Telecom Egypt S Regulatory News (TEEG)

13 Mar 2007 07:02

Telecom Egypt S.A.E13 March 2007 Telecom Egypt Announces FY 2006 Consolidated Results Cairo, 13 March, 2007: Telecom Egypt (TE) (Ticker: ETEL.CA; TEEG.LN), todayannounced its consolidated financial results for the twelve months ending 31December, 2006. Financial statements have been prepared in accordance withEgyptian Accounting Standards. Highlights for the twelve months to 31 December 2006 include: • Revenues reached EGP 9.5 billion, an increase of 11% on 2005 • EBITDA reached EGP 5.4 billion, up from EGP 4.7 billion in 2005 • EBITDA margin rises to 57%, up from 55.2% in 2005 • Net profit increased 16% to EGP 2.4 billion • Earnings per share (EPS) increased 16% from 2005 to EGP 1.36 • Monthly ARPU increased 6.1% to EGP 58.7 • Capex related cash flows reduced by 22% year-on-year to EGP 1.9 billion • 10.8 million fixed-line subscribers, up 4% on FY 2005 • Fixed line penetration reached 15% • Retail ADSL market share rises to 45%, from 30%in 2005 Chairman's statement Commenting on Telecom Egypt's full year 2006 results, Akil Beshir, Chairman ofTelecom Egypt, said: "Telecom Egypt has delivered an impressive performance in 2006. The Company'sability to evolve within the fast-changing telecommunications environment,coupled with a strict approach to fiscal discipline, has resulted in a healthyand prosperous set of figures. "The implementation of our tariff rebalancing programme has had a demonstrableeffect on local call and subscription revenues, producing an 11 percent increasein revenue over the year and significantly boosting monthly ARPU by 6 percent toEGP 58.7 for the year. Driven by our cost-based tariff rebalancing initiative,this incremental increase in revenue comes without an associated cost,positively impacting EBITDA margins. "Our retail Internet business, TE Data, performed exceptionally well during2006, with a threefold increase in its ADSL subscriber base since 31 December2005 and reaffirming its position as the broadband market leader with 45 percent market share. Internet and data revenues have grown at a CAGR of 87 percent over the past four years and we fully expect strong organic growth tocontinue in the future. "Telecom Egypt witnessed substantial benefits from strong growth in the mobilemarket in Egypt. Our increased investment in Vodafone Egypt, a stake which nowrepresents 44.66 per cent, and the strategic cooperation agreement we havesigned with them are both highly positive developments. Vodafone Egypt isdelivering on its strategy and outperforming its competitors in terms of itsshare of mobile revenues and EBITDA margins. "Meanwhile, optimising network capacity to meet the growing demands of otheroperators has had significant positive impact on revenues derived from wholesaleservices, which represent a growing percentage of our total revenue mix. Thisrepresents a key opportunity for TE in the coming year." Financial Review Revenues Total consolidated operating revenues for the twelve months ended 31 December,2006 rose 11 percent to EGP 9.5 billion, compared to EGP 8.5 billion for thesame period in 2005, boosted by the net effects of tariff rebalancing andincreased demand from other operators for interconnection. Retail services TE continues to derive the majority (69%) of its total operating revenues fromretail services, consisting of access and voice. Local voice revenuesrepresented one of the major growth segments, with an increase of 24 percentyear-on-year to EGP 1.97 billion as a result of the net effects of cost basedtariff rebalancing. The customer base has responded well and no real decline inusage has been recorded. Furthermore, increases in local call revenues andsubscriptions have more than offset the decline in connection fees. Internet & Data Internet penetration and demand for services has accelerated in 2006, withpenetration ending 2006 at 11.3 percent. By the year ended 31 December 2006, TEData, TE's 95 percent owned subsidiary, established a 45 percent retail ADSL market share, having increased its ADSL subscriber base threefold to 92,332. Internet and Data revenues for the full year 2006 grew to EGP 184 million. Wholesale services Wholesale revenues derived from other operators using TE's extensiveinfrastructure account for an increasing percentage of total revenues - 30percent in 2006 compared to 27 percent in 2005. The success of TE's deploymentof interconnection services and heightened demand from other operators hasdelivered a strong result for the company. Compared with the same period in2005, total wholesale services revenues, both domestic and international,increased 23 percent to EGP 2.8 billion during 2006. EBITDA/EBIT Consolidated EBITDA before provisions for the twelve months ended 31 December2006 reached EGP 5.3 billion, a gain of 16 percent on the same period in 2005.Tight cost controls and a rigorously pre-qualified investment programme haveenabled the company to sustain EBITDA margins of above 50 percent for the lastthree years, among the industry's highest margins. Despite foreign exchange losses in 2006 of 125 million compared with a foreignexchange gain of 335 million in 2005, EBIT still increased 13 percent on theprevious year, reaching EGP 3.3 billion. Income from Investments In 2006, TE increased its holding in Vodafone Egypt, one of the two licensedEgyptian mobile operators, to 44.66 percent from the 25.5 percent held in 2005.Correspondingly, this stake continues to deliver significant financial returnsfor the Company, as well as allowing for closer strategic servicecollaborations. In presenting consolidated financial statements, and asdetailed in the basis of preparation, TE has changed the way in which it reportsthe income from its investment in Vodafone Egypt, now accounted for using theequity method. For the twelve months ended 31 December 2006, investment incomeincreased 58 percent to reach EGP 609 million. Net profit Consolidated net profit increased by 16 percent to EGP 2.4 billion for the twelve months ended 31 December 2006. The increase was primarily the result ofthe solid increase in revenues and increase in income from investments resultingfrom the higher stake in Vodafone Egypt. Investments in infrastructure TE's existing digital fixed-line network is extensive, with more than 25,000kilometers of fiber optic cables covering 95 percent of populated areas in Egypt. During 2006 TE invested in its network to upgrade transmission capacity furtherto cater for increasing demand from mobile operators and internet serviceproviders. Switching capacity now stands at 13.4 million lines. Capex-relatedcash outflows reached EGP 1.9 billion, slightly above management guidance butlower than 2005 figures by 22 percent. Debt TE's management has geared up its balance sheet in 2006 to increase theefficiency of its capital structure. The company financed the acquisition of the19 percent additional stake in Vodafone Egypt primarily by Debt which led to anincrease in net debt to EGP 6.8 billion up from EGP 4 billion in 2005. As aresult, net debt to equity ratio has reached 28 percent by the end of 2006versus 18 percent in 2005. Outlook The telecommunications market in Egypt is developing rapidly, and 2006 was animportant year, in particular in mobile and data services. 2006 results provide the first tangible illustration of what can be achieved asa result of the Company's medium and long term strategy of shifting its focus tosubscriber segments where demand for additional telecommunications services isintensifying. TE believes that it is these segments which will ultimately bemore profitable for the Company, securing maximum long term shareholder valuefor our investors. The Company's strategic focus for 2007 is the expansion ofnew services and it looks forward to working together with Vodafone Egypt todevelop propositions for customers shared by TE Data and Vodafone Egypt. Significant excess network capacity built into our infrastructure mean that theCompany's Capex rationalization plans can continue into 2007, freeing up freecash flow for shareholders or strategic investments. The technical scope of TE's infrastructure already positions it well to embracethe growing demand among existing retail and wholesale customers for greatercapacity and services. In 2007, TE will take further steps to capitalize on theopportunity to build and expand its successful interconnection wholesaleservices specifically. Operational Highlights 12 Months Period Ending December Previous Quarter Comparison Dec. 2006 Dec. 2005 % Change Q4 2006 Q3 2006 % ChangeNumber of Fixed Line Subscribers 10,807,678 10,396,148 4% 10,807,678 10,720,603 1% Fixed Line Subscribers Net 411,530 936,001 -56% 87,075 92,254 -6%Additions ARPU (EGP/Month) 58.7 55.3 6.1% 61.7 61.2 1% Number of ADSL Subscribers 92,332 27,343 238% 92,332 68,550 35%Retail ADSL Market Share 45% 30% 47% 45% 41% 9% Financial Highlights 12 Months Period Ending December Previous Quarter ComparisonIn EGP 000's (Except Per Share Dec. 2006 Dec. 2005 % Change Q4 2006 Q3 2006 % ChangeData)Sales Revenue 9,488,413 8,547,714 11% 2,566,851 2,450,546 5% EBITDA Before Provisions 5,349,743 4,593,781 16% 1,429,974 1,380,497 4%Margin 56.4% 53.7% 55.7% 56.3% EBITDA After Provisions 5,410,141 4,716,504 15% 1,640,856 1,279,240 28%Margin 57.0% 55.2% 63.9% 52.2% EBIT Before FX Gains or Losses 3,388,306 2,565,579 32% 1,151,785 656,742 75%Margin 35.7% 30.0% 44.9% 26.8% EBIT 3,264,572 2,897,814 13% 1,124,710 642,306 75%EBIT Margin 34.4% 33.9% 43.8% 26.2% Profit Before Taxes & Minority 2,897,825 2,532,853 14% 955,574 568,036 68%Interest Consolidated Net Profit 2,426,877 2,097,275 16% 910,770 404,528 125%Net Profit Margin 25.6% 24.5% 35.5% 16.5% EPS (EGP)* 1.36 1.17 16%* After deducting employees' share in profit & board of directors remuneration pending annual generalassembly approval 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/8128s_-2007-3-12.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/8128s_1-2007-3-12.pdf - Ends - For further information: Investor Relations Contacts Tarek Tantawy, CFADirector of Investment, Treasury & Investor RelationsTelephone: +202 5788111Fax: +202 5789314 Eman AnisInvestor 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. 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 10.8 million subscribersas at the end of December 2006 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 44.66% 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