Telecom Egypt announces first quarter 2009 consolidated results

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

Highlights for first quarter include:

- Total Consolidated Revenues of EGP2,526m, up 6% on Q1 2008.
- EBITDA Before Provisions was EGP1,351m, delivering a margin of 53%.
- Net Profit After Tax was EGP961m representing an increase of 72% on the same period in 2008 and translating to a net profit margin of 38%.
- Earnings Per Share (EPS) increased to EGP0.56, from EGP0.33 in the same period in 2008.
- Capex related cash-flows were EGP178m.
- Total fixed line subscribers were 11.6 million, as at 31 March 2009.
- TE Data ADSL subscribers increased by 83% on the same period in 2008 to reach 477 thousand.
- Positive contribution of share of profits from Vodafone Egypt of EGP350m.

Commenting on the first quarter results, Akil Beshir, Chairman and CEO of Telecom Egypt, said:

"Amid challenging economic conditions and significant market volatility, I am pleased to report a very solid first quarter performance for Telecom Egypt. Not only are these achievements testament to TE's resilience and determination, against a backdrop of a dynamic and aggressive telecommunications market, they are also an endorsement of our stable business model."

"Once again, we have recorded year-on-year revenue growth across both our retail and wholesale businesses. Our retail revenues have increased modestly year-on-year to EGP1,468m, largely driven by an increase in access revenues and internet and data revenues. While voice revenues continue to experience some pressure from mobile substitution, our extensive and modern network enables us to reap the benefits of the resulting increase in mobile traffic through our wholesale revenues which increased 11% year on year," he said.

"Our EBITDA before provisions margin remains comfortably within management expectations at 53%, reflecting prudent financial management. This has fed directly through to a 72% year-on-year increase in net profit, which reached EGP961m for the first three months. TE continues to benefit from its investment in Vodafone Egypt, which has increased its customer base by 35% and total voice minutes by 36% year-on-year, translating to a EGP350m contribution to our first quarter profits. TE's management team is working hard to help ensure we continue to generate solid returns throughout 2009. We are not alone in facing an uncertain economic environment, which in itself presents challenges for TE and its customers. However, I am confident that our solid financial footing allows us to maintain significant flexibility in the business," Beshir added.

Financial Review

Revenues

Total consolidated revenues for the first three months of 2009 increased by 6% year-on-year to reach EGP2,526m. While Telecom Egypt's retail voice revenues continue to come under pressure from the competition of other mobile operators, it benefits from the growing mobile market through third party usage of its infrastructure and its stake in Vodafone Egypt.

Retail services

Total retail revenues for the first quarter of 2009 were EGP1,468m, a modest increase of 2% on the EGP1,435m generated in the same period in 2008. Total access revenues, comprising connections and subscriptions, were EGP536m, compared to EGP459m in Q1 2008, as a result of tariff rebalancing which was only effective in the second half of 2008.

Total voice revenues reached EGP680m for the first quarter of 2009, a decline of 4% on the same period in 2008, reflecting the increased pressure on this segment from the mobile market. However, the largest constituent of Telecom Egypt's voice revenues, derived from local calls, has seen a significant increase yearon-year. As TE Data further increased its market share, revenues from internet and data continued to grow, up 27% year-on-year to reach 146 million for Q1 2009.

In the first quarter alone, TE Data added 52 thousand new subscribers and now holds a 60% share of the retail ADSL market. At the end of March 2009, TE Data had 477 thousands subscribers, an increase of 83% in comparison to the end of March 2008.

Wholesale services

Wholesale revenues constitute an important part of Telecom Egypt's revenue mix, accounting for 42% of the total revenue base. Total wholesale revenues for the first three months of 2009 were EGP1,058m, compared to EGP952m during the same period in 2008. Year-on-year this demonstrates an 11% increase.

EBITDA/EBIT

Consolidated EBITDA before provisions for the first quarter of 2009 was EGP1,351m, an 12% improvement year-on-year, reflecting Telecom Egypt's prudent cost management and lower interconnection connection costs. EBITDA margin before provisions remains comfortably within management expectations at 53%.

EBIT before FX gains and losses increased by 32% year-on-year to reach EGP1,047m for the period
until the end of March 2009.

Income from Investments

Telecom Egypt continues to capitalize on the growing mobile market through its 44.95% stake in Vodafone Egypt. The Company's investments, including Vodafone Egypt, increased 30%, to provide an income contribution of EGP355m compared to EGP273m for the same period last year.

Vodafone Egypt has continued to perform well, reporting total revenues of EGP11,767m for the full-year period ending March 2009, an increase of 13% on the previous year. As of March 2009, Vodafone Egypt had a customer base of nearly 19 million, an increase of 35% year-on-year. (N.B. VE's financial year starts on 1 April).

Net profit

Consolidated Net Profit for the three month period was EGP961m, a year-on-year increase of 72%. This represents a quarter-on-quarter increase of 60%. Net Profit Margin remains in line with management expectations at 38%.

This translates into an EPS of EGP0.56, versus EGP0.33 for the period ended 31 March 2008. Investments in infrastructure Telecom Egypt continues to invest in its state-of-the-art infrastructure and important projects. In the first quarter of 2009, Capex was EGP178m.

Debt

Telecom Egypt continues its debt repayment programme. In the first quarter, Telecom Egypt repaid in excess of EGP777m, with EGP200m of this amount representing early repayment. As of 31 March 2009, Telecom Egypt's net cash position was EGP1,789m, compared to EGP2,002m of net debt in March 2008.