Telecom Egypt S Regulatory News (TEEG)

Telecom Egypt Announces Full Year 2013 Consolidated Results

Cairo, March 12 2014:Telecom Egypt (te) (Ticker: ETEL.CA; TEEG.LN), today announced its consolidated financial results for the Full Year, ending 31 December 2013. The financial statements have been prepared in accordance with Egyptian Accounting Standards.

Highlights

· Consolidated revenues for FY 2013 were EGP 11,135 million, an increase of 11% on FY 2012.

· EBITDA of EGP 3,684 million for FY 2013.

· Net Profit After Tax of EGP 2,959 million, representing a net profit margin of 27%.

· Earnings Per Share (EPS) for the period of EGP 1.43, up 14% from FY 2012.

· Net cash position of EGP 5,080 million, as at 31 December 2013.

· Positive contribution from Vodafone Egypt (VFE) of EGP 969 million.

· Home and Enterprise ADSL subscribers up 22.4% close to 1.7 million, representing a 63.4% market share.

Chief Executive Officer's Statement

Presenting te's full year 2013 results, Mohamed Elnawawy, Managing Director and Chief Executive Officer of Telecom Egypt (te), said:

"2013 was an important year for te. The strong financial performance we have delivered is testament to the early successes of our customer focussed strategy. We have defended and increased our top line, reaching more than EGP 11 billion, while protecting margin. This allows the Board of Directors to recommend a dividend distribution for consideration at the next Annual General Meeting of EGP 1.0 per share.

"Demand for quality broadband services continues to be a key growth driver for retail service revenue and we are committed to delivering a new broadband network model which will enable us to carry more higher capacity traffic. In 2013, we started the EGP 2 billion project, to upgrade te's access network from copper-based technologies, deploying 4 million ports connected on higher capacity fiber-based technologies, to be executed by year end 2015.

"Wholesale service revenues have seen significant expansion during 2013, primarily driven by revenues from International Carriers Affairs and International Customers and Networks business units. The performance of both business units demonstrates the importance of steps taken in previous years, to partner with carriers around the world and to position ourselves at the forefront of the international cable industry. These moves are now bearing fruit and making significant financial contribution.

"This performance is worthy of recognition, but as a company it is critical for us to look beyond the short term and make progress against our longer term strategic objective. We are building a network and capability that will be relevant for tomorrow's communications needs. Our ambition to become Egypt's first total telecoms operator (TTO) will allow us to better serve the needs of the Egyptian people.

"We have no reason to doubt that the National Regulator - NTRA - will continue to support our application for a license, as te stands technically and commercially ready to begin mobile operations. The appetite for integrated telecommunications services among the Egyptian population is already strongly in evidence." 

Revenues by Lines of Business

Revenue Contribution

Home Services

There was a slight 1.1% decrease in revenues for Home Services for the full year. On the one hand, this reflects the ongoing pressure from mobile subsitiution, while on the other hand, it demonstrates the positive effects of te's leading promotional activities in offsetting this pressure.

te continued with its customer-centric focus. During the second half of the year, te launched its "New Beginning" brand campaign, focused on being closer to customer needs and delivering customized products to different regions in Egypt. This relies more heavily on te's regional offices to improve the customer experience.

Customer demand for fixed broadband services remains an important revenue driver for te, offsetting any weakness in voice revenues. Broadband revenues developed strongly in 2013, the market demand for fixed broadband and mobile broadband has been growing at 18% and 42% per annum, respectively. We are making sound progress in combatting the effects of the ADSL line sharing phenomena with our 'tal2a' offers, offering customized products at discounted rates.

Enterprise Services

te's Enterprise Buiness Unit services Egypt's important SME sector and large key accounts, primarily within the public sector and financial industries. Under the "New Beginning" brand strategy te sought to leverage its nationwide footprint, servicing more SMEs in Upper Egypt and the North Coast area.

The 1.7% increase in revenues for the business unit reflected te's ongoing commitment to providing high speed, complete solutions at competitive prices.

The current events in Egypt has led many public and financial sector institutions to cost optimize operations. As a result, competition for legacy services intensified during 2013. te was able, through the depth of its experience and the strength of its service provision, to retain several large key accounts despite competitor advances. Notably, Q4 2013 showed a significant uplift in revenues, rising 11.2% compared to Q4 2012.

We made a positive impact on performance by initiating several significant new contracts with major institutions, including the Commercial International Bank (CIB) and the National Bank of Egypt (NBE).

Domestic Wholesale

Over the period the business unit recorded an increase in all infrastructure service and international transmission revenues, driven by a rise in internet utilization. te has continued to support local operators by delivering state-of-the-art infrastructure and technology, resulting in long term agreements committing Vodafone and Mobinil to its international gateway until the end of 2014.

The Domestic Wholesale business recorded a very positive performance for the full year 2013. This performance was achieved against a backdrop of the continued disruption in business and tourism activity in the country, which had an impact on international outgoing revenues.

International Carriers Affairs

The International Carriers Affairs Business Unit performed strongly over the course of 2013, with a 26.0% rise in revenues compared to the corresponding period in 2012. This was supported by the extensive footprint, variety of customers and the consistent approach of securing special traffic segments, creating a healthy win-win global environment. Today te has bilateral agreements in place with 70+ international telecoms operators, now covering 55 countries and five continents.

Revenues for the business unit during the fourth quarter were stable, despite being impacted by the challenges faced in active bypass routes, as well as pressures driving down the selling rate per minute in favor for OTT applications.

Illegal traffic phenomenon is the main factor that inflicts lots of pressure on ICA performance. Over the period te continued lobbying with all the concerned parties to fight the phenomenon whether from a commercial perspective by giving commercial incentives to local MNOs to exert further efforts to stop the leakage, or by deploying detection systems to act as the gate-keeper and mitigate the leakage.

The ICA business unit's performance in the fourth quarter continued to build on the success of previous quarters, specifically in relation to inbound traffic and associated revenues. This was due primarily to te's international gateway, its geographical footprint and customer centric-approach.

International Customers & Networks

The International Customers & Networks business delivered a strong performance over the period, with growth of 44.7% compared to the corresponding period in 2012. Since its first full year of operation in 2010, IC&N has become a bigger, more diversified business unit with a growing component of recurring revenues. After just a few years of full operation, the IC&N now services almost 100% of all IP traffic from Asia to Europe. This can be seen in reported revenues for Q4 2013 of EGP 234 million, an increase of 322.0% compared to Q4 2012.

Over the period, te signed a $12.5 million settlement in December 2013, relating to damages to two submarine cables cut by the "B-Elephant" tankship early that year.

te Financial Highlights

Income Statement -Summary

Costs

te retains a very careful approach to cost management. However, the increase in costs during the period was due to the 38.5% increase in interconnection costs when compared with last year, as a result of the three year commercial agreements with Vodafone Egypt and Mobinil, for the provision of international voice communication and infrastructure services.

The 8% annual increase in salaries and the newly structured incentive rewards program, both of which came into effect as of the first quarter 2013, had an impact on costs, with a net increase of 13.9% when compared with the same period last year.

EBITDA / EBIT

EBITDA for the full year 2013 was EGP 3,684 million, a decrease of -1.4% compared to the full year 2012, mainly due to the increase in interconnections and the annual increase in salaries.

EBIT increased to EGP 3,081 million, up by 17.7% from the same period last year, but fell by -30.2% when compared to Q3 2013 due to the drop in Revenues & EBITDA on the previous comparative period by -2.8% and -32.3%, respectively.

Income from Investments

Total Income from investments, mainly representing te's stake in VFE was EGP 983 million. During the Q3 2013/2014 period, VFE generated revenues of EGP 10,051 million, an increase of 5.5 % compared with the same period last year.

(Note: Vodafone Egypt's financial year is from 1 April to 31 March).

Vodafone Egypt Financial Highlights

Vodafone Egypt Operational Highlights

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Net Profit

te's consolidated Net Profit After Tax for FY 2013 reached EGP 2,959 million versus EGP 2,620 million in FY 2012, an increase of 12.9%. This translates to an increased EPS of EGP 1.43. The net profit margin for the period was 26.6%.

Balance Sheet -Summary

Cash Flows -Summary

Investments in Infrastructure / Capital Expenditure

Capital expenditure for FY 2013 reached EGP 679 million versus EGP 516 million in FY 2012, up 31.6%. This represented 6.1% of total revenues for the period. Management intends to carry over the 2013 unused CAPEX spend, caused by the events of last year, to the year 2014.

Net Debt

te continues to boast a very healthy balance sheet, with a net cash position of EGP 5,080 million at FY 2013, a reflection of the cash generative nature of te's business.

To download a complete copy of te's FY 2013 Consolidated Financial Results Statements and notes to these statements, please refer to the attached pdf:

http://www.rns-pdf.londonstockexchange.com/rns/0983C_1-2014-3-12.pdf

To download a complete copy of te's FY 2013 Standalone Financial Results Statements and notes to these statements, please refer to the attached pdf:

http://www.rns-pdf.londonstockexchange.com/rns/0983C_2-2014-3-12.pdf 

- Ends -

For Further Information:

Investor Relations Contacts

E-mail: investor.relations@te.eg

Notes to Editors:

Within this statement, we may make forward-looking statements regarding future events or the future performance of the Company. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general 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 cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. When relying on forward-looking statements, you should carefully consider the political, economic, social and legal environment in which Telecom Egypt operates. Such forward-looking statements speak only as of the time of this release today. Accordingly, Telecom Egypt does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise other than as required by applicable laws, the Listing Rules or Prospectus Rules of the United Kingdom Listing Authority, the Egyptian Financial Supervisory Authority or The Egyptian Exchange. The documents filed from time to time with these authorities may identify important factors that could cause actual results to differ materially from those contained in any forward-looking statements.

About Telecom Egypt

Telecom Egypt (te), Egypt's incumbent telecommunications operator, started its operations in 1854 with the first telegraph line in Egypt. Then it was corporatized in 1998 to replace the former Arab Republic of Egypt National Telecommunication Organization (ARENTO). The Company is the largest provider of fixed-line services in the Middle East and Africa with 6.8 million subscribers as at 31 December 2013.

te provides retail telecommunication services including access, local, long distance and international voice, Internet and data, and other services. The company also provides wholesale services including bandwidth capacity leasing to ISPs, and national and international interconnection services. te's services also include the provision of narrowband and broadband internet access through its subsidiary TE Data. TE Data has active operations in Egypt and Jordan.

te currently participates in the mobile segment in Egypt by providing mobile interconnectivity through its current, increased 44.95% holding in Vodafone Egypt, one of the three existing Egyptian mobile operators.

TE's shares and GDRs (Ticker: ETEL.CA; TEEG.LN) are traded on The Egyptian Exchange and the London Stock Exchange.