Telecom Egypt announces nine months 2008 consolidated results

Financial statements have been prepared in accordance with Egyptian Accounting Standards.

Highlights for the nine months period include:

Total consolidated revenues reached EGP7.5bn.

EBITDA Before Provisions was EGP3.9bn.

EBITDA Margin Before Provisions was 52%.

Net Profit after Tax was EGP2.2bn representing an increase of 28.5% on the same period in 2007 and translating to a net profit margin of 29%.

Earnings per share (EPS) increased to EGP1.28, from EGP1.00 for the same period last year.

Capex related cash-flows came in at EGP658m.

Total fixed line subscribers reached 11.3 million, up 3% on the same period in 2007.

ADSL subscribers reached 339,520, up 97% on the same period in 2007

Positive contribution from Vodafone Egypt of EGP954m in September 2008, compared to EGP797m for the same period in 2007 - a rise of 19%.

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

"Our performance during the third quarter 2008 demonstrates that our service offering, while not recession proof, does hold up through periods of market volatility. In the context of a challenging economic environment, we have reached record quarterly revenues of just under EGP2.7bn. While it is clear that the global economy will continue to be affected for some time, our long experience in the industry has shown us that consumer spending on telecoms does not decline as sharply as other consumer goods."

"I am particularly pleased with the rebound in retail revenues in the third quarter of 2008. Total retail revenues for the third quarter amounted to EGP1.65bn representing an increase of 12% quarter on quarter. This strong performance on the retail revenue front was driven by both, access and voice revenues.

"In the meantime, I continue to feel confident that the evolving telecommunications market in Egypt presents TE with many opportunities. As demand for mobile and broadband services continues to increase, our unique role at the centre of the Egyptian market means we are ideally positioned to capitalize on this. While we saw some impact on retail revenues during the first six months of 2008, this was readdressed during the third quarter as the competitive landscape was made equal once again by the recent round of tariff rebalancing.

"On the Internet and data front, TE Data has continued to capitalize on the increased demand for Internet services within the Egyptian market. Internet and data revenues increased 31% to EGP410m mainly driven by growth in broadband revenues, and the company now holds a 57.3% share of the retail ADSL market.

"Our investment in Vodafone Egypt was once again a significant contributor to net profit; income Vodafone Egypt rose 19% to reach EGP954m in September 2008 and Vodafone Egypt has maintained its leading profitability position in terms of share of total mobile sector EBITDA and net profit"

"I would like to underline that the pursuit of increased revenues has not been at the expense of the bottom line, and I am pleased to report Net Profit and Earnings per Share have both increased by 28.5% year on year. We approach 2009 in good shape, but will continue to behave with caution and the interests of our investors at the forefront of our minds."

Revenues

Total consolidated revenues for the nine month period to 30 September 2008 were flat year-on-year at EGP7.5bn for the period, off-setting the slight decline in year-on-year revenues for the first half of 2008.

When viewed quarter-on-quarter, revenues grew by 11% in the third quarter, reaching EGP2.7bn for the three months to end of September 2008. Both the retail and the wholesale segments of the business posted record sales in the third quarter as Telecom Egypt benefited from an increase in mobile traffic across its infrastructure, plus the effects of its tariff rebalancing initiative introduced in July 2008.

Retail services

Total retail revenues for the first nine months of 2008 were EGP4.56bn.

Total access revenues, comprising connections and subscriptions, were EGP1.46bn, compared to EGP1.40bn for the same period last year. The year-on-year nine months increase of 4% is a direct result of the most recent tariff rebalancing program.

Total voice revenues reached EGP2.27bn for the first nine months of 2008, a decline of 8% year-on-year due to the impact of competition from the mobile operators and tariff rebalancing only having been effective for the one quarter of the nine months under review. To illustrate this point further, quarter-on-quarter voice revenues increased by 11%.

Revenues from internet and data, including TE Data, were EGP410m, up 31% year-on-year with broadband revenues contributing to the majority of the increase. TE Data added 117,354 ADSL subscribers to its customer base during the first nine months of 2008, compared to 80,435 for the first nine months of 2007, a 46% increase. It now holds a 57.3% share of the retail ADSL market, compared to 48.9% at the end of September 2007.

Wholesale services

Total wholesale revenues now comprise 39% of TE's consolidated revenues. Total wholesale revenues for the nine months of 2008 were EGP2.93bn, compared to EGP2.84bn during the same period in 2007. Year-on-year this demonstrates a nine month increase of 3%. Quarter-on-quarter, in comparison with the second quarter of 2008, this represents a 9% increase.

EBITDA/EBIT

Consolidated EBITDA before provisions for the first nine months of 2008 was EGP3.9bn. While this represented 6% decline year-on-year, it demonstrates TE has made significant headway in reducing the year-on-year decline from 12% at the half year point. The overall decline is due to one-off employee costs incurred during the first six months of 2008. EBITDA margin (before provisions) remains within management expectations at 52%.

EBITDA before provisions for the quarter reached EGP1.5bn, an increase of 22% over the previous quarter and representing an EBITDA before provisions margin for the third quarter of 2008 of 54.9%.

EBIT before FX gains and losses increased 8.1% year-on-year to EGP2.8bn for the nine month period.

Income from Investments

TE's investments, including Vodafone Egypt, provided total additional income of EGP954m, compared to EGP797m for the same period last year.

TE continues to capitalize on the growing domestic mobile telecommunications market via its investment in Vodafone Egypt. During the nine month period VE, which is one of three mobile operators in the Egyptian market, increased its customer base by 35% year on year to 16.4 million. Total revenues increased 17% to EGP5.9bn for the six months to end of September 2008 (VE's financial year starts on 01 April).

Net profit

Consolidated Net Profit for the nine month period was EGP2.2bn, a year-on-year increase of 28.5%. This translates into an EPS of EGP1.28, versus EGP1.00 for the period ended 30 September 2007.

Investments in infrastructure

Capex related cash flows remain on track, reaching EGP658m, a reduction of 0.2% year-on-year, in line with TE's capex rationalization program.

Debt

TE is well capitalized with no short-term refinancing needs. TE's debt repayment program will continue into 2009, as TE leverages its significant free cash flow.

TE's total debt position as of 30 September 2008 was EGP3.6bn, compared to EGP5.0bn as at 31 December 2007, demonstrating a reduction of EGP1.4bn during the nine month period.

Net debt as of 30 September 2008 was EGP1.6bn compared to EGP3.6bn as at 31 December 2007, demonstrating a reduction of EGP2bn during the nine month period.