Telecom Egypt announces full year 2008 consolidated results

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

Highlights for the full year period include:

- Total Consolidated Revenues of EGP10,117m, up 1.2% on 2007.
- EBITDA Before Provisions was EGP5,163m, delivering a margin of 51%.
- Net Profit After Tax up 10% on 2007 reaching EGP2,790m.
- Earnings Per Share (EPS) increased in 2008 to EGP 1.49, from EGP 1.37 in 2007.
- Capex related cash-flows decreased to EGP919m.
- Q4 2008 net additions of 377 thousand new subscribers, an increase of 91% on Q4 2007.
- Total fixed line subscribers now stand at 11.7m, an increase of 4% on 2007.
- ADSL subscribers reached 424 thousand, up 91% on 2007.

Positive contribution from Vodafone Egypt of EGP1,309m in 2008, compared to EGP1,126m for the same period in 2007.

Commenting on the full year results, Eng. Akil Beshir, Chairman and CEO of Telecom Egypt, said:

"2008 has been an unprecedented year globally and, while I report to you today a consolidated revenue figure which exceeds EGP10bn for the first time, market dynamics continue to present our business with challenges."

"During our long history, we have witnessed periods of economic uncertainty and I am confident that our service offering; the loyalty of our retail customer base, which now exceeds 11.7m subscribers; and the strength of our team positions us well for the coming period.
"Tariff rebalancing, implemented from first of July 2008, has worked to mitigate some of the effects of fixed-to-mobile substitution visible earlier in the year under review. However, competition for mobile subscribers in Egypt remains intense and impacted the revenue contribution from certain segments in TE's retail voice business." he added.

"Our business today is much more diversified, with wholesale revenues comprising 39% of TE's total revenues. Just five years ago, this was just 23%. Domestic wholesale revenues grew 14% year-on-year as our extensive network allowed us to service demand from other operators.

"Profitability is a key priority for TE's management and we remain committed to keeping a close eye on costs. I am immensely proud to be able to deliver a 10% increase in consolidated net profit during such an uncertain year. This translates to a 12 piaster improvement in earnings per share for the year.

"Our Internet and data services subsidiary - TE Data - now has a market share of 59% and an ADSL subscriber base of over 424 thousand. Simultaneously we have benefited from our stake in Vodafone Egypt, which contributed 1,309m Egyptian Pounds to TE's bottom line in 2008.

"We continue to behave with caution and the interests of our shareholders at the forefront of our minds. Having reduced our debt position during the last two years and with significant cash reserves, we have no immediate refinancing requirements. I feel confident that we have started 2009 in good shape, with projects such as TE North on track and generating significant commercial interest; an increasing portion of growth business in the form of TE Data and Vodafone Egypt; a more diversified revenue base than ever before and robust margins which continue to produce significant shareholder returns."

"Based on our solid performance and conservative capital structure, subject to approval by the general assembly meeting at the end of March 2009, I am pleased to announce that the board of directors has approved a proposed dividend distribution of EGP 1.30 per share. This is 30% higher than last year and is the highest ever dividend payout in the history of the company."

Financial Review

Revenues

Total consolidated revenues for the full year period to 31 December 2008 rose by 1% to reach EGP10,117m for the period, from just under 10bn in 2007.

Retail services

Total retail revenues for the 2008 full year were EGP6,181m, marginally up on EGP6,141m generated in 2007.

Total access revenues, comprising connections and subscriptions, were EGP1,999m, compared to EGP1,888m for the same period last year - an year-on-year increase of 6%.

Total voice revenues reached EGP3,015m for the full year 2008, a decline of 5% on 2007.

The positive effects of 2008 tariff rebalancing on local call revenues, our largest voice revenue segment, were mitigated somewhat during the year by pressure on other call segments resulting from the intensification of competition from mobile operators.

Revenues from internet and data were EGP575m, up 26% year-on-year. TE Data was responsible for the majority of this increase, growing broadband revenues by 54% in 2008. TE Data added 202,247 ADSL subscribers to its customer base during the full year 2008, an increase of 56% on 2007 Net Additions. TE Data now commands a 59% share of the retail ADSL market, compared to 52% at the end of December 2007.

Wholesale services

Total wholesale revenues now account for 39% of TE's total consolidated revenues. Total wholesale revenues for the full year 2008 were EGP3,936m, compared to EGP3,852m during the same period in 2007 - a year-on-year increase of 2%. Domestic wholesale revenues grew 14% during the year under review to reach EGP1,058m, compared with 925m in 2007.

EBITDA/EBIT

Consolidated EBITDA before provisions for the full year 2008 was EGP5,163m, a 4% decline year-on-year. The overall decline is mainly attributed to the increase in employee costs incurred in 2008 due to the two salary increases in January and May 2008. EBITDA margin (before provisions) remains within management expectations at 51%.

EBITDA before provisions for the final quarter reached EGP1,272m, 12% down on the fourth quarter 2007.

EBIT before FX gains and losses showed a 4% year-on-year decrease to reach EGP3,515m for the full year period.

Income from Investments

TE's investments, including Vodafone Egypt, increased 16% provided an income contribution of EGP1,309m compared to EGP1,126m for the same period last year. Income from Vodafone Egypt was the main driver here as TE continues to capitalize on the growing domestic mobile telecommunications market via its 45% stake in the mobile operator. As of December 2008, VE had a customer base of 17.6m, an increase of 32% year-on-year. Total revenues generated by this base increased 15% year-on-year, to EGP8,885m for the nine months ending December 2008 (N.B. VE's financial year starts on 1st April).

Net profit

Consolidated Net Profit for the full year period was EGP2,790m, a year-on-year increase of 10%. Net Profit Margin remains in line with management expectations for the year came in at 28%.

This translates into an EPS of EGP 1.49, versus EGP 1.37 for the period ended 30 December 2007.

nvestments in infrastructure

Capex related cash flows ended the year, down 3% year-on-year. This decline is directly related to TE's Capex rationalization program which has been running since 2006.

Debt

TE's debt reduction program has continued throughout 2008. Total debt has reached EGP3,146m in 2008 down from EGP 4,985 in 2007. TE's net debt position has been reduced by 88.5% during the year to EGP411m as of 31 December 2008.