ORASCOM TELECOM GIVING THE WORLD HOLDING A VOICE
Full Year 2010
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CONTENT
Highlights 3
CEO’s Comment 4
Operational Performance 5
Main Financial Events 9
Financial Review 14
Financial Statements 20
Operational Overview 25
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Orascom Telecom Holding Full Year 2010 Results
Cairo, April 18th, 2011: Orascom Telecom Holding (OTH) (Ticker: ORTE.CA, ORTEq.L, ORAT EY, OTLD LI), announces its year end 2010 consolidated results.
Highlights
• On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is no longer applicable under IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 and 9M 2010 have been restated to reflect the accounting treatment of OTT.
• Total subscribers exceeded 101 million, an increase of 16% over the same period last year.
• Net Income before minority interest showed a sharp increase of 106% compared to the same period last year, reaching US$ 781 million1 for the period ending December 31st, 2010, mainly due to the gain recognized on the Mobinil transaction by comparing the carrying amount of the investments in Mobinil and ECMS to the relevant fair value, taking into consideration the net proceeds from the transaction for the global settlement fee amounting to US$300 million.
• Revenues reached US$ 3,825 million1, increasing by 2% over the previous year as a result of strong growth in all GSM operations, with the exception of Algeria. The persistence of an adverse operating environment in Algeria, which was further affected by the hindrance of promotions, caused a 6.5% decrease in OTA’s YoY revenues. Revenues of Mobilink and banglalink had a positive impact on GSM revenue growth for the year ending December 31st, 2010. Revenues of Mobilink were impacted YoY due to currency devaluation: revenues for Mobilink were up 9% in local currency vs. a 5% increase in US$. banglalink’s revenues grew by 30% compared to the same period last year. Consolidated Revenue in Q4 2010 remained stable compared to Q3 2010.
• EBITDA reached US$ 1,584 million1, an increase of 4% compared to the same period last year. The solid performance across all the GSM subsidiaries was negatively impacted by the 8% decrease in Djezzy’s EBITDA as a result of the ongoing crisis situation in Algeria. EBITDA in Q4 2010 increased by over 1% compared to Q3 2010.
• Group EBITDA margin stood at 41.4%, an increase of 1% compared to the year 2009. EBITDA margins for the major subsidiaries were: Djezzy 56.2%, Mobilink 39.6% banglalink 27.9%, and koryolink 87%.
• Earnings per GDR reached US$ 0.73/GDR (based on a weighted average for the outstanding GDRs of 1,015 million over 12M 2010)2.
• Net Debt as of December 31, 2010 stood at US$ 4,009 million with a Net Debt/EBITDA of 2.5x. Pro-forma for the receipt of proceeds from the disposal of Tunisiana, Net Debt/EBITDA is approximately 1.9x.
1. US$ financial figures in the Income Statement & Balance Sheet are according to the International Financial Reporting Standards (IFRS). 2. The weighted average for the outstanding GDRs was 1,015,240,054 as of December 31st, 2010.
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Khaled Bichara, Group CEO, commented on the results:
“The year 2010 has proven to be a year income before minority interest of US$ 781 million for the of significant milestones aiding the year ending 31 December 2010. In addition, Net growth of Orascom Telecom Holding, Debt/EBITDA now stands at 2.5x. Pro-forma for the on an operational and strategic level. receipt of proceeds from the disposal of Tunisiana, Net Debt/EBITDA is approximately 1.9x. On October 4th, 2010 WIND TELECOM, OTH’s parent company, and While the majority of our operations have displayed VimpelCom Ltd. announced their strong and stable growth, the Algerian unit, due to the intention to combine their groups, thereby creating the consistently hostile operating environment, has faced a world’s sixth largest telecommunications company. decrease in revenues of 6.5% compared to the year Most recently, in March 2011 the VimpelCom Special end of 2009. Many restrictions on the operation still General Meeting approved the transaction. remain in place, such as the hindrance of promotions Furthermore, on April 14th, over 97% of OTH’s and local governmental restrictions, in addition to SIM shareholders approved the proposed refinancing plan card shortages resulting from a ban on imports. Despite for the company, as well as a demerger into two a number of cost cutting initiatives being instigated in separate entities: OTH and Orascom Telecom Media order to stabilize and maintain network quality, and Technology Holding S.A.E (OTMT). The refinancing restrictions imposed by the Algerian government plan will ensure an improvement in the company’s continue to negatively impact Djezzy’s results. liquidity position and capital structure, while OTMT will Pakistan has shown a 9% increase in its revenues for the serve as a holding company year, in local currency terms, for Mobinil, koryolink, Alfa “OTH will join the ranks of truly global alongside efficient cost management contract, the management initiatives which cable businesses and OT players in the field of telecommunications resulted in a YoY EBITDA margin Ventures. Consequently, OTH supported by expertise and a strong growth of 3%. will join the ranks of truly leverage profile while benefiting from global players in the field of significant synergies resulting from the The high subscriber growth trend telecommunications WIND-VimpelCom transaction.” in Bangladesh has translated into supported by expertise and a revenue growth of over 30% in strong leverage profile while benefiting from significant comparison to 2009 despite increasing competitive synergies resulting from the WIND-VimpelCom pressures in the Bangladeshi telecommunications transaction. The demerged entity of OTMT will allow for market. better focus on strategies, and lend both OTH and OTMT WIND Mobile Canada continues to grow its customer the independence to drive faster growth. base and has succeeded in adding nearly 100 On January 4th, 2011, OTH sold its entire shareholding in thousands new subscribers compared to the last Orascom Tunisia Holding and Carthage Consortium, quarter, nearing its total subscribers to a quarter of a through which we owned 50% of Tunisiana, for a total million. cash consideration of US$ 1.2 billion, equalling an In light of the company’s promise to deliver innovation enterprise value of 6.7x Tunisiana’s 2009 EBITDA and and value to its shareholders moving forward into the generating over 40% annual return on OTH’s investment new era of consolidation, we see the perfect in the business since 2003. opportunity to do so in the expected combination of OTH now counts over 101 million subscribers across its WIND TELECOM and VimpelCom, allowing us to operating countries. The 16% increase in our customer continue to maximize long-term shareholder value. “ base compared to last year has translated into a net
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Operational Performance
Subscribers
Throughout the year 2010, Orascom Telecom achieved despite the various obstacles succeeded in surpassing the 100 million subscriber encountered throughout the year relating to mark reaching over 101 million customers, showing banning Djezzy promotions, advertising on an increase of nearly 16% over the same period last government owned TV channels, as well as the year. For comparative purposes, subscriber base for inability to import SIM cards. YE 2009 and Q3 2010 have been adjusted to reflect Telecel Globe’s significant subscriber growth of 78% the sale of Tunisiana. during 2010 contributed to Orascom Telecom’s 101 In Bangladesh aggressive acquisition and strong million strong customer base. Similarly, koryolink’s customer retention led to a 39% YoY increase in subscriber figures have witnessed a sharp increase banglalink’s subscriber base. Our Pakistani YoY, reaching over 400,000 subscribers compared to operation showed over 3% growth in subscribers just over 90,000 subscribers at year end 2009. WIND compared to the year end of 2009 as a result of Mobile Canada added nearly 100,000 new aggressive acquisition promotions countering a dip customers this quarter in comparison to Q3 2010 in subscriber figures experienced in the previous consequently showing a 67% increase. quarter due to damages incurred during the Under the management contract of Alfa, customer massive country-wide floods. base has witnessed a 26% increase over the Djezzy subscribers increased by 3% compared to the previous year, maintaining steady growth well year end of 2009. The growth in customer base was above the 1 million subscriber mark.
Table 1: Total Subscribers
Inc/(dec) 31 Dec. 30 Sept. 31 Dec. Subsidiary Dec. 2010 vs. 2009 2010 2010 Dec. 2009 Djezzy (Algeria) 14,618,166 14,919,031 15,087,393 3.2%
Mobilink (Pakistan) 30,800,354 31,444,099 31,794,292 3.2%
banglalink (Bangladesh) 13,886,913 18,107,163 19,327,005 39.2%
Telecel Globe 1,823,000 2,952,530 3,242,000 77.8%
koryolink (DPRK) 91,704 301,199 431,919 n.m.
Alfa (Lebanon) 1,067,552 1,253,163 1,342,385 25.7%
Total 62,287,689 68,977,185 71,224,994 14.3%
Inc/(dec) Operations accounted for under 31 Dec. 30 Sept. 31 Dec. Dec. 2010 vs. the equity method 2009 2010 2010 Dec. 2009
Mobinil (Egypt) 25,354,209 28,401,312 30,224,888 19.2% Wind Canada (Canada) 139,681 232,641 n.a. Total 25,354,209 28,540,993 30,457,529 20.1% Grand Total 1 87,641,898 97,518,178 101,682,523 16.0%
1. After excluding Tunisiana subscribers in December 2009 and September 2010.
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ARPU
Strong subscriber growth had a dilutive impact on all the while still maintaining strong growth of its ARPU in most operations compared to Q4 2009. In customer base. Algeria, ARPU remained stable in local currency In Bangladesh and North Korea, the significant terms. Djezzy shows resilience despite the impact of growth in subscribers YoY led to ARPU dilution. the new interconnection catalogue of July 2009, which was further modified in July 2010, resulting in In Pakistan, Mobillink’s ARPU displayed stability in US$ lower incoming ARPU. Moreover, the stagnant “no- terms, while increasing slightly over 1% in local promotion” conditions imposed upon the Algerian currency terms compared to Q4 2009. This was operator have had a negative impact on pre-paid mainly due to subscriber growth, targeted ARPU. acquisition of high value customers, increased traffic and increased VAS. Mobinil experienced heavy ARPU dilution of nearly 25% compared to Q4 2009 due to highly The increase in Alfa’s subscriber base had a dilutive competitive pressures significantly reducing tariffs, impact on ARPU in comparison to the same period last year.
Table 2: Blended Average Revenue Per User (ARPU)1
31 Dec. 30 Sept. 31 Dec. Inc/(dec) 2009 2010 2010 Subsidiary Dec. 2010 vs. US$ US$ US$ Dec. 2009 (3 months) (3 months) (3 months) Djezzy (Algeria) 9.9 9.6 9.7 (2.3%)
Mobilink (Pakistan) 2.9 2.7 2.9 0.0%
Mobinil (Egypt)2 6.5 5.4 4.9 (24.6%)
banglalink (Bangladesh) 2.3 2.3 2.1 (10.0%)
koryolink (DPRK) 24.5 15.2 14.6 (40.5%)
Wind Canada (Canada) 30.0 (4.3%)
Alfa (Lebanon) 40.0 43.9 38.3 (4.3%) 3 Global ARPU (YTD) 5.3 5.3 4.5 (14.7%)
Global ARPU (3 months) 5.1 4.6 4.5 (12.2%)
Table 3: Blended Average Revenue Per User (ARPU) (Local Currency)
31 Dec. 30 Sept. 31 Dec. Inc/(dec) Subsidiary 2009 2010 2010 Dec. 2010 vs. (3 months) (3 months) (3 months) Dec. 2009 Djezzy (Algeria) (DZD) 721.4 724.5 724.1 0.4%
Mobilink (Pakistan) (PKR) 241.7 231.0 244.6 1.2%
1. After excluding Tunisiana subscribers in December 2009 and September 2010. 2. ARPU expressed under OTH’s definition may differ from Mobinil’s disclosed ARPU. Please see Appendix for definition. 3. Global ARPU is calculated on a year to date basis, taking into account the weighted average subscribers for calculation.
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Market Share & Competition
At the end of 2010, Orascom Telecom’s operations The strong subscriber growth trend in Bangladesh led maintained their market leading positions, except banglalink’s share of the market to edge beyond for banglalink which remains at a secured second 28%. position in the Bangladeshi market. Mobilink’s market share illustrated a minor decline as Djezzy was able to maintain its market leadership, a result of subscriber clean-up and increased MNP capturing nearly 58% of the market in Algeria and activity. Mobilink’s market share of active subscribers showing stability compared to Q3 2010, despite the as measured internally on traffic patterns stood at ongoing challenges the operation continues to 39% as of December 31, 2010. face.
In Egypt, Mobinil held its market share and showed slight improvement over the previous quarter, closing in on almost 40% of market share in the face of a highly aggressive competitive environment.
Table 4: Market Share & Competition
Market Share (%) Market Names of additional Country Brand name 30 Sept 31 Dec. Position network operations 2010 2010 Algeria Djez z y 57.9% 57.6% 1 AMN, Qtel 1 U-Fone, Paktel, Telenor, Pakistan Mobilink 32.6% 31.4% 1 Al Warid Egypt Mobinil 39.0% 39.9% 1 Vodafone, Etisalat
1 Garmeen, Aktel, Citycell, Bangladesh banglalink 27.8% 28.5% 2 BTTB, Airtel
1. Market share, as announced by the national Regulator is based on information disclosed by the other operators which use different subscriber recognition policies.
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CAPEX
Total consolidated capital expenditures for the strong and steady growth of banglalink twelve months of 2010 declined by 13% compared subscribers, and consequently traffic, is reflected in to the previous year. increased investments in network capacity. A CAPEX increase of 93% was recorded for In Algeria, the blocking of imports of equipment banglalink in comparison to the previous year. and spare parts remained in place throughout Q4 2010, resulting in a 66% decline in CAPEX The 13% decrease in “Other” CAPEX compared to compared to the same period last year. Mobilink’s the twelve months of 2009 is related to investments CAPEX for the twelve months of 2010 showed a of Telecel Globe, koryolink and our submarine YoY decline of 9% as a result of rollout delays cables. caused by the country-wide floods in Q3 2010. The
Table 5: Capital Expenditure of OTH Subsidiaries for the twelve months to December 31st1
Total Total Country Service name US$ million US$ million Inc/(dec) 2009 2010 Algeria Djezzy 261 90 (66%)
Pakistan Mobilink 157 143 (9%)
Bangladesh banglalink 122 235 93%
Other 2 221 192 (13%)
Total 761 660 (13%)
Total Consolidated 761 660 (13%)
Consolidated Capex/Sales 20.2% 17.3% (3%)
1. Based on 100% ownership of all subsidiaries. 2. “Other” companies include CHEO, Linkdotnet, MedCable, Mena-Cable, OT Holding, Ring and Telecel Globe in 2009 and CHEO, Linkdotnet, Mena-Cable, OT Holding, Ring and Telecel Globe in 2010.
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Main Financial Events
France Telecom and Orascom Telecom submit the main terms of their agreements on MobiNil and ECMS to the Egyptian Financial Supervisory Authority
In April 2010, France Telecom and Orascom Telecom submitted to the Egyptian Financial Supervisory Authority the main terms of the agreements on MobiNil and ECMS signed between them. The content of this submission can be found below.
1. Maintaining the partnership between the Parties, and subject to paragraph 4 below, neither Party shall transfer to the other Party any shares in MobiNil for Telecommunications (unlisted) or the Egyptian Company for Mobile Services (listed). The Parties further agreed that Orascom Telecom Holding shall not own or hold, directly or indirectly and/or whether acting in concert, an equity stake in the Egyptian Company for Mobile Services (listed) of more than 20% of the share capital of the latter (this refers to a standstill provision which further provides that Orascom Telecom Holding shall not seek to directly or indirectly and/or whether acting in concert increase its current equity stake in ECMS. This has been clarified in a subsequent press release);
2. Amending and restating the existing shareholders’ agreement between the Parties relating to MobiNil for Telecommunications (unlisted). As a result of this amendment, OT will adopt the equity method instead of the proportionate consolidation method for the basis of accounting on the shareholders’ equity. OT will consolidate its investment using the equity method in accordance with the Egyptian Accounting Standard No. 18, where OT's share in the net assets of ECMS at the date of entry into force of the settlement agreement shall be presented in a separate line item in the consolidated balance sheet, rather than on a line-by-line basis. As a result of this reclassification, there will be no impact on OT’s consolidated income statement and OT’s consolidated shareholders’ equity, at that date. As for the OT’s share in the profits or losses, the changes in the shareholders’ equity of ECMS recognized after that date will be presented in a separate line item in the consolidated income statement and the consolidated statement of shareholders’ equity respectively. By virtue of the International Financial Reporting Standards, France Telecom will fully consolidate its investment in MobiNil Telecommunications and ECMS as from the date of entry into force of the settlement agreement and the Amended and Restated Shareholders Agreement. The modification of the basis of the accounting treatment for France Telecom and Orascom Telecom will have no effect on ECMS and the minority shareholders of ECMS;
3. Granting Orascom Telecom Holding certain rights in the amended and restated shareholders’ agreement with respect to the approval of material decisions and operational matters, the governance model under the Amended and Restated Shareholders Agreement is designed to ensure (i) the consolidation by FT of the financial results of MobiNil and its subsidiaries, and (ii) that material matters relating to the finances and operations of MobiNil, ECMS and/or their material Subsidiaries may not be taken unless such actions are authorized pursuant to the approval of all of the OT Directors and a majority of the FT Directors. The composition of the boards of MobiNil and ECMS reflects participation by OT and FT which is not materially different from the original shareholders agreement, whereby FT appoints, directly or indirectly, the majority of the members of the MobiNil and ECMS board of directors. The ECMS board of directors shall continue to include three non-executive, independent directors with relevant industry background. ECMS' management will include a CEO appointed by FT and a CFO designated from among FT candidates, whereas the Chief Technical Officer and the Chief Commercial Officer will be designated by the CEO from among OT candidates. Under the original shareholders agreement, in case the OT and the FT representatives on the board of MobiNil fail to reach consensus on a decision, a deadlock mechanism was triggered where either party buys the other’s stake in MobiNil through a bidding process. Being the main reason behind the dispute subject matter of the arbitration between OT and FT, the parties agreed to simplify and amend such deadlock resolution mechanism and replace it with a right granted to OT in certain deadlock situations to put its shares in MobiNil and ECMS to FT for the Put Option Consideration, which consideration is calculated on a per share price;
4. Granting Orascom Telecom Holding in the amended and restated shareholders’ agreement the option to put its shares in MobiNil for Telecommunications (unlisted) together with its shares in the Egyptian Company for Mobile Services (listed) to the France Telecom Group (i) during the period from September 15 through November 15, 2012, and (ii) during the period from September 15 through November 15, 2013, as well as (iii) at anytime until November 15,
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2013 in a limited number of deadlock situations on some material decisions, and subject to certain conditions. In the event of the exercise of the put option, the price per the Egyptian Company for Mobile Services (listed) share ("ECMS P") which has been agreed between the Parties will increase over time from EGP 221.7 as of closing up to EGP 248.5 as of end 2013, to be converted in EUR at a fixed EUR/EGP exchange rate of 7.53. As for the opening put option price (221.7 as of 30/06/2010), it was calculated in reference to the weighted average market share price of ECMS for the week preceding April 14, 2010 accreted by 3% to 30/06/2010 = 220.3*(1+3%*79/360), payable in Euros at a fixed rate corresponding on the EGP:EUR rate as at the date of signing of the agreement. Each subsequent price represents a 3% annual accretion over the opening put option price. Therefore, the price of the put option does not express the parties’ view of the long term valuation of ECMS. The price per MobiNil for Telecommunications (unlisted) share will be computed as ECMS P multiplied by the total number of ECMS shares held by MobiNil for Telecommunications (unlisted) in the Egyptian Company for Mobile Services (listed) and divided by the total number of MobiNil for Telecommunications (unlisted) shares;
5. The continuation of the Parties in rendering technical support and management services to the Egyptian Company for Mobile Services (listed) according to the two existing management agreements with the Parties, which were ratified to the General Assembly of the Company, and whereby each Party receives a fee equal to 0.75% of the total revenues of the Company (excluding equipment sales and sales taxes). In case of exit by OT, it will assign to FT its rights to the above management fees and enter into a transition services agreement to the benefit of ECMS enabling ECMS, at its option, to continue or terminate the various services and/or technical assistance agreements entered into with OT group, all subject to applicable laws and the approval of the competent corporate bodies of ECMS. In consideration for the assignment referred to above and the entering into by ECMS of the transition agreement, FT shall pay to OT a fee of EUR 110 million;
6. Prior to the settlement agreement, a dispute between the relevant parties on the ownership of the "MobiNil" trademark existed. OT and FT agreed that MobiNil and ECMS shall regularize the ownership of the MobiNil Trademark in the best interests of ECMS and all its shareholders and with a view to enhance the visibility of the trademark;
7. The agreement in principle of the Parties on the acquisition by the Egyptian Company for Mobile Services of Link Dot Net S.A.E and Link Egypt S.A.E, a leading Egyptian ISP, for total consideration calculated on the basis of an aggregate enterprise value of USD 130,000,000, subject to obtaining the approval of the competent corporate bodies (general assemblies and/or boards of directors) and completing the necessary procedures in accordance with applicable laws and regulations; and
8. In consideration for the settlement of all disputes between the Parties, whether in Egypt or abroad, under the Master Agreement, FT also agrees to pay OT a global settlement fee of USD 300,000,000 in consideration for OT's undertakings and obligations under the Master Agreement, the termination of the original shareholders agreement as well as execution of the Amended and Restated Shareholders Agreement (which results in the loss for OT of consolidation of MobiNil financial results) and the Settlement Agreement. There is no specific contractual breakdown of the global settlement fee among the items set forth above. However, the quantum was agreed taking into account the value of the additional portion of EBITDA that will be consolidated by France Telecom in its financial statements. Such fee shall be paid by one of the FT Entities in cash on the Closing Date and is in line with the benchmark of companies suffering a discount on their holdings in non consolidated assets. The quantum and the payment of such global settlement fee do not impact ECMS and the minority shareholders of ECMS. All the more, ECMS will benefit from the global settlement between its main shareholders as it will enable ECMS to perform and pursue its development with the full support and commitment of France Telecom and Orascom Telecom. Moreover, the global settlement enables France Telecom to reinforce its long term investment in Egypt and to ensure a positive media environment for its investment.
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Orascom Telecom Algeria’s (“OTA”) Tax Appeal Process
In November 2009 Orascom Telecom Algeria (OTA) received a notice of reassessment from the Algerian Direction des Grandes Entreprises (“DGE”) in respect of the tax years 2005, 2006 and 2007 (the “Reassessment”). In December 2009, OTA filed an administrative appeal. To appeal, OTA was required to pay 20% of alleged taxes and penalties to be owed, amounting to USD 120 million. The appeal was rejected.
In March 2010, OTA paid a further 20% of the remaining balance amounting to USD 110 million (including delay penalties), to appeal to the Central Commission, which was rejected. OTA’s administrative appeal in relation to the 2004 tax reassessment had also been rejected.
In April, after exhausting all appeal available within internal forums at the Algerian tax authority, OTA then appealed to the Administrative Court of Algiers to request:
- An injunction to immediately suspend the payment order received pursuant to the rejection of OTA’s appeal to the tax administration on April 1st, 2010, and
- The dismissal of the entire tax adjustment for the years 2004 through to 2007, on the merit of the case.
OTA paid the remaining balance of the principal amount of the authorities’ tax reassessment claim for the years 2005-2007 equivalent to USD 597* million, excluding penalties which amount to USD 74 million from which USD 49 million were paid and USD 25 million has been suspended until final ruling of the administrative court on merits in the case filed by OTA pertaining to taxes and penalties related thereto. All amounts paid will be recoverable if OTA’s case against the tax authority is successful.
These payments were made without prejudice to any rights OTH or OTA may have under: (1) the tax exemptions and protections granted under an Investment Agreement dated 5 August 2001 signed by Algeria with OTH and Oratel International Inc. (now a fully owned subsidiary of OTH) acting for and on behalf of OTA; (2) the 1997 Treaty for the Mutual Promotion and Protection of Investments between Algeria and Egypt; and (3) Algerian law.
In September 2010, OTH announced that OTA received a preliminary tax notification from the DGE in respect of the years 2008 and 2009, in which the DGE preliminarily re-assessed taxes alleged to be owed by OTA in the amount of approximately DZD 17 billion (approximately USD230 million). In December, OTA received the Final Tax Reassessment for the aforementioned amount. In February, OTA paid the equivalent of USD 230 million to the Algerian tax authority under protest, representing the settlement in full of the 2008-2009 Tax Reassessment.
OTH and OTA consider that the 2008-2009 Tax Reassessment is baseless, relying on the same arbitrary measures as the tax claims made in relation to preceding years. Accordingly, OTA is challenging the 2008-2009 Tax Reassessment with the tax administration and the Algiers administrative court.
This appeal should have entitled OTA to defer payment of 80% of the claim, subject only to the provision of financial guarantees. However the Algerian tax authorities refused to consider any of the guarantees offered by OTA (including full cash collateral) and OTA had no choice but to pay in full in order to avoid coercive enforcement action and/or risk incurring additional penalties.
Without prejudice to their rights under the Investment Agreement, applicable bilateral investment treaty and applicable laws, OTH and OTA intend to take all necessary legal steps to challenge the Reassessment.
* Based on an exchange rate of: USD 1 = DZD 73.6.
Orascom Telecom Holding Announces the Sale of LINKdotNET and Link Egypt to Mobinil
In July 2010, Orascom Telecom Holding S.A.E. (“OTH” or “the Company”) announced that it had concluded the sale of its internet services arm LINKdotNET and Link Egypt (“LINK”) to the Egyptian Company for Mobile Services (“Mobinil”). InTouch Communications S.A.E, a wholly-owned subsidiary of OTH signed a share sale and purchase agreement with Mobinil for the sale of LINK. The sale excludes the non-ISP part of Link Egypt’s business and affects LINKdotNET’s Egyptian operations only. The other non-connectivity business, LINK Development, LINKonLINE, Connect Ads, Arab Finance Brokerage Company and Arpu+ remain owned by OTH. The deal was a cash transaction based on an enterprise value of USD 130 Million. The business represented 56% and 90% of the revenue and EBITDA of OTH Internet Services respectively.
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VimpelCom combines with WIND TELECOM to create new global telecom group
In October 2010, WIND TELECOM S.p.A (WIND TELECOM), the parent company of Orascom Telecom Holding S.A.E. (“OTH”) announced that it signed an agreement with VimpelCom Ltd. (“VimpelCom”) to combine the two groups creating the world’s sixth largest mobile telecommunications carrier by subscribers. In March 2011, WIND TELECOM announced that the shareholders of VimpelCom Ltd. voted in their Special General Meeting in favor of the combination with WIND TELECOM. On April 15th, 2011, VimpelCom and WIND TELECOM announced the closing of the transaction that combines the two entities to create a new global telecom group.
Orascom Telecom Holding Sells its 50% Shareholding in Tunisiana to Qatar Telecom
In November 2010, Orascom Telecom Holding S.A.E. (“OTH”) announced that it has entered into a share purchase agreement with Qatar Telecom Q.S.C. (“Qtel”) by which OTH would sell its entire shareholding in Orascom Tunisia Holdings (“OTuH”) and Carthage Consortium (“Carthage”), two companies through which OTH owns 50% of Orascom Telecom Tunisie (“Tunisiana”).
In January 2011, OTH announced that it had completed the sale of its entire shareholding in OTuH and Carthage for a total cash consideration of US$ 1.2 billion, corresponding to an enterprise value equal to 6.7 times Tunisiana’s 2009 EBITDA and generating over 40% annual return on OTH’s investment in the business since 2003.
Proceeds will be used to strengthen OTH’s liquidity position and support the development of higher-growth businesses.
OTH Lenders Support Further Financial Flexibility
In January 2011, Orascom Telecom Holding S.A.E. (“OTH”) announced that it has successfully obtained the support of its Senior Secured Lenders for relief from representations, warranties, and covenants in the credit agreements as they relate to Orascom Telecom Algeria (“OTA”), in order to provide the Group with greater flexibility while it assesses its alternative options relating to OTA and enabling OTH to be in a position to negotiate effectively with the Algerian government to procure the most favourable outcome relating to Algeria in order to protect its interest and that of its stakeholders. Furthermore, part of the Orascom Telecom Tunisie (“Tunisiana”) disposal proceeds would be applied to prepay principal maturities, eliminating debt repayment obligations until the second half of 2012. Consequently, the Group significantly strengthened its liquidity position and financial flexibility.
Over 97% of The Voting Shares that Participated in OTH’s OGM/EGM Approve Demerger and Refinancing Plan
On April 14th, 2011, Orascom Telecom Holding S.A.E. (“OTH” or the “Company”) announced that the Company’s shareholders overwhelmingly approved all of the items on the agenda at today’s Ordinary and Extraordinary General Assembly Meetings, paving the way to implement the Company’s refinancing plan and the demerger of the Company into two separate entities, Orascom Telecom Holding S.A.E. and Orascom Telecom Media and Technology Holding S.A.E., in connection with the “VimpelCom-WIND TELECOM” transaction.
Shareholders approved the following significant resolutions, among others:
1. the approval of a refinancing plan to refinance the Company’s outstanding secured and high yield debt together with certain derivative transactions in an amount of approximately US$2.7BN.
2. an increase in OTH’s authorized share capital to EGP 14BN (with the issued and paid-in capital remaining unchanged).
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3. the approval of the planned demerger from OTH of Orascom Telecom Media and Technology Holding S.A.E. (“OTMT”), a company to be formed at the time of the demerger. OTMT will hold certain assets of OTH that are not intended to form part of the VimpelCom-WIND TELECOM group going forward, including OTH’s interests in Egyptian Company for Mobile Services (“ECMS”), CHEO Technology Joint Venture company (“koryolink”) in North Korea, Orascom Telecom Ventures S.A.E. (formerly Intouch Communication Services S.A.E.), as well as other investments in the media and technology sectors, including undersea cable assets.
Shareholders representing 63.44% of the Company’s voting shares participated in the Ordinary General Assembly Meeting and 63.44% at the Extraordinary General Assembly Meeting. The resolutions were approved by 99.99% of the voting shares that participated in the Ordinary General Assembly Meeting and approximately 97% at the Extraordinary Assembly Meeting.
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Financial Review Revenues
Total Consolidated Revenues increased 2% in amounted to 9%. The significant growth in the comparison to the previous year, with GSM Pakistani operation can be attributed to an revenues up 3% YoY. increase in subscriber base, as well as highly effective promotional activities throughout 2010. Despite the overall increase during the period, GSM revenue growth was negatively impacted by the The strong subscriber uptake of banglalink, as well 6.5% decline in Djezzy’s revenues for the year as the penetration of new market segments, ended December 31st, 2010. The adverse resulted in a 30% YoY increase of revenues. conditions in Algeria still persist; the hindrance of Similarly, the increase of koryolink subscribers had a promotions in conjunction with the drop in positive impact on the operation’s revenue growth incoming tariffs from the newly implemented for the year 2010 compared to the same period catalogues adjusted in July 2010, have had a last year. negative impact on the operation’s revenues. Although the SIM card shortage has now been Telecel Globe revenues increased by 25% YoY as a contained, it impacted the YoY decline in result of subscriber acquisition and focused market revenues. penetration. In Q4 2010 the decline in tariff prices in Burundi, CAR and Zimbabwe, led to an overall The revenues of Mobilink for the full year of 2010 decline in revenues. showed a 5% increase compared to the same period last year. It is worth considering the impact The 36% YoY increase in “Other” Telecom Services is of currency devaluation, as the YoY increase in attributed to growth of subscribers of OT Lebanon Mobilink’s revenues in local currency terms (Alfa Management Contract). Table 6: Consolidated Revenues1
Represented Represented Q4 - 2010 31 Dec. 31 Dec. Inc/ Q3 - 2010 Inc/ Subsidiary 2010 2009 (dec) (3 months) (dec) US$ (000) 2 US$ (000) 2 (3 months) US$ (000) GSM
Djezzy (Algeria) 1,867,837 1,746,566 (6.5%) 444,597 452,915 1.9%
Mobilink (Pakistan) 1,058,448 1,107,067 4.6% 266,705 280,869 5.3%
banglalink (Bangladesh) 350,884 456,984 30.2% 120,576 122,284 1.4%
Telecel Globe (Africa) 81,384 101,830 25.1% 28,040 25,007 (10.8%)
koryolink (North Korea) 25,951 66,402 155.9% 18,445 24,757 34.2%
Total GSM 3,384,503 3,478,848 2.8% 878,363 905,833 3.1%
Telecom Services
Ring 206,474 152,278 (26.2%) 38,895 37,506 (3.6%)
Other 3 79,906 108,350 35.6% 28,695 27,912 (2.7%)
Total Telecom Services 286,380 260,628 (9.0%) 67,590 65,419 (3.2%)
Internet Services 88,881 86,058 (3.2%) 29,061 8,780 (69.8%)
Total Consolidated 3,759,764 3,825,534 1.7% 975,014 980,031 0.5%
1. On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is no longer applicable under IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 and 9M 2010 have been restated to reflect the accounting treatment of OTT. 2. On July 13, 2010, the amended and restated shareholders’ and settlement agreements concluded with France Telecom entered into force. Consequently, starting Q3 2010, Mobinil is reflected through the equity method. Mobinil’s financial figures for 2009 and H1 2010 are represented as a discontinued operation under IFRS. 3. Other Telecom Services Companies include C.A.T., OT Lebanon and TWA in 2009 and OT Lebanon, Mena Cable and TWA in 2010.
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Total GSM Revenues
3,384 3% 3,479
26 66 81 102 351 Total GSM 457 koryolink (North Korea) 1,058 1,107 Telecel Globe (Africa) banglalink (Bangladesh) Mobilink (Pakistan) 1,868 1,747 Djezzy (Algeria)
31 Dec 31 Dec 2009 2010 US$ (million) US$ (million)
Consolidated revenues for the fourth quarter of banglalink's revenues for Q4 2010 indicated an 2010 remained stable in comparison to Q3 2010, increase of over 1.4% compared to the previous while GSM revenues increased by 3% QoQ. quarter as competitive pressures intensify and lower The revenues of Djezzy witnessed a 2% increase end market segments are penetrated. compared to Q3 2010 due to local currency appreciation against the US$. In local currency In North Korea, revenue growth reached 34% QoQ terms, revenues were stable resulting from the attributable to the high additions made to its mitigation of the harsh operating conditions from subscriber base. Telecel Globe saw an 11% SIM shortage, which was contained towards Q4 decrease in revenues for Q4 2010 in comparison to 2010, to no promotions since the previous quarter. Q3 2010 due to the impact of price wars in the In Pakistan, Q4 2010 revenues grew by 5% in Burundi market. comparison to the previous quarter. The increase in traffic stimulated by promotions spanning The QoQ decrease of 70% in Internet Services’ discounted tariffs, SMS bundles and VAS revenues is attributed to the disposal of LINKdotNET and LINK Egypt in Q3 2010. contributed to the quarterly revenue’s growth.
Table 7: Proforma Consolidated Revenues (Local Currency)1
31 Dec. 31 Dec. Inc/ Inc/ Q3 - 2010 Q4 - 2010 Subsidiary 2009 2010 (dec) (dec) (3 months) (3 months) GSM
Djezzy (Algeria) (DZD bn) 135.6 129.2 (4.7%) 33.0 32.8 (0.5%)
Mobilink (Pakistan) (PKR bn) 86.8 94.3 8.7% 22.5 23.9 6.4%
1. Un-audited Figures.
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EBITDA
Consolidated EBITDA increased by 4% compared to activation taxes, which were reduced from Rs the same period last year. While GSM EBITDA grew 500/SIM to Rs 250/SIM in July 2009. by 2.5% YoY, it was adversely impacted by the crisis conditions facing the Algerian unit. The high growth of banglalink’s subscribers and revenues corresponded to an increase in EBITDA for Djezzy’s EBITDA declined 8% compared to the the year of 8% in comparison to the full year of 2009. previous year as a result of the previously mentioned decrease in revenues. Both Telecel Globe and Koryolink showed tremendous increases in their EBITDA compared to In Pakistan, the EBITDA of Mobilink grew 13% YoY in the previous year as a result of subscriber and US$ terms, while EBITDA in local currency terms revenue growth complimented by OPEX savings. showed an increase of 18% compared to the same period last year. The increase is a result of higher The increase in Telecom Services is mainly attributed revenues coupled with lower absorption of to OT Lebanon (Alfa Management contract).
Table 8: Consolidated EBITDA1, 2
Represented Represented Q4 - 2010 31 Dec. Q3 - 2010 31 Dec. Inc/ Inc/ Subsidiary 3 2010 3 2009 (dec) (3 months) (dec) US$ (000) (3 months) US$ (000) US$ (000) US$ (000) GSM
Djezzy (Algeria) 1,067,241 982,167 (8.0%) 265,548 241,357 (9.1%)
Mobilink (Pakistan) 386,653 438,071 13.3% 105,431 111,223 5.5%
banglalink (Bangladesh) 118,560 127,686 7.7% 23,340 30,772 31.8%
Telecel Globe (Africa) (435) 23,505 n.m. 7,565 6,643 (12.2%)
koryolink (North Korea) 17,153 57,764 n.m. 7,475 31,611 n.m.
Total GSM 1,589,172 1,629,193 2.5% 409,360 421,605 3.0%
Telecom Services
Ring (8,317) (6,885) 17.2% (3,298) (6,885) (108.8%)
Other 4 (3,184) 21,905 n.m. 4,339 2,465 (43.2%)
Total Telecom Services (11,501) 15,020 n.m. 1,040 (4,421) n.m.
Internet Services 9,557 11,914 24.7% 3,431 2,293 (33.2%)
5 OT Holding & Other (68,693) (71,843) (4.6%) (18,625) (19,518) (4.8%)
Total Consolidated 1,518,535 1,584,283 4.3% 395,207 399,959 1.2%
1. EBITDA excludes management fees which were previously treated as a cost in each subsidiary and as a revenue for the Holding. 2. On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is no longer applicable under IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 and 9M 2010 have been restated to reflect the accounting treatment of OTT. 3. On July 13, 2010, the amended and restated shareholders’ and settlement agreements concluded with France Telecom entered into force. Consequently, starting Q3 2010, Mobinil is reflected through the equity method. Mobinil’s financial figures for 2009 and H1 2010 are represented as a discontinued operation under IFRS. 4. Other Telecom Services Companies include: C.A.T., MedCable, Mena Cable, OT Lebanon, TWA, and OTWIMAX in 2009 and 2010. 5. Other non operating companies include: OTH, OTV, OIIH, OTI Malta, Cortex, Eurasia, FPPL, IWCPL, Moga, Oratel, OT Finance, Swyer, OT Holding Canada, OT Asia, Oscar, OT ESOP, OT Services Europe, TMGL, Pioneers, OT Wireless Europe for 2009, in addition to TIL and TILSA in 2010.
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Total GSM EBITDA
2.5% 1,589 1,629
(0.4) 23 17 58 119 Total GSM 128 Telecel Globe (Africa) 387 438 koryolink (North Korea) banglalink (Bangladesh) Mobilink (Pakistan) 1,067 982 Djezzy (Algeria)
31 Dec 31 Dec 2009 2010 US$ (million) US$ (million)
Consolidated EBITDA increased by 1.2% compared The EBITDA of banglalink showed an increase of 32% to the previous quarter, with GSM EBITDA illustrating a compared to Q3 2010 which is attributable to the 3 % increase YoY due to the adverse impact of a 9% high customer base growth and increasing revenues. decrease in Djezzy’s EBITDA despite an increase Telecel Globe witnessed higher interconnect costs as among all other operations. well as intensified competition in its operations leading to a decrease of 12% in its EBITDA in In Algeria, EBITDA declined 9% QoQ, mainly a result comparison to the last quarter. of the decrease in revenues as well as the application of a new tax on recharge cards, further The EBITDA of Internet Services compared to Q3 2010 accompanied by a decrease in OPEX arising from showed a decline of 33%, mainly due to the disposal marketing, technical maintenance, leased lines and of LINKdotNET and LINK Egypt. The 43% decrease of bad debt. “Other” Telecom Services is due to insurance costs relating to the cable business, as well as lower Mobilink’s high revenues translated to a 5.5% growth quarterly revenues from OT Lebanon as a result of in EBITDA compared to the previous quarter. ARPU dilution and increased subscriber costs.
Table 9: Proforma Consolidated EBITDA (Local Currency)1
31 Dec. 31 Dec. Inc/ Inc/ Q3 - 2010 Q4 - 2010 Subsidiary 2009 2010 (dec) (dec) (3 months) (3 months) GSM
Djezzy (Algeria) (DZD bn) 78.1 72.5 (7.2%) 19.6 17.3 (11.7%)
Mobilink (Pakistan) (PKR bn) 31.7 37.3 17.8% 9.5 9.4 (0.7%)
1. Un-audited Figures.
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EBITDA MARGIN
The EBITDA margin for the group stood at 41.4% cost control. In Bangladesh, the decrease of 6% in representing a 1% increase over the same period banglalink’s EBITDA margin in comparison to last last year. year came as a consequence of higher cost due to strong net additions to the network, as well as the Djezzy’s margin declined by only 1% compared to impact of SIM tax subsidies borne by the operators year end of 2009 as a result of efficient cost in the market. management in order to mitigate the impact of the prevailing challenges the unit is facing with regards Both Telecel Globe and koryolink showed significant to its operating environment and imposed increases in their EBITDA margins, growing 24% and restrictions. 21% respectively. The increase in koryolink is attributable to higher revenues, while Telecel Globe The EBITDA margin of Mobilink grew by 3% YoY has also implemented cost control measures. thanks to high revenue generation coupled with
Table 10: Consolidated EBITDA Margin
Represented Represented 31 Dec. Q4 - 2010 Subsidiary 31 Dec. Change Q3 - 2010 Change 2010 (3 months) 2009 (3 months) GSM
Djezzy (Algeria) 57.1% 56.2% (0.9%) 59.7% 53.3% (6.4%)
Mobilink (Pakistan) 36.5% 39.6% 3.0% 39.5% 39.6% 0.1%
banglalink (Bangladesh) 33.8% 27.9% (5.8%) 19.4% 25.2% 5.8%
Telecel Globe (Africa) (0.5%) 23.1% 23.6% 27.0% 26.6% (0.4%)
koryolink (North Korea) 66.1% 87.0% 20.9% 40.5% 127.7% 87.2%
Total GSM 47.0% 46.8% (0.1%) 46.6% 46.5% (0.1%)
Total Telecom Services (4.0%) 5.8% 9.8% 1.5% (6.8%) (8.3%)
Internet Services 10.8% 13.8% 3.1% 11.8% 26.1% 14.3%
EBITDA M ar gin 40.4% 41.4% 1.0% 40.5% 40.8% 0.3%
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Foreign Exchange Rates Table 11: Foreign Exchange Rates used in the Income Statement & Balance Sheet
3 3 % Chg % Chg Currency Dec. 09 Sept. 10 Dec. 10 Dec. 10 vs Dec. 10 vs Dec. 09 Sept. 10 Egyptian Pound/USD 1 Income Statement 5.5801 5.6221 5.6359 1.0 0.2 2 Balance Sheet 5.5090 5.7050 5.8057 5.1 1.7
Algerian Dinar/USD 1 Income Statement 72.5825 74.5171 73.9910 1.9 (0.7) 2 Balance Sheet 72.7309 74.7419 74.2862 2.1 (0.6)
Pakistan Rupee/USD 1 Income Statement 81.9791 85.1752 85.6721 4.3 0.6 2 Balance Sheet 84.2333 86.3333 85.1836 1.1 (1.3)
Bangladeshi Taka/USD
Income Statement1 69.4675 69.7500 69.6256 0.2 (0.2) 2 Balance Sheet 69.6500 70.1000 70.5983 1.3 0.7
Canadian Dollar/USD
Income Statement 1 1.1210 0.9736 1.0297 (8.9) 5.4
Balance Sheet 2 1.0386 0.9801 0.9970 (4.2) 1.7
1- Represents the average monthly exchange rate from the start of the year until the end of the period. 2- Represents the spot exchange rate at the end of the period. 3- Appreciation / (Depreciation) of USD vs. Local Currency.
Net Income
Net Income before minority interest for the year end of 2010 appreciation of the US$ against the Egyptian Pound from stood at US$ 781 million. Net income attributable to equity 5.5090 to 5.8057 over the course of the year had a holders for the year 2010 was positive for US$ 743 million. significant effect on the mark to market value of the US$ denominated debt at OTH of approximately US$ 3.5 billion. Effective July 13, 2010 and as per the amended and restated shareholders’ and settlement agreements Secondly, the impairment of both tangible and intangible concluded with France Telecom, OTH measured its assets relating to Telecel Globe’s subsidiary in Namibia investments in Mobinil and ECMS at fair value according to caused a further decline to the impairment of non-current IAS 31 “Interests in Joint Ventures” and subsequently assets in Q4 2010. This led to the impairment of related accounted for them using the equity method. OTH deferred taxes, which adversely affected income tax. recognized a gain of US$ 822 million on the transaction by Furthermore, the impairment of MedCable in Algeria, comparing the carrying amount of the investments in caused by the disallowing of the cables’ use for domestic Mobinil and ECMS to the relevant fair value, taking into and international calls by OTA, also impacted the bottom consideration the net proceeds from the transaction for the line. Finally, the net income for the period also global settlement fee amounting to US$300 million. encompassed start up losses from our Canadian This recorded gain was partially offset by several factors. operations. EPS in the 12 months ended December 31, 2010 Firstly, as per statutory requirements, OTH’s primary stood at US$ 0.73/GDR. accounts are held in Egyptian Pounds, consequently the
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Table 12: Income Statement in IFRS/US$
Represented 31 Dec. Inc/ Represented Inc/ 31 Dec. Q4 - 2010 2010 (dec) Q3 - 2010 (dec) 2009 (3 months) (3 months) US$ (000) US$ (000) US$ (000) US$ (000) Revenues 3,759,764 3,825,534 2% 975,014 980,031 1%
Other Income 34,887 32,265 7,501 6,722
Total Expense (2,263,239) (2,273,678) (585,280) (584,782)
Net unusual Items (12,877) 162 (110) 272 1 EBITDA 1,518,535 1,584,283 4% 397,125 402,243 1%
Depreciation & Amortization (760,739) (792,368) (185,553) (236,226) 2 2 2 Impairment of Non Current Assets (38,297) (122,756) (7,784) (79,936)
Gain (Loss) on Disposal of Non Current 3 4 42,237 27,909 26,993 4 1,475 Assets Operating Income 746,620 697,067 (7%) 230,781 87,557 (62%)
5 Financial Expense (439,772) (466,847) (114,107) (101,186)
6 Financial Income 87,172 56,084 20,788 (1,845)
7 Foreign Exchange Gain (Loss) 24,753 (78,448) 24,184 8,913
7 Net Financing Cost (327,847) (489,212) (69,135) (94,118)
Share of Profit (Loss) of Associates (47,129)8 (118,829) 8 (15,844) 8 (36,071)8
Impairment of Financial Assets - (48,129) 9 - (48,129)
Profit Before Tax 371,644 40,898 (89%) 145,802 (90,761) n.m.
Income Tax (266,073) (239,298) 10 (56,336) (84,617) 10
Profit from Continuing Operations 105,571 (198,400) n.m. 89,466 (175,378) n.m.
Gains or losses from discontinued 273,057 979,851 844,762 5,845 operations 11 Profit for the Period 378,628 781,452 106% 934,228 (169,533) n.m.
Attributable to: 12 Equity Holders of the Parent 317,290 743,099 134% 939,209 (178,834) n.m.
13 Earnings Per Share (US$/GDR) 0.36 0.73 103% 0.90 (0.17) n.m.
Minority Interest 61,338 38,352 (4,981) 9,301
Net Income 378,628 781,451 106% 934,228 (169,533) n.m.
1- Management Presentation developed from IFRS financials. 2- Mainly due to the impairment of Telecel Globe’s investment in Namibia and the impairment of MedCable in Algeria. 3- Due to the proceeds of the disposal of M-Link. 4- Due to the proceeds of the disposal of LINKdotNET and LINK Egypt in Q3 2010. 5- Due to a waiver obtained from the lenders regarding the Algerian tax claim amounting to approximately US$ 24 million in H1 2010. 6- Mainly due to gains of approx. US$36.5 million resulting from the early extinguishment of PMCL’s bond. 7- Mainly due to the unrealised FX loss from mark to market value of the US$ denominated debt at OTH of US$ 3.5 billion as a result of the depreciation of the Egyptian Pound during 2010, 8- Mainly due to the launch of the Canadian operations. Q3 & Q4 2010 figures include the equity consolidation of Mobinil as per the amended and restated shareholders’ and settlement agreements concluded with France Telecom which entered into force on July 13, 2010. 9- Due to the impairment of Orabank, a financial receivable related to North Korea. 10- Due to the impairment of deferred taxes associated with the impairment of Telecel Globe’s investment in Namibia 11- On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is no longer applicable under IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 and 9M 2010 have been restated to reflect the accounting treatment of OTT. 12- Equates to Net Income after Minority Interest. 13- Based on a weighted average for the outstanding number of GDRs of 1,015,240,054 GDRs as of 31 December 2010. On a pro forma basis for the rights issue, the weighted average for the outstanding number of GDRs for 2009 is 878,947,566. The weighted average for the outstanding number of GDRs in Q3 2010 and Q4 2010 is: 1,045,651,444 GDRs and 1,046,501,539 GDRs respectively.
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Table 13: Balance Sheet in IFRS/US$
IFRS/US$ IFRS/US$ 31 December 31 December 2009 2010 US$ (000) US$ (000) Assets
Property and Equipment (net) 5,031,757 3,763,359
Intangible Assets 3 2,261,477 1,486,662
Investment in Associates - 1,029,294
Other Non-Current Assets 3 963,990 1,104,740
Total Non-Current Assets 8,257,224 7,384,055
Cash and Cash Equivalents 759,546 824,085
Trade Receivables 331,759 258,820
Assets Held for Sale 109,953 422,604 2
Other Current Assets 640,536 1,090,912
Total Current Assets 1,841,794 2,596,421
Total Assets 10,099,018 9,980,476
Equity Attributable to Equity Holders of the Company 1,275,548 2,726,524
Minority Share 140,000 74,639
Total Equity 1,415,548 2,801,163
Liabilities
Long Term Debt 4,873,991 3,859,447
Other Non-Current Liabilities 342,351 354,225
Total Non-Current Liabilities 5,216,342 4,213,672
Short Term Debt 998,231 973,454
Trade Payables 1,042,907 811,443
Other Current Liabilities 1,425,990 1,180,744
Total Current Liabilities 3,467,128 2,965,641
Total Liabilities 8,683,470 7,179,313
Total Liabilities & Shareholder’s Equity 10,099,018 9,980,476
Ne t De bt 1 5,112,676 4,008,816
1- Net Debt is calculated as a sum of Short Term Debt, Long Term Debt, less Cash and Cash Equivalents. 2- On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is no longer applicable as per IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 and 9M 2010 have been restated to reflect the accounting treatment of OTT. 3- Due to reclassification purposes, some figures previously presented as other non-current assets in 9M 2010 have been adjusted to intangible assets
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1,2 Table 14: Cash Flow Statement in IFRS/US$ IFRS/US$ IFRS/US$ Represented Represented 31 31 December December 2009 2010 US$ (000) US$ (000) Cash Flows from Operating Activities
Profit for the Period 104,517 (198,634)
Depreciation, Amortization & Impairment of Non-Current Assets 799,036 915,124
Income Tax Expense 266,073 239,053
Net Financial Charges 327,847 489,383 Share of Loss (Profit) of Associates Accounted for Using the 47,129 118,829 Equity Method Impairment of Financial Assets - 48,129 3 Other 57,973 38,740
Changes in Assets Carried as Working Capital (61,075) (579,962) 4
Changes in Other Liabilities Carried as Working Capital 188,907 109,441
Income Tax Paid (521,866) (300,982)
Interest Expense Paid (408,513) (356,517)
Net Cash Generated by Operating Activities 800,028 522,604
Cash Flow s from Investing Activities Cash Outflow for Investments in Property & Equipment, Intangible (1,080,718) (690,153) Assets, and Financial Assets & Consolidated Subsidiaries Proceeds from Disposal of Property & Equipment, Subsidiaries and 209,620 142,592 Financial Assets Advances & Loans made to Associates & other parties (135,237) (300,348)
Dividends & Interest Received 27,010 20,152
Net Cash Used in Investing Activities (979,325) (827,757)
Cash Flows from Financing Activities
Proceeds from loans, banks' facilities and bonds 932,921 332,843
Payments for loans, banks' facilities and bonds (632,472) (866,978)
Net Payments from financial liabilities - (10,683)
Net Change in Cash Collateral 83,212 (924)
Dividend Payments (91,160) -
Payments for Treasury Shares (4,189) (460)
Capital injection - 765,233
Change in non-controlling interest (20,468) -
Net Cash generated by Financing Activities 267,844 219,031
Discontinued operations
Net cash generated by operating activities 386,261 23,913
Net cash (used in) generated by investing activities (240,872) 142,251
Net cash (used in) generated by financing activities (103,764) 38,879
Net cash generated from discontinued operations 41,625 205,043
Net Increase in Cash & Cash Equivalents 130,172 118,921
Cash included in Assets Held for Sale (13,561) (43,559)
Effect of Exchange Rate Changes on Cash & Cash Equivalents (8,848) (10,823)
Cash & Cash Equivalents at the Beginning of the Period 651,783 759,546
Cash & Cash Equivalents at the End of the Period 759,546 824,085
1. On July 13, 2010, the amended and restated shareholders’ and settlement agreements concluded with France Telecom entered into force. Consequently, starting Q3 2010, Mobinil is reflected through the equity method. Mobinil’s financial figures for 2009 and H1 2010 are represented as a discontinued operation under IFRS. 2. On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is no longer applicable under IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 have been restated to reflect the accounting treatment of OTT. 3. Due to the impairment of Orabank, a financial receivable related to North Korea. 4. Mainly comprised of advance payments made for OTA’s tax dispute. Orascom Telecom Holding FY– 2010 Page | 22
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Table 15: Income Statement in EAS/Egyptian Pounds1
Represented 31 Dec. Inc/ Represented Inc/ 31 Dec. Q4 - 2010 2010 (dec) Q3 - 2010 (dec) 2009 (3 months) (3 months) LE (000) LE (000) LE (000) LE (000) Revenues 20,979,798 21,560,259 3% 5,561,039 5,562,524 0%
Other Income 194,671 181,844 43,028 38,238
Total Expense (12,594,908) (12,784,460) (3,354,003) (3,309,113)
Net unusual Items (67,170) - (618) 618
EBITDA 2 8,512,391 8,957,643 5% 2,249,446 2,292,267 2%
Depreciation & Amortization (4,241,760) (4,463,057) (1,061,357) (1,337,730)
Other (62,366) (534,381) 106,346 (442,377)
Operating Income 4,208,265 3,960,205 (6%) 1,294,435 512,160 (60%)
Financial Expense (2,471,214) (2,616,839) (649,702) (572,345)
Financial Income 494,306 315,120 118,635 (10,562)
Foreign Exchange Gain (Loss) 147,774 (442,126) 130,672 49,030
Net Financing Cost (1,829,134) (2,743,845) (400,395) (533,877)
Share of Profit (Loss) of Associates (262,986) (571,602) (93,113) (105,469)
Impairment of Financial Assets (271,251) (271,251)
Profit Before Tax 2,116,145 373,507 (82%) 800,927 (398,438) n.m.
Income Tax (1,484,707) (1,355,325) (320,770) (486,313)
Profit from Continuing Operations 631,438 (981,818) n.m. 480,157 (884,751) n.m.
Gains or losses from discontinued 1,564,635 2,106,966 1,881,524 15,494 operations
Profit for the Period 2,196,073 1,125,148 (49%) 2,361,680 (869,257) n.m.
Attributable to:
Equity Holders of the Parent 1,844,897 880,717 (52%) 1,951,081 (922,404) n.m.
Earnings Per Share (EGP/Share) 3 0.42 0.17 (59%) 0.37 (0.18) n.m.
Minority Interest 351,176 244,431 31,202 53,147
Net Income 2,196,073 1,125,148 (49%) 2,361,680 (869,257) n.m.
1- According to the Egyptian Accounting Standards (EAS), the investments in Mobinil and ECMS are measured at cost and not at fair value as per the IFRS. Consequently, the gain recognized on the ECMS Transaction is not reflected in the following statement. 2- Management Presentation developed from EAS financials. 3- Based on a weighted average for the outstanding number of shares for 2010 of 5,076,200,272 local shares. On a pro forma basis for the rights issue, the weighted average for the outstanding number of shares for 2009, Q3 2010 and Q4 2010 is 4,394,737,830; 5,228,257,218 and 5,232,507,694 local shares respectively.
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Table 16: Balance Sheet in EAS/Egyptian Pounds1
EAS/L E EAS/L E 31 December 31 December 2009 2010 LE (000) LE (000) Assets
Property and Equipment (net) 27,557,254 21,710,070
Intangible Assets 12,260,323 8,584,912
Other Non-Current Assets 5,310,618 8,558,597
Total Non-Current Assets 45,128,195 38,853,579
Cash and Cash Equivalents 4,184,340 4,784,360
Trade Receivables 1,827,658 1,502,624
Assets Held for Sale 605,732 2,430,567
Other Current Assets 3,539,221 6,332,816
Total Current Assets 10,156,952 15,050,367
Total Assets 55,285,148 53,903,946
Equity Attributable to Equity Holders of the Company 6,804,851 12,246,749
Minority Share 762,697 458,581
Total Equity 7,567,548 12,705,330
Liabilities
Long Term Debt 26,747,219 22,314,854
Other Non-Current Liabilities 1,886,006 1,735,569
Total Non-Current Liabilities 28,633,225 24,050,423
Short Term Debt 5,483,719 5,639,775
Trade Payables 5,747,657 4,710,968
Other Current Liabilities 7,852,999 6,797,450
Total Current Liabilities 19,084,375 17,148,193
Total Liabilities 47,717,600 41,198,616
Total Liabilities & Shareholder’s Equity 55,285,148 53,903,946
Ne t De bt 2 28,046,598 23,170,269
1- Management presentation developed from EAS financials. 2- Net Debt is calculated as a sum of Short Term Debt, Long Term Debt, less Cash and Cash Equivalents.
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Presence in Countries with Favourable Dynamics:
Operations owned by Orascom Telecom (OTH has 65% indirect equity ownership in Globalive Canada but a minority voting stake)
OTH serves a population of 517 million* with an average penetration of 48%
EGYPT ALGERIA Population: 80.5 million Population: 35 million BANGLADESH CANADA GDP Growth: 4.7% GDP Growth: 4.1% Population: 34 million GDP/Capita PPP ($): 6,000 GDP/Capita PPP ($): 7,400 Population: 156 million GDP Growth: 6% GDP Growth:-2.5% Pop. Under 15 years: 33% Pop. Under 15 years: 25% GDP/Capita PPP ($): 38,200 Sovereign Rating: BB Sovereign Rating: NR GDP/Capita PPP ($): 1,700 Pop. Under 15 years: 35% Pop. Under 15 years: 16% Mobile Penetration: 92% Mobile Penetration: 75% Sovereign Rating: AAA Sovereign Rating: NR Mobile Penetration: 70% Mobile Penetration: 43% NAMIBIA CENTRAL AFRICA REPUBLIC Population: 2.1 million Population: 4.8 million GDP Growth: -0.8% GDP Growth: 1.7% Pop. Under 15 years: 36% Pop. Under 15 years3: 41% PAKISTAN NORTH KOREA Population: 184 million Sovereign Rating: BBB Sovereign Rating: NR Population: 22.8 million Mobile Penetration: 83% Mobile Penetration: 17% GDP Growth: 4.2% GDP Growth: 3.7% GDP/Capita PPP ($): 2,500 GDP/Capita (PPP) ($): 1,900 Pop. Under 15 years: 37% Pop. Under 15 years: 21% Sovereign Rating: CCC ZIMBABWE BURUNDI Sovereign Rating: NR Mobile Penetration: 54% Population: 11.7 million Population: 9.9 million Mobile Penetration: 2% GDP Growth: -1.3% GDP Growth: 3.5% Pop. Under 15 years3: 44% Pop. Under 15 years: 46% Sovereign Rating: NR Sovereign Rating: NR Mobile Penetration: 49% Mobile Penetration: 15%
Note: Sovereign Ratings shown are Moody’s/S&P. Population Figures from CIA Factbook (est. December 2010). Mobile Penetration is based on December 31, 2010 subscriber figures & market share
*excluding Canada and Lebanon
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Operational Overview
Djezzy – Algeria
Financial Data Operational Data
December December Inc/ December September December Inc/(dec) Dec. 2010 vs. 2009 2010 (dec) 2009 2010 2010 Dec. 2009
Financial Data Operational Data Subscribers 14,618,166 14,919,031 15,087,393 3.2% Revenues (US$ 000) 1,867,837 1,746,566 (6.5%) Revenues (DZD bn) 135.6 129.2 (4.7%) Market Share 59.4% 57.9% 57.6% (1.8%)
A RPU (US$) EBITDA (US$ 000) 1,067,241 982,167 (8.0%) 9.9 9.6 9.7 (2.3%) (3 months) A RPU (DZD) EBITDA (DZD bn) 78.10 72.50 (7.2%) 721 725 724 0.4% (3 months)
EBITDA Margin 57.1% 56.2% (0.9%) MOU (Y TD) 248 278 280 13.0%
Capex (US$ m) 261 90 (66%) Churn (3 months) 7.1% 7.3% 5.7% (1.4%)
OTA succeeded in managing a very challenging year in From a regulatory perspective, during Q1 OTA managed 2010, closing with 15.1 million subscribers, maintaining its to overcome the fact of not getting any approvals from leadership position with a 58% market share, controlling the Algerian telecommunication regulator (ARPT) for the largest distribution across all 48 Wilayas and new offers or promotions by pushing/recycling the operating the largest network with 7,527 BTS by year existing offers and focusing on churn management. end. During Q2, none of the Algerian GSM operators could get any approvals from the ARPT for any offer, as ARPT’s During 2010 OTA faced many handicaps of all kinds Board of Directors did not issue any decisions during this from a number of government authorities. In spite of period for internal reasons. such an adverse environment, OTA did its best to mitigate and compensate as much as possible those In order to react against this handicapping situation, a extreme challenges. During H1 2010, OTA recovered new marketing road map was put in place based on from the unfortunate football related events that revamped and recycled pre-paid offers and new post- happened in Q4 2009, including reopening all of its paid bundles. Ramadan promotion campaigns were damaged owned shops (CDS), restoring interrupted IT put in place as well as the 50% Bonus campaign in services, refurbishing destroyed offices and warehouses, November. New value added services were launched, and recovering all damaged technical sites. During Q2 supported by strong communication campaigns such as 2010, the Bank of Algeria issued a decision, instructing football content pack, golden numbers and directory the banks not to process any transfer abroad in foreign services. In addition, multiple marketing researches were currency for OTA, which also resulted in putting on hold conducted in order to assess the market reaction in any custom clearance of imported goods. OTA terms of customer satisfaction and network perception. managed since then and throughout 2010 to serve its OTA mitigated an arbitrary ban from announcing on the customers with the best possible quality, although it has national public TV, through the sponsoring of TV shows been blocked from importing equipment for network and advertising on other regional TV channels like expansions or for maintenance purposes. One of the Nessma & MBC, as well as Internet, and through consequences of the Bank of Algeria decision is that changing its media mix to ensure awareness about new OTA was impeded from importing SIM cards, which launches and maintain the emotional bond with OTA’s affected subscriber acquisitions from the end of Q2 until customer base. mid-Q4 2010 when local SIM manufacturers were able to On the sales side, OTA continued selling its mobile fully address OTA's needs. telecommunications services through indirect channels (distributors) and opened 16 new shops under the
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“Djezzy” brand to reach 87 owned shops by year end. million to US$ 1.7 million. EBITDA decreased by 8% YoY, OTA continued to serve the corporate sector through a while the EBITDA margin declined by less than 1% dedicated sales force. The nine exclusive national compared to 2009. EBITDA decrease results mainly from distributors that cover all the 48 Wilayas are distributing the decrease in revenues as well as the application of a OTA’s products through 19,000 authorized POS. new tax on recharge card. The revenue decrease was accompanied by a decrease in OPEX coming from The overall customer base increased by 3.2% to reach Marketing, Technical maintenance, leased lines and again 15.1m customers by end of 2010. Gross adds bad debt. The effect of OPEX decrease was however evolution was mainly driven by the blockage of partially absorbed by the additional provision related to importing SIMs. Market share of Gross Adds went from tax claim (compared to 2009) of 1 bn DZD. 41% in May to 23% in October due to the blockage of OTA’s imports by the Bank of Algeria which started in On September 29th 2010, a preliminary tax assessment April 2010. However we managed to increase it again to notification amounting to DZD 17,064,210,906 related to 39% in December after restoring the SIM supply through 2008/2009 tax years was received. This assessment local manufacturers. OTA managed to control churn disregards OTA accounting records and is being through the enhancement of “Imtyaz” loyalty program accounted on deemed basis. as the churn rate in Q4 2010 was only 5.7% compared to OTA is maintaining a proper accounting system and has 7.1% for Q4 2009. paid all taxes dues within the normal course of business Although OTA's ARPU saw a slight increase in Q4 2010 for the year ended 2008 & 2009. On December 13th compared to Q4 2009 (it went up from DZD 721 to DZD 2010 a final tax assessment notification amounting to 724) as a result of the unfortunate football related DZD 17,064,210,906 related to tax years 2008 and 2009 events (which started mid of November 2009) the 2010 together with an order to pay were issued by tax average yearly ARPU dropped by 6.9% to reach DZD 712 administration. As per law OTA has 40 days to submit compared to DZD 764 during 2009, as a result of the their reply on the preliminary tax assessment received. numerous handicaps that OTA suffered during 2010, which were the main factors causing OTA's revenue drop in 2010 as compared to 2009.
OTA revenue evolution along 2010 followed a parallel trend to the actions undertaken by OTA to mitigate operational handicaps being faced throughout 2010.
Revenues for the year end of 2010 showed declined by 6.5% compared to the same period of 2009, from US$ 1.9
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Mobilink – Pakistan
Financial Data Operational Data
December December Inc/ December September December Inc/(dec) Dec. 2010 vs. 2009 2010 (dec) 2009 2010 2010 Dec. 2009
Financial Data Operational Data Subscribers 30,800,354 31,444,099 31,794,292 3.2% Revenues (US$ 000) 1,058,448 1,107,067 4.6% Revenues (PKR bn) 86.8 94.3 8.7% Market Share* 31.5% 32.6% 31.4% (0.3%)
A RPU (US$) EBITDA (US$ 000) 386,653 438,071 13.3% 2.9 2.7 2.9 0.0% (3 months) A RPU (PKR) EBITDA ( PKR bn) 31.70 37.33 17.8% 242 231 245 1.2% (3 months)
EBITDA Margin 36.5% 39.6% 3.0% MOU (Y TD) 198 202 206 4.1%
Capex (US$ m) 157 143 (9%) Churn (3 months) 5.2% 9.3% 8.2% 3.0%
* Market share, as announced by the Pakistani Regulator is based on information disclosed by the other operators which use different subscriber recognition policies.
2010 proved to be a tough year for Pakistan where it faced a With a focus on market share maintenance, acquisition offer of number of challenges. The year was marked by the worst flood “3000 + 3000” was run to bring new customers on board and in history of the country, war against terrorism, as well as gas attract port-in subscribers which contributed in increasing the and electricity load shedding. Increase in electricity prices subscriber base. In parallel, reactivation promotions were given coupled with load shedding put pressure on individuals and a different flavor with the introduction of short duration flash business entities. The flood also devastated telecommunication promotions like one week and weekends coupled with services in various areas along with the infrastructure damage innovative offerings which helped bringing back the customers. and displacement of people. Mobilink, feeling its corporate Occasion based promotions were also launched with one responsibility, came forward and helped the countrymen being done on Eid-ul-Azha and the other on 10th of Moharram. through flood relief efforts putting in both money and time. In Dec 2010, Mobilink launched its Youth package by the name On the financial side, Mobilink experienced a stable year in of “Jazba”. Jazba offered competitive base tariff tailored to 2010 with growth in revenues and EBITDA. For the year ending youth’s needs. Eyeing the need of SMS bundles for youth December 2010, revenue registered 9% growth in local segment a portfolio of SMS bundles including daily, weekly and currency, growing by 5% in US$ terms and reaching US$1,107 monthly bundles were promoted which got an overwhelming million in 2010. EBITDA also showed improvement with 18% YoY response. Jazba brought a new vibe in the Jazz portfolio with its growth in local currency terms, an increase of 13% in US$ terms, exclusive campaign and vibrant treatment. compared to year end of 2009 emphasizing Mobilink’s drive to On the postpaid front, a new package “iBusiness” was curtail its operational costs. EBITDA margin improved from 36.5% launched to target SME segment. This move helped in in 2009 to 39.6% in 2010. Market share witnessed a slight decline expanding the portfolio in the corporate segment by targeting of 0.3% compared to the previous quarter as a consequence of a very sizable SME segment. Overall, the package got a good a subscriber based clean-up in addition to increased MNP response because of its low line rent, all network free minutes activity. and low Closed User Groups call rate offer. For the Telecom industry, 2010 proved to be a year full of Mobilink also had several firsts when it came to the operator led competition among the mobile operators with aggressive handset market. Mobilink launched Pakistan’s Android based offers, segmentation, retention and acquisition being the key Motorola Milestone, the first Windows 7 Phone and Samsung’s focus areas throughout the year. During Q4 when competition Galaxy Tablet. These launches helped in engaging the heated up after the usual dip in Ramadan, Mobilink rolled out customers and strengthening Mobilink’s image as an innovator. back to back aggressive offers which collectively ramped to Further Mobilink was also able to engage its customers through over 1 million subscriptions per day. Aggressive voice plus SMS 4 rounds of its Q&A based SMS Khazana competition. bundle was floated in the market along with an industry first All- in-One bundle which offered On-net, Off-net, International Direct Dialing minutes and SMS all coupled in one bundle.
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banglalink – Bangladesh
Financial Data Operational Data
December December Inc/ December September December Inc/(dec) Dec. 2010 vs. 2009 2010 (dec) 2009 2010 2010 Dec. 2009
Financial Data Operational Data Subscribers 13,886,913 18,107,163 19,327,005 39.2% Revenues (US$ 000) 350,884 456,984 30.2% EBITDA (US$ 000) 118,560 127,686 7.7% Market Share * 26.8% 27.8% 28.5% 1.7% EBITDA Margin 33.8% 27.9% (5.8%) A RPU (US$) Capex (US$ m) 122 235 93% 2.3 2.3 2.1 (10.0%) (3 months) A RPU (BDT) 163 160 149 (8.7%) (3 months)
MOU (Y TD) 253 232 230 (9.3%)
Churn (3 months) (0.6%) 5.2% 4.6% 5.2%
* Market share, as announced by the Regulator in Bangladesh is based on information disclosed by the other operators which use different subscriber recognition policies. banglalink has completed another year of high-growth In 2010, banglalink has continued to invest in its network with subscriber base reaching 19.3 million at the end of expansion in rural areas as well as enhancing capacity 2010, a 39% increase over last year. banglalink and quality to support the growth in subscriber base. continued its aggressive acquisition and strong customer banglalink invested US$ 235 Million, an increase of 93% retention policy in 2010 which led to this major growth in over 2009 capital expenditure of US$ 122 Million. subscriber base. Market share at the end of 2010 was banglalink established itself as the leader in Mobile 28.5% which is a 1.7% increase from 26.8% at the close of Financial Services by continuing to launch more services 2009. Revenue performance has also been impressive since it launched m-remittance, first time ever in South with US$457 million revenue in 2010, an increase of 30% Asia and by launching m-ticketing, mobile bill-pay and year-on-year, mainly triggered by a higher subscriber domestic remittance services’ with Bangladesh Post base. Office etc. banglalink continued to introduce attractive banglalink achieved an EBITDA of US$128 million VAS services such as, ‘Facebook Text’-updating representing an 8% increase compared to the previous Facebook by SMS, ‘Timer SMS’, and ‘emergency year. EBITDA margin decreased to 28% in 2010 recharge’. compared to a margin of 34% in 2009. EBITDA margin Indian telecom giant Airtel has taken over Warid in Q2 has declined primarily due to SIM tax paid to and in Q4 they have launched their brand “Airtel” in government for new subscriber acquisition. ARPU in Q4 Bangladesh coinciding with their global launch of new 2010 decreased 10% compared to the previous quarter, logo. mainly due to dilution caused by the high subscriber uptake.
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koryolink – Democratic People's Republic of Korea
Financial Data Operational Data
December December Inc/ December September December Inc/(dec) Dec. 2010 vs. 2009 2010 (dec) 2009 2010 2010 Dec. 2009 Financial Data Operational Data Subscribers 91,704 301,199 431,919 n.m. Revenues (US$ 000) * 25,951 66,402 155.9% Market Share 100.0% 100.0% 100.0% 0% A RPU (US$) EBITDA (US$ 000) * 17,153 57,764 n.m. * 24.5 15.2 14.6 (40.4%) (3 months) EBITDA Margin 66.1% 87.0% 20.9% Capex (US$ m) * 27 47 74% MOU (Y TD) 239 320 316 32.4%
* Based on the official exchange rate between the US$ and the North Korean Won (KPW) of KPW 135 as sourced by Bloomberg. koryolink closed the year 2010 with revenues reaching ARPU that typically takes place when enlarging the US$ 66 million representing over 156% growth compared base through expanding to lower end market segments. to the same period last year. 12M EBITDA reached US$ As a startup to its VAS launch plan and in an effort to 58 million showing a tremendous increase over the same increase the 3G network utilization, koryolink has period last year on a comparable basis reflecting an successfully launched the Video Call service in Q3 2010 EBITDA margin of 87%. to witness a high demand on the service from different koryolink, the first and only mobile operator providing 3G segments, especially the youth segment. The high services in the DPRK, has celebrated its second demand was in return reflected in the higher Video Call anniversary with a big jump in the number of subscribers; usage per subscriber compared to other operators in which has more than quadrupled compared to the 2009 similar markets. As a result, more and more innovative closing base. VAS are planned to be launched in 2011.
During the last year, koryolink has focused its entire koryolink has managed in 2010 to increase the number efforts to boost its subscriber growth rate via targeting of shops in Pyongyang to reach 18 shops and to new market segments with innovative offerings, increase the number of shops outside Pyongyang – expanding sales outlets regionally across all main cities through an agreement with KPTC, to 8 shops covering and maximizing the network coverage accordingly. the eight main cities in the DPRK. Through the expanded distribution network, koryolink has managed to better In order to increase the base size, koryolink introduced a penetrate the market and provide its services new rate plan in Q2 2010 targeting lower end customers conveniently to both new as well as existing customers. which paid off as we have witnessed an increasing sales trend from outside Pyongyang that reached nearly 50% koryolink’s network currently has 333 on air base stations in September 2010. This, in addition to the other sales covering Pyongyang as well as 14 other main cities efforts, succeeded in countering the shortage in (mainly Wonsan, Hamhung, Pyongsong, Anju, Kaechon, handset supply that was continuously caused by the Nampo, Sariwon & Haeju) as well as 22 highways. The handset distributor. network supports a variety of services in addition to voice such as video call, SMS, MMS, voice mail, WAP Additionally, the high demand on voice and VAS and HSPA. As of the end of 2010, koryolink has managed provided by koryolink compensated for the drop in to cover 91% of DPRK population.
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Equity Method Mobinil – Egypt
Operational Data
December September December Inc/(dec) Dec. 2010 vs. 2009 2010 2010 Dec. 2009
Operational Data Subscribers 25,354,209 28,401,312 30,224,888 19.2%
Market Share 42.0% 39.0% 39.9% (2.1%)
A RPU (US$) 6.5 5.4 4.9 (24.6%) (3 months) A RPU ( EGP) * 36 31 28 (20.9%) (3 months)
MOU (Y TD) * 173 171 167 (3.2%)
Churn (3 months) * 10.8% 7.2% 7.3% (3.5%)
* ARPU, MOU & Churn expressed under OTH’s definition may differ from Mobinil’s disclosed figures.
With close to 5 million net additions over 2010, Mobinil During Q4 2010 the main commercial launches Mobinil has exceeded 30 million customers. This confirms its did was Bedoon Sheroot (simple tariff) where customers strong position in the maturing Egyptian mobile market can benefit from the lowest rate EGP 0.14/min when and positions the company for future profitable growth. calling a Mobinil number from the first minute with no conditions or extra fees, in addition to receiving the Q4 2010 mobile customers’ net additions reached 1.8 lowest rate when calling any other operator or landline. million resulting in total additions of 4.9 million customers Mobinil also launched Recharge and Win where ALO for 2010 (with 0.76 million in Q1, 0.03 million in Q2 and and Primo customers can enjoy the chance to win 2.25 million in Q3). valuable prizes every time they recharge through Mobinil scratch cards or e-recharge for EGP 15. What’s The main event of Mobinil in 2010 was the acquisition of more, the launch of a double credit promotion with ALO LINKdotNET that is expected to help offering more allowed customers to profit from double recharged innovative commercial initiatives. amount every time they recharge their accounts with EGP 10 or more.
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WIND Mobile– Canada
September December Inc/(dec) Dec. 2010 vs. 2010 2010 Dec. 2009 Operational Data Subscribers 139,681 232,641 n.a.
ARPU (US$)(3 months - 30 n.a.
A RPU (CA D)(3 months - 29 n.a.
Globalive Wireless Management Corp. (“Company” or to $150 at time of activation, then apply a portion of “GWMC”), operating its wireless business under the their monthly service bill towards partially or entirely brand name WIND Mobile, celebrated its first repaying the device cost. WIND Mobile has broadened anniversary in the Canadian market in December 2010 its handset lineup throughout 2010 to end fourth quarter with 232,641 active subscribers. WIND Mobile has with 14 distinct devices ranging from high-end expanded its advanced fully enabled HSPA network Blackberries and Android devices to entry-level phones. coverage to include five of the top six population WIND Mobile’s distribution network has been centers in Canada and their peripheries with slightly over considerably extended throughout 2010 reaching a 11 million- population covered, with National Roaming total of 440 points of sale by year end including 130 supplementing national coverage for its customers. WIND branded locations. The diversity of WIND’s WIND Mobile reinforced its position as the first real, distribution network serves customers across all market country-wide alternative in the Canadian market that segments. WIND’s distribution network comprises a mix was marked by an oligopoly of three players for more of corporate stores, strategic alliances (store within a than a decade. store in Blockbuster), exclusive dealers, and third party WIND Mobile continued offering simple, feature-rich retailers. service plans and seasonal promotions as the pioneer In January 2010, the Company was named as a for the unlimited tariff structure in the Canadian market respondent in an application by Public Mobile Inc. to and a wide range of voice and data services starting as the Federal Court of Canada for an order overturning low as $15 a month with global standards and true value the December 2009 Cabinet order which permitted for Canadians, featuring no charges for incoming text or GWMC to launch its wireless operations. In that incoming long distance, no system access fees and no December 2009 order, the Cabinet had determined contracts, along with the unique payment agnostic that the Company met the requirements of Canada's concept where plan offerings are identical for both ownership and control rules and was, therefore, eligible post-paid and pre-paid segments. As a market leader in to commence operations. On February 4, 2011, the its product range, WIND continued its unlimited Federal Court ruled that the Cabinet order contained province-wide calling and unlimited nation-wide calling two errors and should be quashed. WIND Mobile and plans with specific holiday promotions and these plans the Canadian Government have appealed the decision were well accepted across customer segments and the decision has been stayed pending the increasing WIND’s active subscriber base by 67% in Q4 resolution of the appeal. WIND Mobile expects a 2010. favorable outcome. WIND introduced the TAB in November by which qualifying customers received a handset subsidy of up
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Table 17: Ownership Structure & Consolidation Methods
Ownership Consolidation Method Subsidiary December 31 December 31 2009 2010 2009 2010 GSM Operations 1 Mobinil (Egypt)2 28.75% 28.75% Proportionate Consolidation Equity consolidation Egyptian Co. for Mobile Services 20.00% 20.00% Proportionate Consolidation Equity consolidation 1 IWCPL (Pakistan) 100.00% 100.00% Full Consolidation Full Consolidation Orascom Telecom Algeria 3 96.81% 96.81% Full Consolidation Full Consolidation Telecel (Africa) 100.00% 100.00% Full Consolidation Full Consolidation Orascom Telecom Tunisia 4 50.00% 50.00% Proportionate Consolidation Assets Held for sale Telecel Globe 94.00% 100.00% Full Consolidation Full Consolidation OT Ventures 5 100.00% 100.00% Full Consolidation Full Consolidation CHEO 75.00% 75.00% Full Consolidation Full Consolidation Internet Service Intouch 100.00% 100.00% Full Consolidation Full Consolidation Non GSM Operations Ring 99.00% 99.00% Full Consolidation Full Consolidation Orasinvest - - - - OTCS 100.00% 100.00% Full Consolidation Full Consolidation OT ESOP 100.00% 100.00% Full Consolidation Full Consolidation M-Link 100.00% - Full Consolidation - OT Services Europe 100.00% 100.00% Full Consolidation Full Consolidation MedCable 100.00% 100.00% Full Consolidation Full Consolidation Mena Cable 100.00% 100.00% Full Consolidation Full Consolidation Moga Holding 100.00% 100.00% Full Consolidation Full Consolidation Oratel 100.00% 100.00% Full Consolidation Full Consolidation C.A.T.6 50.00% 50.00% Proportionate Consolidation Proportionate Consolidation OT Wireless Europe 100.00% 100.00% Full Consolidation Full Consolidation OT WIMA X 100.00% 100.00% Full Consolidation Full Consolidation TWA 51.00% 51.00% Full Consolidation Full Consolidation OIIH 100.00% 100.00% Full Consolidation Full Consolidation OT Holding 100.00% 100.00% Full Consolidation Full Consolidation FPPL 100.00% 100.00% Full Consolidation Full Consolidation MinMax Ventures 100.00% 100.00% Full Consolidation Full Consolidation OIH 7 100.00% 100.00% Full Consolidation Full Consolidation OTFCSA 100.00% 100.00% Full Consolidation Full Consolidation OT Holding Canada 8 100.00% 100.00% Full Consolidation Full Consolidation ITCL 50.00% 50.00% Proportionate Consolidation Proportionate Consolidation SAWLTD 100.00% 100.00% Full Consolidation Full Consolidation OT_OSCAR 100.00% 100.00% Full Consolidation Full Consolidation OTLB 100.00% 100.00% Full Consolidation Full Consolidation TMGL 100.00% 100.00% Full Consolidation Full Consolidation OTO 100.00% 100.00% Full Consolidation Full Consolidation
CORTEX 100.00% 100.00% Full Consolidation Full Consolidation 1. On July 13, 2010, the amended and restated shareholders’ and settlement agreements concluded with France Telecom entered into force. Consequently, starting Q3 2010, Mobinil is reflected through the equity method. Mobinil’s financial figures for 2009 and H1 2010 are represented as a discontinued operation under IFRS. 2. Mobinil is a holding company which controls 51% of ECMS, the mobile operator. Mobinil is also the brand name used by ECMS. 3. Direct and Indirect stake through Moga Holding Ltd. and Oratel. 4. On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (“OTT”). As a result the proportionate consolidation of OTT during Q4 is not applicable as per IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS. Figures for 2009 and 9M 2010 have been restated to reflect the accounting treatment of OTT. 5. OT Ventures owns 100% of Sheba Telecom which operates under the trade name banglalink. 6. Direct and Indirect stake through International Telecommunications Consortium Limited (ITCL). 7. OIH owns 100% of Orascom Telecom Iraq which sold Iraqna in December 2007. 8. Holding company for OTH’s Share in Globalive which has been accounted for under the equity method.
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Appendix
Glossary
ARPU (Average Revenue per User): Average monthly recurrent revenue per customer (excluding visitors roaming revenue and connection fee). This includes airtime revenue (national and international), as well as, monthly subscription fee, SMS, GPRS & data revenue. Quarterly ARPU is calculated as an average of the last three months.
Capex: Tangible & Intangible fixed assets additions during the reporting period, includes work in progress, network, IT, and other tangible and intangible fixed assets additions but excludes license fees.
Churn: Disconnection rate. This is calculated as the number of disconnections during a month divided by the average customer base for that month.
Churn Rule: A subscriber is considered churned (removed from the subscriber base) if he exceeds the 90 days from the end of the validity period without recharging. It is worth noting that the validity period is a function of the scratch denomination. In cases where scratch cards have open validity, the subscriber is considered churned in case he has not made a single billable event in the last 90 days (i.e. outgoing or incoming call or sms, wap session…). Open cards validity is applied for OTA, Mobilink, Mobinil and banglalink so far. A koryolink customer is considered churn if he/she does not recharge within four months after the validity of the scratch card.
MOU (Minutes of Usage): Average airtime minutes per customer per month. This includes billable national & international outgoing traffic originated by subscribers (on-net, to land line & to other operators). Also, this includes incoming traffic to subscribers from land line or other operators.
OTH’s Market Share Calculation Method: The market share is calculated through the data warehouse of OTH’s subsidiaries. The number of SIM cards of competitors that appeared in the call detail record of each of OTH’s subsidiaries is collected. This reflects the number of subscribers of the competition. However, OTH deducts the number of SIM cards that did not appear in the call detail records for the last 90 days to account for churn. The same is applied to OTH subsidiaries. This method is used to calculate the market shares of Djezzy and Mobinil only. In Pakistan and Bangladesh, Market share as announced by the Regulators is based on disclosed information by the other operators which may use different subscriber recognition policy.
For more information: Investor Relations Orascom Telecom Holding S.A.E. Nile City Towers – South Tower - 26th Floor – Ramlet Beaulac Tel: +202 2461 5050 / 51 Fax: +202 2461 5055 / 54 Email: [email protected] Website: www.orascomtelecom.com
This presentation contains statements that could be construed as forward looking. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the subscriber base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activity and situation relating to the company.
Such forward looking statements are no guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward looking statements as a result of various factors.
You are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation, which is not intended to reflect Orascom Telecom’s business or acquisition strategy or the occurrence of unanticipated events.
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