Telecom Egypt announces full Year 2007 consolidated results

Highlights for the period include:
• Total consolidated revenues reached EGP10bn, an increase of 5% in comparison to 2006
• EBITDA Before Provisions were EGP5.4bn, up 2.1% year-on-year
• EBITDA Margin Before Provisions of 54%
• Net Profit after Tax was EGP2.5bn, an increase of 4.4% in comparison to 2006
• Earnings per share (EPS) were EGP1.39 up 3.8% year-on-year
• Ongoing rationalization resulting in twelve months capex related cash-flows of EGP945m
• Total fixed line subscribers reached 11.23 million, up 4% on 2006
• Share of the retail ADSL market is 52%, with 141% subscriber growth
• Positive contribution from Vodafone Egypt of EGP1.1bn in 2007, compared to EGP710m in 2006.

Chairman's statement

Commenting on the company's results for the full year 2007, Akil Beshir, Chairman and CEO of Telecom Egypt, said:

"As a company, we are very proud of our continued profitability, and the ability to increase profits in a changing market should not be underestimated. Our EBITDA margin remains robust and within management expectations in the low to mid fifties. In 2007, our Net Profit after Tax reached EGP2.5bn an increase of
4.4% compared to 2006, largely driven by the growth we have seen in internet and data and wholesale revenues. Ensuring profitability is sustained remains a key priority for TE and we remain committed to keeping a close eye on costs.

"2007 was a year of focused growth in our subscriber base. The fourth quarter was particularly strong in terms of net additions, resulting from the market's positive response to our promotional activities. In addition, our
Internet and data services subsidiary - TE Data - now has a market share of 52% and an ADSL subscriber base of over 220 thousand subscribers. Simultaneously we have benefited from our stake in Vodafone Egypt, which contributed over one billion Egyptian Pounds to group bottom line throughout 2007.

"Meanwhile, our revenue mix has continued to evolve with wholesale revenues now accounting for 35% of total sales, while retail revenues account for the remaining 65%. The growth in wholesale revenues was 22% yearon-year with the main driver for this double digit growth is the increase in demand for our infrastructure by other operators in the domestic market. We continue to see our extensive infrastructure as our key asset and we intend to capitalize on it to capture the growing demand for telecommunication services in the domestic market.

"An important part of driving future revenues is looking for new opportunities and initiatives, such as our submarine cable project, TE North, which is due for completion in the second half of 2009. Taking advantage of the boom in Internet traffic from Asia to Europe and vice versa, this submarine cable capitalizes on our existing national infrastructure and will enable Telecom Egypt to generate further wholesale revenues by selling capacity to other operators. We have already signed agreements with three companies, totaling $126m, and we expect to announce more throughout 2008."

Financial Review

Revenues

Total consolidated operating revenues for the full year ended 31 December 2007 rose five percent to reach EGP10bn, from EGP9.5bn in 2006. The main driver for growth in the period was the revenues we derive from domestic and international wholesale, which increased 22% in total and now accounts for 35% of our total revenues.

Retail services

Retail revenues for 2007 were EGP6.5bn, a slight decrease in comparison to EGP6.6bn for 2006.
Pressure on voice revenues is being more than offset by the corresponding increase in wholesale revenues, as other operators require larger capacity.

Meanwhile, take up of Internet and data services from TE's subsidiary - TE Data - demonstrated impressive growth as ADSL subscribers more than doubled during the year, representing a 52% market share. Internet and data revenues reached EGP335m in 2007, compared to EGP184m in 2006.

Wholesale services

The integrity and reach of TE's fully-modernised telecommunications network is fundamental to our wholesale offering and continued demand from other telecom operators has again translated to an increase in revenues. Total wholesale revenues for 2007 were EGP3.5bn, compared to EGP2.8bn for 2006, an increase of 22%.

Domestic wholesale revenues increased by 62.3% to EGP767m, driven by two factors. The first, mobile to fixed interconnection, as a result of increased traffic. The second, revenue from leasing TE's extensive infrastructure to other telecom providers which witnessed a 94% increase.

Overall, international wholesale grew by 14% from EGP2.4bn to EGP2.7bn underpinned by a surge to mobile-to-international traffic requiring increasing TE's network capacity.

EBITDA/EBIT

Consolidated EBITDA before provisions for 2007 reached EGP5.4bn, a 2.1% increase on 2006. This resulted in an EBITDA margin before provisions, within management expectations, of 53.9%. The one-off impairment for Algeria affected EBITDA after provisions in 2007.

Meanwhile, EBIT for 2007 was 9.7% up on the previous year, reaching EGP3.6bn.

Income from Investments

Total income from TE's investments for the period was EGP1.13bn, including income from Vodafone Egypt which off-set an operating loss of EGP59m from its investment in Consortium Algerien De Tele-Communications (CAT).

Throughout 2007, Vodafone Egypt continued to demonstrate sound operational and financial management, increasing revenues by 30% to EGP7.7bn. Vodafone Egypt doubled net subscriber additions and had 13,333 closing customers as of 31 December 2007. This represents a 53% increase in comparison to 2006, when the Company had 8,704 closing customers.

Net profit

Consolidated Net Profit for the period was EGP2.5bn, a 4.4% increase compared to 2006. This translates to EPS of EGP1.39.

Investments in infrastructure

Over the past few years TE has invested heavily in providing its customers with a fully digitalized, state of the art network, which has significant capacity to cope with the rising demand for wholesale services. As a result, TE reduced its capex by over 50% in 2007 by spending EGP945m.

Debt

TE's net debt position as of 31 December 2007 was EGP3.6bn. This represents a reduction of EGP3.2bn in comparison to 31 December, 2006, when TE's net debt rose to EGP6.8bn as a result of the acquisition of an additional stake in Vodafone Egypt.