Telecom Egypt S Regulatory News (TEEG)

15 Nov 2006 16:47

Telecom Egypt S.A.E15 November 2006 Telecom Egypt Announces 9M 2006 Consolidated Results Cairo, 15 November, 2006: Telecom Egypt (TE) (Ticker: ETEL.CA; TEEG.LN), todayannounced its consolidated financial results for the nine months ended 30September, 2006. Financial Statements have been prepared in accordance withEgyptian Accounting Standards. Highlights for the first nine months of 2006 include: • 10.7 million fixed-line subscribers, up 4.7% on 9M 2005 • Fixed line penetration reached 14.9% • Substantial growth in number of ADSL subscribers - from 21.7k in Sept 2005 to 68.6k in Sept 2006 • Revenues up 7.9% on 9M 2005, reaching EGP 6.9 billion • 54.5% EBITDA margin remains one of the industry's highest • 9M 2006 EBIT decreased by 16.4% year-on-year to EGP 2.1 billion, as a result of several non-cash items • Non-cash items impacted net profit before tax and minority interest - down 14.3% on 9M 2005 to EGP 1.9 billion • Effect of non-cash items also causes net profit after tax to fall 17.2% in comparison with 2005 to EGP 1.5 billion • Capex related cash flows1 reduced by 35.7% year-on-year to EGP 1.2 billion • Earnings per share (EPS) decreased from EGP 1.07 for 9M 2005 to EGP 0.89 for 2006 • Monthly ARPU2 increased 4.6% year-on-year to EGP 57.7 for nine months ended September 2006 1 Capex calculation has been amended and no longer includes repayment of old debts related to acquisition of property, plant and equipment 2 ARPU calculation is calculated to include recurring revenues driven by TE's subscriber base. Monthly ARPU = (Subscription + Local + Long Distance + Fixed to International +Fixed to Mobile + Prepaid Calling Cards + Mobile to Fixed Interconnection +Incoming International Calls Revenues) / average number of subscribers duringthe period Chairman's statement Commenting on Telecom Egypt's nine months 2006 results, Akil Beshir, Chairman ofTelecom Egypt, said: "Our fixed line customer base continues to be one of the largest and most stablein the region and for the first time the effects of tariff rebalancing areworthy of note, increasing subscription and local call revenues by 22% and 14%respectively versus the comparative period in 2005. The overall effect is ahigher monthly ARPU, which we view as a very pleasing trend and one which is inline with the medium and long term objective of shifting our focus to subscribersegments where demand for additional telecommunications services isintensifying. These are the segments which we believe will ultimately be moreprofitable and where the technical scope of our infrastructure positions us wellto embrace the growing demand among existing retail and wholesale customers forgreater capacity and services. "During the first nine months of 2006 we have, once again, delivered top linegrowth of 8% year-on-year while maintaining a very healthy EBITDA margin. Incomparison with 2005, reported net profits have been negatively impacted byseveral non-cash items during the period under review, however, when oneexamines the underlying financial performance more closely, stripping out theseitems, this in fact masks a very positive underlying trend. "Ultimately our focus for the future is on a greater range of telecommunicationsservices which are, in reality, becoming increasingly convergent. Demand forinternet access and services is already intensifying in Egypt and TE Data'sability to capture broadband market share shows no signs of slowing; rising tomore than 41% by the end of September 2006. Even in the last quarter, ADSLsubscribers grew by 44% and we fully expect a similar rate of organic growth tocontinue during the remainder of 2006. "We have provided several recent updates to you in respect of our investment inVodafone Egypt (VE), which continues to deliver a strong financial result forTE. Our increased stake in VE simply serves to underline the strategicimportance of this initiative. Following the successful outcome of TE's tenderfor VE shares, launched during the third quarter of 2006, we have furthercemented our relationship with the overall Vodafone Group in entering into astrategic, co-operation agreement. I would echo the comments made by VodafoneGroup, that this partnership holds great promise and allows both companies tobenefit from one another's knowledge, reach and technical prowess." Financial Review Revenues Total consolidated operating revenues for the nine months ended 30 September,2006 rose 7.9% to EGP 6.9 billion, compared to EGP 6.4 billion for the firstnine months of 2005. Retail Services TE continues to derive the majority (69.9%) of its total operating revenues fromretail services, consisting of access and voice. During the first nine monthsof 2006, access revenue increased year-on-year by 4.4%. This increase in accessrevenue was recorded, despite lower connection revenues, as a result of thenotable increase in subscription revenues up 22.0%, which more than offset thedecrease. Similarly, total voice revenue, made up of local, long distance,fixed to international and fixed to mobile interconnection, increased by 5.6%year-on-year to EGP 2.8 billion. Local call revenues have increased 14.1% year-on-year to EGP 1.4 billion as aresult of higher volumes of billable voice traffic and the net effects of tariffrebalancing. Wholesale services Compared with the same period in 2005, total wholesale services revenues, bothdomestic and international, increased 21.5% to EGP 2 billion during the firstnine months of 2006. Similarly to the second quarter of 2006, total domesticwholesale revenues rose 26.2% year-on-year to reach EGP 341 million at the endof September 2006. However, the main boost to wholesale revenues came from theinternational segment (mobile to international and incoming international calls)which experienced growth of 20.6% year-on-year, rising to EGP 1.7 billion. EBITDA/EBIT Consolidated EBITDA for the first nine months of 2006 reached EGP 3.8 billion, a2.1% decline on the same period in 2005. Meanwhile, EBIT for the nine monthsended 30 September 2006 was 16.4% down on the previous year, reaching EGP 2.1billion. This decline in EBITDA and EBIT was as a result of several non-cashitems. At the EBITDA level, provisions and impairments of EGP 205 million masked thecompany's solid financial performance during the period versus the nine monthsended September 2005, which included a non-recurring positive effect as a resultof the unused provisions for EGP 260 million. At the EBIT level theconsolidated result was compounded by foreign exchange losses of EGP 97 millionversus a gain of EGP 294 million in the first nine months of 2005. Income from Investments TE has made significant progress in further defining its mobile strategy; duringthe quarter TE announced the launch of a tender offer for an additional stake ofup to 24.4% in Vodafone Egypt S.A.E, one of the two existing mobile operators.This transaction closed in October and it is important to note that today'sreport is based on the original 25.5% stake. In presenting consolidatedfinancial statements, and as detailed in the basis of preparation, TE haschanged the way in which it reports the income from its investment in VodafoneEgypt, now accounted for using the equity method. This stake continues todeliver significant benefit to the company and leaves TE well positioned tocapitalize on growth in the Egyptian mobile segment. For the nine months ended30 September 2006, investment income from Vodafone Egypt reached EGP 450million. Net profit Consolidated net profit decreased by 17.2% to EGP 1.5 billion for the ninemonths ended 30 September 2006, as the effect of the non-cash items describedabove was felt. Investments in infrastructure Having reduced its network investment during 2006, as its targets for coverageand network capacity are met, TE has substantially reduced capex related cashflows from EGP 1.8 billion in the first nine months of 2005 to EGP 1.2 billionfor the same period in 2006. It is important to note that TE's method of calculating capex has been amendedand no longer includes repayment of old debts related to acquisition ofproperty, plant and equipment. Debt Over the 12 months between 30 September 2005 and 30 September 2006, net debt hasbeen reduced by EGP 1.2 billion, standing at EGP 2.8 billion at the end of thefirst nine months of 2006. Operational Highlights 9 Month Period Ending September Previous Quarter Comparison Sept. 2006 Sept. 2005 % Change Q3 2006 Q2 2006 % ChangeNumber of Fixed Line Subscribers 10,720,603 10,240,547 4.7% 10,720,603 10,628,349 0.9% Fixed Line Subscribers Net Additions 324,455 780,400 -58.4% 92,254 142,763 -35.4% ARPU (EGP/Month) 57.7 55.1 4.6% 61.2 56.8 7.8% Number of ADSL Subscribers 68,550 21,673 216.3% 68,550 47,740 43.6%Retail ADSL Market Share 41.2% 29.8% 38.3% 41.2% 38.5% 7.1% Financial Highlights 9 Month Period Ending September Previous Quarter ComparisonIn EGP 000's (Except Per Share Data) Sept. 2006 Sept. 2005 % Change Q3 2006 Q2 2006 % ChangeSales Revenue 6,921,562 6,415,546 7.9% 2,450,546 2,298,270 6.6% EBITDA 3,769,285 3,848,917 -2.1% 1,279,240 1,235,465 3.5%EBITDA Margin 54.5% 60.0% 52.2% 53.8% EBIT 2,139,862 2,560,038 -16.4% 642,306 762,641 -15.8%EBIT Margin 30.9% 39.9% 26.2% 33.2% Profit Before Taxes & Minority 1,942,251 2,265,616 -14.3% 568,036 706,198 -19.6%Interest Consolidated Net Profit 1,516,107 1,831,619 -17.2% 404,528 576,093 -29.8%Net Profit Margin 21.9% 28.5% 16.5% 25.1% EPS (EGP) 0.89 1.07 -17.2% 0.24 0.34 -29.8% Please copy and paste the following link into your web browser to access the consolidated financial statements and their accompanying notes: http://www.rns-pdf.londonstockexchange.com/rns/1467m_-2006-11-15.pdf Please copy and paste the following link into your web browser to access the standalone financial statements and their accompanying notes: http://www.rns-pdf.londonstockexchange.com/rns/1467m_2-2006-11-15.pdf - Ends - For further information: Investor Relations Contacts Tarek Tantawy, CFADirector of Investment, Treasury & Investor RelationsTelephone: +202 5788111Fax: +202 5789314 Eman Anis Investor Relations ManagerTelephone: +202 5788787Fax: +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. You should be aware that a number of important factors could causeactual results to differ materially from the plans, objectives, expectations,estimates and intentions expressed in such forward-looking statements. Whenrelying on forward-looking statements, you should carefully consider thepolitical, economic, social and legal environment in which Telecom Egyptoperates. Such forward-looking statements speak only as of the time of thisrelease today. Accordingly, Telecom Egypt does not undertake any obligation toupdate or revise any of them, whether as a result of new information, futureevents or otherwise other than as required by applicable laws, the Listing Rulesor Prospectus Rules of the United Kingdom Listing Authority, the EgyptianCapital Markets Authority or the Cairo and Alexandria Stock Exchange. Thedocuments filed from time to time with these authorities may identify importantfactors that could cause actual results to differ materially from thosecontained in any forward-looking statements. 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 10.7 million subscribersas at the end of September 2006 representing a teledensity of 14.9 percent. 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 48.97% 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