Telecom Egypt S Regulatory News (TEEG)

15 May 2007 07:20

Telecom Egypt S.A.E15 May 2007 Telecom Egypt Announces 1Q 2007 Consolidated Results Cairo, 15 May, 2007: Telecom Egypt (TE) (Ticker: ETEL.CA; TEEG.LN), todayannounced its consolidated financial results for the three months ending 31March, 2007. Financial statements have been prepared in accordance with EgyptianAccounting Standards. Highlights for the three months ending 31 March, 2007 include: - Revenues reached EGP 2.4 billion, an increase of 9% on 1Q 2006 - EBITDA after provisions reached EGP 1.35 billion, up from EGP 1.25 billion in 1Q 2006 - EBITDA margin for the period was 56.9% - Net profit increased 22% to EGP 585 million - Earnings per share (EPS) increased 22% from 1Q 2006 to EGP 0.34 - Monthly ARPU increased 1% to EGP 55.4 - Capex related cash flows reduced by 23% year-on-year to EGP 265 million - 10.9 million fixed-line subscribers, up 4% on 1Q 2006 - Fixed line penetration reached 15% - 186% growth in ADSL subscribers versus 1Q 2006 - 46.5% retail ADSL market share Chairman's statement Commenting on Telecom Egypt's first quarter 2007 results, Eng. Akil Beshir,Chairman and CEO of Telecom Egypt, said: "After what was an exceptional performance in the final quarter of 2006, I amgreatly encouraged by a solid start to the year. When compared with the firstquarter of 2006, the effects of our tariff rebalancing programme can again beseen especially in subscription revenues. This has contributed to a 9 percentincrease in revenue in the first quarter of 2007 relative to the comparativeperiod in 2006. "The growth in demand from other operators to connect to our extensive networkhas again given rise to a healthy quarterly result from our wholesale services,which now represent 31 percent of our total revenue mix. Wholesale revenueswere up 19 percent on this time last year and represent a key commercialopportunity for TE in the remainder of 2007. "Furthermore, with both ARPU and EBITDA metrics showing minor increases, butmore importantly stability, I believe we are well positioned for anothersuccessful year. "Our retail Internet business, TE Data, continues to make inroads into theretail ADSL market, having achieved a 46.5 percent market share by the end ofthe first quarter. Its ADSL subscriber base has already grown 20 percent in thefirst three months of the year; 186 percent since 31 March 2006. The technicalability and service excellence of the TE Data team, combined with a desire togrow the market as well as their share in it, means we are confident that during2007 we will further cement our position as the broadband market leader. "Aside from the wholesale revenues contribution I mentioned above, TE continuesto derive substantial benefit from the sustained growth in the mobile market inEgypt from our significant investment in Vodafone Egypt (VE). VE's performancein the first quarter contributed EGP 243 million to our consolidated results.Crucially, over the last 5 months we have been working closely with VE on thenature of commercial collaboration and I expect to be able to announce theoutcome of this cooperation during the second quarter." Financial Review Revenues Total consolidated operating revenues for the three months ended 31 March, 2007rose 9 percent to EGP 2.4 billion, compared to EGP 2.2 billion for the sameperiod in 2006, boosted by the net effects of tariff rebalancing and increaseddemand for wholesale services, both international and domestic. Retail services The profile of TE's total operating revenues continues to change, as revenuesfrom wholesale services represent a growing percentage of the total revenue mix. However, during the first quarter of 2007, retail revenues still comprised 69percent of total operating revenues. During the first quarter, the company recorded a year-on-year increase of 21percent in subscription revenues, reaching EGP 420 million and local callrevenues of EGP 445 million, versus EGP 438 million in the same period of 2006,as a result of the net effect of cost based tariff rebalancing. Internet & Data Demand for internet services has continued to accelerate, with TE Data, TE's 95percent owned subsidiary, adding a further 18,700 subscribers in the first threemonths of the year. By the three months ended 31 March 2007, TE Data's share ofthe retail ADSL market has reached 46.5 percent, generating internet and datarevenues for the first quarter of 2007 of EGP 56 million excluding revenues fromdial-up internet. Wholesale services Other operators are increasing their use of TE's wholesale services, which nowcomprise 31 percent of total revenues, or EGP 739 million - an increase of 19percent when compared to the first quarter of 2006. This development istestament to the success of TE's deployment of wholesale services and itsadvanced network capacity, as well as heightening demand from other operators. EBITDA/EBIT Consolidated EBITDA after provisions for the three months ended 31 March 2007reached EGP 1.35 billion, a rise of 8 percent on the same period in 2006. Thecompany's tight cost controls have again enabled it to sustain EBITDA margins inthe mid-50 percent range. There was some improvement in the performance of the Egyptian Pound against theEuro when comparing 1Q 2007 and 1Q 2006, with foreign exchange losses of EGP 14million compared with a loss of EGP 25 million in 1Q 2006. EBIT increased 27percent on the previous year, reaching EGP 860 million. Income from Investments TE's increased stake in Vodafone Egypt, one of the two licensed Egyptian mobileoperators, continues to deliver significant financial returns for the company,as well as allowing for closer strategic service collaborations. In presentingconsolidated financial statements, and as detailed in the basis of preparation,TE has changed the way in which it reports the income from its investment inVodafone Egypt, now accounted for using the equity method. For the three monthsended 31 March 2007, income from investments increased 122 percent to reach EGP222 million. Net profit In the first quarter 2007, consolidated net profit increased year-on-year by 22percent to EGP 585 million. The increase was primarily the result of the solidincrease in revenues, tight cost controls and an increase in income frominvestments, resulting from the higher stake in Vodafone Egypt. Investments in infrastructure TE's existing digital fixed-line network is extensive and already hassignificant excess network capacity built in, which is more than meeting theneeds of its own traffic and that of other operators. This headroom has allowedthe company to further rationalize its Capex programme. During the firstquarter of 2007, Capex-related cash outflows reached EGP 265 million, comparedwith EGP 346 million - a decrease of 23 percent. Debt TE's management geared up its balance sheet in 2006 to increase the efficiencyof its capital structure. The company financed the acquisition of the 19 percentadditional stake in Vodafone Egypt primarily by debt which led to an increase innet debt to EGP 6.8 billion by the end of 2006. Since the beginning of 2007 net debt has been reduced to EGP 5.8 billion by 31March 2007. This represents a net debt to equity ratio of 25 percent. Outlook Developments in the Egyptian telecommunications market continue apace, and 2007is expected to be another challenging, but exciting, year. First quarter 2007results provide a glimpse of what the year has in store and what can beachieved. Demand for greater capacity and services among the retail segment areaccelerating, which in turn means that wholesale usage of our network isintensifying. In 2007, TE will take further steps to capitalize on thetechnical scope of its infrastructure and the opportunity to expand further itssuccessful wholesale services specifically. The company's strategic focus for 2007 is the expansion of new services and itsclose collaboration with Vodafone Egypt on shared customer propositions will bean important part of this. We continue to generate significant free cash flow and as the company's Capexrationalization plans continue into 2007 the company expects to put this cash towork in strategic value enhancing investments or return it to shareholders. Operational Highlights 3 Months Period Ending March Previous Quarter Comparison March 2007 March 2006 % Change Q1 2007 Q4 2006 % Change Number of Fixed Line Subscribers 10,897,815 10,485,586 4% 10,897,815 10,807,678 1% Fixed Line Subscribers Net Additions 90,137 89,438 1% 90,137 87,075 4% ARPU (EGP/Month) 55.4 54.8 1.0% 55.4 61.7 -10% Number of ADSL Subscribers 111,030 38,799 186% 111,030 92,332 20.3% Retail ADSL Market Share 46.5% 35.2% 32% 46.5% 44.9% 4% Financial Highlights 3 Months Period Ending March Previous Quarter Comparison In EGP 000's (Except Per Share Data) March 2007 March 2006 % Change Q1 2007 Q4 2006 % Change Sales Revenue 2,377,758 2,180,163 9% 2,377,758 2,566,851 -7% EBITDA Before Provisions 1,370,915 1,287,637 6% 1,370,915 1,429,974 -4%Margin 57.7% 59.1% 57.7% 55.7% EBITDA After Provisions 1,351,762 1,250,660 8% 1,351,762 1,640,856 -18%Margin 56.9% 57.4% 56.9% 63.9% EBIT Before FX Gains or Losses 874,111 705,323 24% 874,111 1,151,785 -24%Margin 36.8% 32.4% 36.8% 44.9% EBIT 860,259 679,361 27% 860,259 1,124,710 -24%EBIT Margin 36.2% 31.2% 36.2% 43.8% Profit Before Taxes & Minority Interest 709,961 612,463 16% 709,961 955,574 -26% Consolidated Net Profit 585,229 479,932 22% 585,229 910,770 -36% Net Profit Margin 24.6% 22.0% 24.6% 35.5% EPS (EGP) 0.34 0.28 22% Please copy and paste the following link into your web browser to access theconsolidated financial statements and their accompanying notes: http://www.rns-pdf.londonstockexchange.com/rns/5960w_1-2007-5-15.pdf Please copy and paste the following link into your web browser to access thestandalone financial statements and their accompanying notes: http://www.rns-pdf.londonstockexchange.com/rns/5960w_2-2007-5-15.pdf - Ends - For further information: Investor Relations Contacts Tarek Tantawy, CFA Director of Investment, Treasury & Investor Relations Telephone: +202 5788111 Fax: +202 5789314 Eman Anis Investor Relations Manager Telephone: +202 5788787 Fax: +202 5789314 E-mail: investor.relations@telecomegypt.com.eg Notes to Editors: Within this statement, we may make forward-looking statements regarding futureevents or the future performance of the Company. By their very nature,forward-looking statements involve inherent risks and uncertainties, bothgeneral and specific, and risks exist that the predictions, forecasts,projections and other forward-looking statements will not be achieved. Youshould be aware that a number of important factors could cause actual results todiffer materially from the plans, objectives, expectations, estimates andintentions expressed in such forward-looking statements. When relying onforward-looking statements, you should carefully consider the political,economic, social and legal environment in which Telecom Egypt operates. Suchforward-looking statements speak only as of the time of this release today.Accordingly, Telecom Egypt does not undertake any obligation to update or reviseany of them, whether as a result of new information, future events or otherwiseother than as required by applicable laws, the Listing Rules or Prospectus Rulesof the United Kingdom Listing Authority, the Egyptian Capital Markets Authorityor the Cairo and Alexandria Stock Exchange. The documents filed from time totime with these authorities may identify important factors that could causeactual results to differ materially from those contained in any forward-lookingstatements. About Telecom Egypt Telecom Egypt (TE), Egypt's incumbent telecommunications operator, started itsoperations in 1854 with the first telegraph line in Egypt. Then it wascorporatized in 1998 to replace the former Arab Republic of Egypt NationalTelecommunication Organization (ARENTO). The Company is the largest provider offixed-line services in the Middle East and Africa with 10.9 million subscribersas at the end of March 2007 representing a teledensity of 15%. TE provides retail telecommunication services including access, local, longdistance and international voice, Internet and data, and other services. Thecompany also provides wholesale services including bandwidth capacity leasing toISPs, and national and international interconnection services. Telecom Egypt'sservices also include the provision of narrowband and broadband internet accessthrough its subsidiary TE Data. TE Data has active operations in Egypt andJordan. TE currently participates in the mobile segment in Egypt by providing mobileinterconnectivity through its current, increased 44.79% holding in VodafoneEgypt, one of the two existing Egyptian mobile operators. TE's shares and GDRs (Ticker: ETEL.CA; TEEG.LN) are traded on the Cairo andAlexandria Stock Exchanges and the London Stock Exchange. This information is provided by RNS The company news service from the London Stock Exchange