of EGP1.73/share and EGP1.25/share. Trading of both shares will resume on Sunday, Jan. 22, 2012. With regards to ORTE's GDSs, trading was not suspended. That said, ORTE GDS holders are entitled to receive the same amount of OTMT GDSs, once the program is created. However, OTMT GDS holders' ability to sell OTMT GDSs could be limited, ORTE anticipates that the listing process to be completed during 1Q12.

Corporate structure

OTMT will hold ORTE’s assets that were not intended to form a part of VimpelCom-Wind Telecom group (please see Figure 10). OTMT includes: . Mobinil (28.755%) . Egyptian Company for Mobile Services (ECMS) (20%) . Koryolink (75%) . Orabank NK (North Korea) (95%) . Middle East and North Africa for Sea Cables (100%) . Trans World Associate (Pakistan) (51%) . Med Cable Limited (UK) (100%) . Orascom Telecom Ventures (formerly InTouch) (99.99%) . ARPU for Telecommunication Services (Egypt) (1%) . ORACAP Holding (Free Zone Port Tawfik) (99%)

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January 22, 2012 Figure 11| OTMT Corporate Structure

Source: VimpelCom press release

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January 22, 2012 OTMT's share buyback

In our previous note "Spin-off gives ORTE minorities an option", dated Mar. 29, 2011, we had recommended investors to hold OTMT stock once it starts trading. Our recommendation was based on the optional share buyback by OTMT that was to be offered to minorities (a ratio of 1 share of Egyptian Company for Mobile Services (ECMS) [EMOB] for each 151 OTMT shares plus EGP0.60/OTMT share, which would have valued OTMT at EGP1.5/share). Given the current market conditions, we do not believe that such a buyback would take place at its previously-mentioned terms. However, if it were, given the current EMOB market price, the share buyback option would value OTMT at EGP1.13/share, a discount of 10% compared to its open price of EGP1.25/share (which is based on Nov. 24, 2011 closing price).

Figure 12| OTMT share buyback offer implied by Mobinil's market price

Value per Value per Value LTFV (Disc.)/ TP (Disc.)/ (Disc.)/ Ratio/ 151 OTMT OTMT per per Prem. vs. per Prem. vs. Prem. vs. Details value shares (EGP) share share share LTFV share TP Implied TP

Share swap initial proposal (1) Each 151 OTMT shares will be exchanged for … ECMS' [EMOB] most recent price is EGP 80.1 1 80.1 0.53

(2) Each OTMT share will receive … Cash (EGP) 0.6 90.6 0.60

OTMT 170.7 1.13 1.6 -28% 1.6 -30% 1.25 -10%

Source: Media sources, Bloomberg, and CI Capital Research estimates

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January 22, 2012 OTMT's Mobinil put option

OTMT may sell its 34.7% stake in Mobinil to France Telecom, according to the Mobinil's put option to amended shareholder agreement signed between ORTE and FT, in April 2010, act as a catalyst for which gives ORTE a window of two months (September 15 to Nov. 15) in 2012 and 2013 and anytime until Nov. 15, 2013 in a limited number of deadlock OTMT situations, to exercise a put option to sell its direct and indirect stakes in EMOB at an opening price of EGP221.7/share.

Below is a table showing our calculation (applying time value of money) what the put option exercise price would be at certain dates. While Eng. Naguib Sawiris has repeatedly mentioned that he does not intend to sell OTMT's stake in Mobinil at all, we believe this put option will support Mobinil's (and hence OTMT's) price, especially as we approach its exercise dates. If the put option is exercised, France Telecom will be obliged to submit a mandatory tender offer to Mobinil's minorities (as per the executive regulations of the Egyptian capital market law) at the same put option exercise price. This, in effect, would reflect positively on OTMT's share price. We calculate that an exercise of the put option as early as September 15, 2012 would translate into an OTMT share price of EGP2.20 or a 76% upside versus an open price of EGP1.25/share.

Figure 13| OTMT’s Mobinil put option priced* by timeline Mobinil price OTMT price Days EUR EGP EGP % upside 4/14/2010 29.26 220.30 6/30/2010 77 29.45 221.71 12/31/2010 184 29.90 225.11 4/14/2011 288 30.15 227.03 12/31/2011 549 30.80 231.86 TODAY 1/22/2012 571 30.85 232.26 2.17 74% 4/14/2012 654 31.05 233.80 2.18 75% 9/15/2012 808 31.43 236.64 2.20 76% 2M first 10/15/2012 838 31.50 237.20 2.21 77% window 11/15/2012 869 31.58 237.77 2.21 77% 12/31/2012 915 31.69 238.62 2.22 77% 4/14/2013 1,019 31.95 240.54 2.23 78% 9/15/2013 1,173 32.33 243.39 2.25 80% 2M second 10/15/2013 1,203 32.40 243.94 2.25 80% window 11/15/2013 1,234 32.48 244.51 2.26 80% 12/31/2013 1,280 32.59 245.36 2.26 81% * Increasing by 3% p.a. and to be converted at a fixed exchange rate of EGP7.53/EUR. Company reports, Bloomberg, and CI Capital Research estimates

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Research CI Capital Securities Brokerage (Egypt & UAE) Dynamic Securities Amr Hussein Elalfy, CFA | Co-Head of Research Khaled Abd El Rahman | MD & Global Head of Securities Brokerage Hesham Khalil | MD [email protected] [email protected] [email protected] Mona Mansour | Co-Head of Research [email protected]

CI Capital Holding 8 Nadi El-Seid Street, Third Floor Dokki Giza, Egypt

Tel: +2(02) 33 38 62 59 [email protected] www.cicapital.com.eg

Disclaimer

The information used to produce this market commentary is based on sources that CI Capital Research (CICR) believes to be reliable and accurate. This information has not been independently verified and may be condensed or incomplete. CICR does not make any guarantee, representation or warranty and accepts no responsibility or liability to the accuracy and completeness of such information. Expression of opinion contained herein is based on certain assumptions and with the use of specific financial techniques that reflect the personal opinions of the authors of the commentary and is subject to change without notice. It is acknowledged that different assumptions can always be made and that there is a wide choice of techniques that can be adopted each of which can lead to a different conclusion. Therefore, all that is stated herein is of an indicative and informative nature as forward-looking statements, projections and fair values quoted may not be realized. Accordingly, CICR does not take any responsibility for decisions made on the basis of the content of this commentary. This commentary is made for the sole use of CICR’s customers and no part or excerpt of its content may be redistributed, reproduced or conveyed in any form, written or oral, to any third party without the prior written consent of CICR. This commentary does not constitute a solicitation or an offer to buy or sell securities.

Rating System In February 2008, CI Capital Research (CICR) launched a new rating system to give analysts more freedom to be market responsive. This is to make one element of our research more dynamic, namely the advertising of target prices and recommendations. What we did not change is our assessment of the Long Term Fair Value (LTFV), nor have we stopped our detailed industry and company research. What we did is change the target price to trade in the balance of where a share should trade and where we think it will trade.

LTFV: As before we continue to estimate a fundamental valuation, largely DCF and/or NAV based.

Target Price: The price, which is not necessarily the LTFV, is where the analyst, given all (qualitative as well as financial) information available, thinks the share price can get to within the next 3-12 months. This can be changed at any time on changing facts and perceptions.

Recommendations: Our new rating system falls out from the total return relating to the share price performance to the target price, and including any distributions may not be included in the target price calculation. This is shown in the table below, and to be BUY must return over 19%, an arbitrary hurdle rate we think reasonable given prevailing interest rates and risks (Please see table below.)

Rating Potential Upside/Downside Strong Buy >30% Buy >20%<30% Hold >10%<20% Underweight >0% <10% Sell <0%