Aspire Forward Annual Report 2014

Transcription

1 Aspire Forward Annual Report

2 Table of contents Head Office: Building Intersection of Zayed The 1st Street and Sheikh Rashid Bin Saeed Al Maktoum Street P.O. Box 3838 Abu Dhabi, UAE Regional Offices: Abu Dhabi, Dubai, Northern Emirates Key Highlights of 02 Business Snapshot 04 Chairman s Statement 06 Board of Director s 08 Our Journey 10 Chief Executive Officer s Statement 12 Management Team 14 Group Strategy 18 key events of the year 20 Operational Highlights 22 Group s Footprint 26 Management Review Middle East 30 Africa 38 Asia 46 Awards 52 Human Resorces 54 Corporate Social Responsibility 56 Corporate Governance 58 Independent Auditor s Report to the Shareholders 60 Consolidated Income Statement 62 Consolidated Statement of Comprehensive Income 63 Consolidated Statement of Financial Position 64 Consolidated Statement of Changes in Equity 65 Consolidated Statement of Cash Flows 66 Notes to the Consolidated Financial Statements 67 Notice of General Annual Shareholders Meeting

3 Key highlights of 48.8 AED Billion Revenue 169 Million Aggregate subscribers 23.4 AED Billion EBITDA 8.9 AED Billion Net Profit 8.9 AED Billion CAPEX 70 Fils Dividend per share 10 % Bonus share Maroc Telecom Group welcome to the Family 02 Annual Report 03

4 Aspire Forward Business Snapshot Our business model is based on meeting our customers expectations through continued investment in our networks to support wider coverage, higher speeds and greater capacity, and to provide innovative service offerings Our aspiration is to be the leading and most admired emerging markets telecom group by pro-actively and consistently serving our customers with a common set of brand values based on innovation, customer centricity and building trusted relationships. The key pillars of our strategy reflect this desire. These pillars involve owning and managing an attractive well balanced portfolio of assets, providing differentiated, innovative service offerings that leverage our broadband infrastructure and networks and superior customer experience. In line with our aspirations and strategy; in the past year completed its acquisition of a 53% stake in Maroc Telecom. This acquisition marks the largest and most complex deal in the history of. It is one of the largest crossborder Mergers & Acquisition transactions in the Middle East & North Africa region and it expands s reach from fifteen to nineteen markets. By combining our assets in West Africa under Maroc Telecom, we intend to establish the largest Francophone West Africa telecom Group. Our business model is based on meeting our customers expectations. We aspire to achieve this through the continued investment in our networks and innovative service offerings to ensure we provide our customers with the best possible experience and to ensure that we continue with our practice of high cash generation so we can continue to reward our shareholders and grow our business. We have sustained a generous dividend programme with close to AED 17 billion returned to shareholders in the past 3 years. Over the years we have maintained a high level of capital expenditure to support wider coverage, higher speeds and greater capacity in our networks. With over 169 million customers, we are one of the fastest growing telecom operators with access to close to 0.8 billion people in the markets we operate in. The majority of our customers and the growing share of our mobile customers are in Africa and Asia. We believe that voice is still a growth area that we intend to tap into with the continued upgrade of our networks; however, primary focus is on securing leadership position in the more lucrative data segment. To that end, we have in the recent past invested in spectrum licences in Pakistan, Afghanistan, Benin and Cote D Ivoire to support our push into mobile data services and to support future growth. Our focus is on leveraging our technology platforms to deliver innovative products and services that offer both economic and social benefits to our customers. We aspire to transform the communities we operate in, be it through enhancing financial services access through products like Flooz, to healthcare and education. In the UAE; we continue to make great strides in technological advancements with over 85 percent of the population covered by LTE and most recently we tested and deployed LTE-A as well as showcasing 5G at GITEX. is committed to being a responsible global corporate citizen through strategic partnerships that enhance access to education and health care via use of technology. These efforts are contributing to bridging the gap in terms of access within the communities we serve, while generating impressive digital dividends in the form of jobs, economic growth and stability. For nearly 40 years, has helped the UAE sustain its position as the region s hub for business, trade and foreign investment by providing reliable and high quality services. This was accomplished through investment in advanced world class networks where both fibre-to-thehome (FTTH) and LTE roll-out exceeds 85% coverage of the population. Due to these investment UAE today demonstrates leadership in terms of regional technology, innovation and deployment and leads the world in terms of high-speed broadband penetration. The country enjoys one of the highest smartphone penetration rates in the world with over 75 per cent mobile consumers using smartphones. In the coming years, will play a crucial role in driving innovative growth in the multi-billion dollar UAE telecom market, especially in the enterprise and government sectors. 04 Annual Report 05

5 Chairman s Statement Innovation will continue to be at the heart of everything we do at As we look forward to the year ahead, it s important to take stock of what an auspicious year was for. was defined by being future ready we experienced increased revenues and profits, as well as the number of subscribers, putting in an excellent position to engage the opportunities and changing landscape of the coming year, even as the industry continues to evolve in a profound and challenging way. It has become clear that the paradigm shift we detected at the outset of is now in full force. Telecommunications is becoming ever more present in more areas of life, and we strive to be at the forefront of transforming ICT from its current role as a set of service offerings to its future as a total customer experience, and to deliver access to as many people as possible. Our current success is a result of understanding the need our customers have to rely on to deliver. The aspirations we put forth at the start of have largely been realised we accomplished impressive growth, and with this growth, fueled and continue to fuel innovation in the industry. Our long-held belief is that growth has to be accompanied by constant attention to the innovation that drives it. It is that synergy that is at the heart of our continued success, which will deliver an unmatched customer experience that will lead to future growth. s financial results are a great benchmark of the aspirations set forth in the beginning of the year. In, consolidated revenue grew by 26% to AED 48.8 billion, with net profit after Federal Royalty increasing to AED 8.9 billion, representing a 26% growth in the year. In line with our strategy to create value for our shareholders, the Board has recommended a dividend distribution of 70 fils per share for the fiscal year. The milestone of acquiring Maroc Telecom one of the largest in the region s history has added great value to s global footprint. This acquisition has allowed us to consolidate and begin to streamline services for millions across North and West Africa. As we aspire to be the leading emerging markets telecom provider, we view this acquisition as a critical investment in our long-term future in Africa. We have already begun to realise not only the financial benefits, but also our ability to enact real, transformational change in local African communities through enabling small businesses to grow, create jobs, and deliver new innovative products and services that will in turn foster vast improvements in education, healthcare, and many other socially vital initiatives. Our growth in these emerging markets secures long term success for, building trust within these communities and allowing us to be the most reliable partner in these markets when the time comes to deliver the next round of technological achievements. This long-term commitment is what enables not only our current success, but strengthens our ability to prosper in the future. Innovation will continue to be at the heart of everything we do. Being future ready means not only adapting to the changing landscape, but to continue being the agents of that change. For instance, the development of Smart Cities will come to define many functions of everyday life. Aware of this fact, we have been spearheading the development of 5G technology in order to position as a driver for the technology that will deliver the future of the industry will be an important year in solidifying the growth and gains of. As we move forward, will continue to engage in bold yet prudent investments to generate value and profit for local communities and shareholders alike. As with any enterprise this large, challenges will arise. With so many working parts, it can sometimes be difficult act quickly to changes in the marketplace, even when one is looking to preempt them. Obstacles will emerge however I am confident that, given our proven record of innovative solutions and the skill and professionalism of our teams across the family, any challenges will be overcome. I would like to express my gratitude to the leadership of the UAE, who have unwavering supported in our journey to becoming one of the world s leading telecommunications operators. And finally, most of all, I want to thank our customers, for continuing to engage our services with excitement and place their faith in us to deliver time and again. was a watershed year for, having continued to establish ourselves as a leading telecom operator at the forefront of innovation. With the commitment of our world-class employees across 19 operations, the continued support of our investors, and the input and cooperation of our millions of subscribers, 2015 will no doubt continue this pattern of success. Eissa Mohamed Al Suwaidi Chairman - Group 06 Annual Report 07

6 Board of Directors Eissa Mohamed Al Suwaidi Chairman Investment & Finance Committee Khalaf Bin Ahmed Al Otaiba Vice Chairman Member-Investment & Finance Committee Sheikh Ahmed Mohamed Sultan Bin Suroor Al Dhaheri Member Audit Committee Abdulla Salem Al Dhaheri Member Chairman-Nomination & Remuneration Committee Mohamed Hadi Ahmed Abdulla Al Hussaini Member Investment & Finance Committee Mubarak Rashed Al Mansouri Member Nomination & Remuneration Committee Investment & Finance Committee Abdulfattah Sayed Mansoor Sharaf Member Investment & Finance Committee Mana Mohamed Saeed Al Mulla Member Audit Committee Abdelmonem Bin Eisa Bin Nasser Alserkal Member Nomination & Remuneration Committee Essa Abdulfattah Kazim Member Chairman-Audit Committee Shoaib Mir Hashim Khoory Member Nomination & Remuneration Committee Hasan Al Hosani Corporate Secretary 08 Annual Report 09

7 Our Journey 1994 The Middle East s first GSM service is introduced in the UAE. launches Emirates Data Clearing House, now one of the world s leading clearing houses - providing a complete solution to GSM operators to provide roaming facilities to their customers in turn The Middle East s first broadband Internet service using the latest ADSL technologies is introduced. buys stake in Tanzanian operator Zantel, its first step towards becoming a major international telecoms group acquires a stake and takes management control of PTCL, the incumbent fixed operator in Pakistan. expands into West Africa by taking a stake in Atlantique Telecom with operations in Benin, Burkina Faso, the Central African Republic, Gabon, Ivory Coast, Togo, and Niger wins the third mobile license in Egypt and launches the country s first 3G network. awarded a license to provide mobile services in Afghanistan. Services Holding is formed to manage eight business units that offer mission-critical telecoms related services to the industry acquires Tigo, a Sri Lankan operator, which is later rebranded to Lanka wins 3G license in Afghanistan and Ivory Coast and launches the first 3G services in Afghanistan. completes acquisition of 53% shareholding in Maroc Telecom. successfully issued its inaugural bond under its Global Medium Term Note (GMTN) programme listed on the Irish Stock Exchange. signs SPA with Maroc Telecom for sale of s shareholding in Atlantique Telecoms The ownership structure changes with the United Arab Emirates government getting a 60% share in the company and the remaining 40% is publicly traded becomes one of the founding investors in satellite telecommunications provider, Thuraya. launches the Middle East s first 3G network Emirates Telecommunications Corporation launches Middle East s first mobile network Internet services are rolled out across the country, another first in the region introduces the E-Vision brand for its cable TV services wins the second license to operate in Saudi Arabia, introducing Etihad Mobily. buys a stake in Canar; a fixed line operator in Sudan acquires a stake in a green-field operator EMTS in Nigeria, the largest and fastest growing market in Africa completes the rollout of a nationwide fibre optic backbone over which next generation services will be provided in the UAE introduces 4G (LTE) experience to its customers in the UAE. signed SPA with Vivendi to acquire Vivendi s 53% stake in Maroc Telecom Group. Benin obtains a Universal Mobile Service License. Emirates Telecommunication Corporation is founded. 10 Annual Report Annual Report 11

8 Chief Executive Officer s Statement The addition of Maroc Telecom Group to family strengthens our portfolio Building on the momentum established in, last year s achievements came to define s mantras of growth and innovation. Our expansion in North and West Africa, which increased our international presence to 19 markets across the MENA region, was accompanied by strong figures, revenue grew by 26% to AED 48.8 billion, along with continuance of steady growth for our operations in the UAE, and an accelerated effort to spearhead the development of 5G technology through leading global partnerships. It is important to take stock of these successes and celebrate them. In the UAE last year, we invested 2.5 billion AED in bringing 4G to its fullest potential. We remain the dominant force in the mobile industry as a result of our consistently innovative product and service offerings, coupled with competitive prices. However, it has been the realm of data and internet where we have really looked towards the future. has recognized that the rapid growth of data usage holds the key to success in our industry, and will be one of the principle drivers of ICT innovation going forward. New, transformative platforms such as M2M and mobile identities, as well as the digitization of traditional forms of information transfer, particularly video broadcast, are taking the industry to exciting new levels. This is where the future lies. In, in addition to further expanding our fiber-to-the-home (FTTH) network, we have actively worked towards establishing the digital infrastructure required for the ever-increasing data demands of the future. Part of this has been the introduction of cutting-edge technology; but it has also been our engagement in industry thought leadership recognizing innovative paths that need to be taken for the telecom sector to perform optimally to truly deliver for its customers. has not merely participated in these developments, but has been an initiator and enabler of them on regional and international levels. We are the first telco in the Middle East to introduce M2M technologies such as embedded SIMs to the marketplace. Moreover, we have engaged our peers and the industry at large, establishing partnerships with several global technology players, in order to build new, creative revenue streams and tackle industry obstacles in a dynamic and effective way. will continue to explore integrating and regulating new platforms in ways that will benefit telcos, OTTs, and customers alike. H.H. Sheikh Khalifa bin Zayed bin Sultan Al Nahyan, President of the UAE, Ruler of Abu Dhabi and Commander of the Union Defence Force, has made the establishment Smart Cities across the UAE a priority. As our home market, we will continue to invest heavily in making this vision a reality across the UAE. We have also taken H.H. Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai s recent announcement to move 1,000 government services to the digital arena in the next three years as impetus for to further develop the digital infrastructure necessary for the realization of the concept in the UAE. was also a game-changer for internationally. We saw the addition of Maroc Telecom to the family, and with its acquisition of Atlantic Telecom, the creation of a regional telecommunications block unrivaled on the African continent. Not only does this greatly strengthen our portfolio in Africa, but provides opportunity to revolutionize the ICT landscape in frontier markets. The delivery of affordable, accessible mobile technology is literally changing the lives of thousands of people in our African markets. Our mobile finance technology is providing people in remote and underdeveloped rural areas the ability to access the international banking system for the first time. We will continue to focus on the unique experiences and situations of each individual market, providing the next big thing to each of our 19 national subscriber bases whether that s 5G in the UAE or nation-wide mobile data coverage in Niger. Success depends on having our finger on the pulse of each market s individual requirements. Ultimately, our ability to create value and profit is tied directly to our devotion to ambitious growth and cutting edge innovation. Our long-term success depends on our investment in long-term solutions. This is why has invested in developing infrastructure that will serve shareholders, customers and markets alike for years to come. We have a lot of work ahead of us continuing to progress in 19 diverse markets at various levels up the technological ladder requires tenacity and creative thinking. But given the proven performance of s devoted employees, who are equipped with the talent and experience, and with the continued support of the UAE Government, our shareholders, and our customers, I have no doubt that we are up to the task. Ahmad Abdulkarim Julfar Chief Executive Officer - Group 12 Annual Report 13

9 Management Team Ahmad Abdulkarim Julfar Chief Executive Officer- Group Mr. Julfar was appointed as the CEO of the Group in August Prior to this appointment, he was the Chief Operating Officer of EG. Mr. Julfar has more than 25 years experience in the telecommunication sector and has served in various management positions including General Manager of ecompany, ComTrust and s Dubai region. In addition, Mr. Julfar serves on the boards of Mobily, where he is the Chairman of the Risk Management committee, Misr, Maroc Telecom and Services Holding. Mr. Julfar holds Bachelor s Degrees in Civil Engineering and Computer Science from the USA. Saleh Al Abdooli Chief Executive Officer, UAE Engineer Saleh Al Abdooli was appointed as Chief Executive Officer of UAE in April A strong and charismatic leader, Saleh rose to international fame after his resounding success in Egypt as the CEO of Misr. He built and launched the first 3G operator in Egypt in 7 months. In less than five years, he achieved 27% of revenue share, 28% market share, 36% EBITDA margin, and 99% 2G/3G coverage. Al Abdooli holds Bachelor s and Master s in Electrical Eng. and Telecom from University of Colorado at Boulder, USA. Serkan Okandan Chief Financial Officer, Group Mr. Okandan joined in January 2012 as Chief Financial Officer of the Group. Prior to his appointment, he was the Group Chief Financial Officer of Turkcell. Mr. Okandan started his professional career at PricewaterhouseCoopers in 1992, and worked for DHL and Frito Lay as a Financial Controller before joining Turkcell. Mr. Okandan is a board member and Chairman of the audit committee of Nigeria, PTCL, Ufone, Services Holding and a board and audit committee member of Maroc Telecom. Mr. Okandan graduated from Bosphorus University with a degree in Economics. Abdeslam Ahizoune Chairman of the Management Board, Maroc Telecom Mr. Ahizoune has been Chairman of the Maroc Telecom Management Board since February 2001 and served as CEO from 1998 to Earlier, he was Minister of Telecommunications in four different governments. Mr. Ahizoune has been Chairman of the Moroccan Royal Athletics Federation since 2006, and also serves as a board member of several foundations: Inter Alia; King Mohammed V for solidarity; King Mohammed VI for the environmental protection, and Princess Lalla Salma against cancer. He is also the Vice-President of CGEM and the President of its Moroccan-Emirati economic commission. He holds an engineering degree from Télécom ParisTech. Abdulaziz Al Sawaleh Chief Human Resources Officer, Group Mr. Al Sawaleh is the Chief Human Resources Officer (CHRO) of the Group. Prior to this position, he was the CHRO of UAE. Mr. Al Sawaleh has more than 25 years experience in various leadership positions. He is responsible for leading the global Human Capital strategies including the areas of talent development, organization effectiveness, compensation & benefits and Performance Management. He is a board member of Atlantique Telecom, Nigeria and Services Holding. Mr. Al Sawaleh holds an MBA degree in Global Leadership Management from UAE University and a BBA degree from the USA. Saeed Al Hamli Chief Executive Officer, Misr Mr. Al Hamli was appointed as Chief Executive Officer of Misr in April Prior to this role, he was the Chief Executive Officer of Afghanistan since Mr. Al Hamli has more than 20 years of experience at and Thuraya where he was the Chief Commercial Officer before moving to Afghanistan. Mr. Al Hamli also serves on the board of Misr. Mr. Saeed holds a Bachelor s of Science degree in Electrical Engineering from USA and Executive Master s of Business Administration degree from the American University of Sharjah. Dr. Daniel Ritz, Ph.D Chief Strategy Officer, Group Daniel Ritz was appointed as Chief Strategy Officer for EG in February Prior to this appointment, he was the CSO at Swisscom Group where he held various positions including Board member of each of the Group s Executive Board, Fastweb, Belgacom and Swisscom IT Services. He also served as Chairman of Swisscom s Hospitality Services and as CEO of Swisscom (Central & Eastern Europe). Prior to joining Swisscom, he was a partner at BCG. Dr. Ritz also serves on the Board of Atlantique Telecom, Thuraya, Maroc Telecom, PTCL and Ufone. Dr. Ritz holds a Ph.D from the Hochschule St. Gallen in Switzerland. Rainer Rathgeber Chief Commercial Officer, Group Rainer Rathgeber was appointed as Chief Commercial Officer of EG in January. Prior to joining, he was Senior Vice President of Marketing in Europe of the OTE Group. Mr. Rathgeber joined Deutsche Telekom in 2002 as Head of Strategy for T-Mobile Germany, and Executive Vice President of Sales and Service Strategy for T-Mobile International. He then went on to serve in various positions including Executive Vice President of Market Management for T-Mobile International, CEO of T-Mobile Croatia and Member of the Executive Management Committee of T-Mobile International. Mr. Rathgeber is a board member of Nigeria, PTCL and Ufone. Mr. Rathgeber holds a Diplom-Kaufmann Degree in Economics. 14 Annual Report 15

10 Management Team Khalifa Al Shamsi Chief Digital Services Officer, Group Khalifa Al Shamsi was appointed as Chief Digital Services Officer of the EG in Prior to this role, Mr. Al Shamsi held the position of Senior Vice President of Technology Strategy of the Group. Since joining in 1993, Mr. Al Shamsi has held various key senior positions including Vice President and Senior Vice President of Marketing of UAE. Mr. Al Shamsi serves on the Boards of Afghanistan, Mobily and E-vision. Mr. Al Shamsi has a Bachelor s degree in Electrical Engineering from the University of Kentucky, USA. Hatem Bamatraf Chief Technology Officer at Group Mr. Hatem Bamatraf was appointed Chief Technology Officer at Group in September. Prior to this position he was the Executive Vice President of Enterprise Business at Du. Hatem began his professional career in 1995 at and was seconded to Mobily in 2004 as Director of Mobile Network Development in the Central Region, KSA. Mr. Bamatraf serves on the boards of Afghanistan and Sri Lanka. He graduated from the College of Engineering and holds a bachelor s degree in Engineering. He has been recognised by Global Telecom Business as one of the 40 under 40 telecom leaders in the world. Dr. Kamal Shehadi, PhD Chief Legal & Regulatory Officer, Group Kamal Shehadi was appointed as Chief Legal & Regulatory Officer of EG in November He Joined in 2010 as Head of the Regulatory Department. Prior to that, Dr. Shehadi was the Chairman and CEO of TRA, Lebanon. He has more than 17 years of experience in consulting and advisory services for telecom regulatory authorities and telecom service providers. Dr. Shehadi serves on the board of Atlantique Telecom. Dr. Shehadi has a B.A. in Economics from Harvard University and a PhD in International Political Economy from Columbia University, USA. Javier Garcia Chief Internal Auditor, Group Javier Garcia joined in December 2012 as Chief Internal Auditor of the EG. Mr. Garcia was the head of Internal Audit at Telefonica Group before joining. He held various positions with Telefonica including Business Process Audit Director and Vice President of Internal Audit (Chile) before becoming the Group Head of Internal Audit. Mr. Garcia serves on the audit committees of Maroc Telecom, PTCL and Ufone. Mr. Garcia holds a Bachelor s in Economics and a Master s in Financial Markets from the Autonomous University of Madrid. Obaid Bokisha Chief Procurement Officer, Group Obaid Bokisha was appointed as Chief Procurement Officer of the EG in June Since joining, he was assigned various responsibilities contributed to the network implementation of all existing systems covering GSM, UMTS, LTE and WiFi networks. Positions held include Vice President Mobile Networks Planning & Int l Support of UAE and Senior Vice President Mobile Networks Optimization EG.Mr. Bokisha serves on the board of Canar, Zantel and Nigeria. Mr. Bokisha has a degree in Communications Engineering from the College of Engineering. John Wilkes Chief Internal Control Officer, Group John Wilkes was appointed as the Chief Internal Control Officer for EG in January. Prior to this, Mr. Wilkes was the General Manager of Risk & Supply Chain of the Vodafone Hutchison Company. He has more than 24 years of experience in companies such as KPMG Air in New Zealand where he was the Group Internal Auditor and Stockland in Australia where he held the position of Chief Risk Officer. Mr. Wilkes is a qualified chartered accountant. 16 Annual Report 17

11 Vision, Mission and Strategic Pillars Group Strategy Achievements continues to make important progress in execution of its corporate strategy, focused on ICT & Content Vision Mission Strategic Pillars To be the leading and most admired emerging markets telecom group Provide best in class total customer experience for retail and business Deliver attractive returns to shareholders while investing in the company s long term future Support economic development and job creation through ICT & socially responsible behavior One Company Operational Excellence Customer Experience People & culture Portfolio Service offering The Middle East, Africa and Asia continue to present strong growth opportunities for the telecom industry. Marked by its diversity, s footprint includes markets where people are experiencing the internet for the first time on mobile networks, while in others FTTx and 4G is fast becoming a widespread technology. Yet there is a common theme. Fuelled by the rollout of advanced networks and increasingly affordable smartphones and other data-enabled devices, demand for high quality data and voice networks and an array of data-driven consumer and business services continues to increase and support the overall growth of the telecom industry in all of s markets of operation. As the industry evolves, continues to position itself at the heart of change and to stay ahead of the challenges presented. Across its footprint, Group s vision, mission and corporate strategy remain valid. In, has not only made important progress in the journey of execution of its corporate strategy, but has also increased its focus on two sectors, ICT and Content. It believes this focus is vital to achieving its strategic objectives and adapting to the changing dynamics of customer demand. The areas of ICT and Content both play increasingly important roles for, representing vital value-driven services with which it can provide a holistic and differentiated offering to its consumer and business customers, as well as monetizing the investments made in its high quality broadband networks. Service Offering maintains its commitment to providing a differentiated and innovative service offering, defined by the individual needs of the markets in which it operates. Whilst not overlooking the vital importance of voice for s customers, the recent focus on data-driven services has enabled significant growth in data revenues across its operations. has also increased its share of the business segment by securing major regional Multi-National Company (MNC) accounts and providing an increasingly wide range of tailored propositions to suit Enterprise and SME needs. The growing focus on Information and communications technology (ICT), particularly in key markets such as the UAE and Saudi Arabia, will continue to help drive growth in this area. In digital services, s revenues continue to show encouraging growth through enhanced offerings and widened reach. s m-commerce service, for example, extends to 12 countries with a wide range of functionalities and services. In addition, M2M services have been launched in several key markets within s footprint and a unified cloud platform is currently being deployed across all major operating companies. Customer Experience In, continued to enhance the level of customer experience it provides across all touch points. In addition to an expanding portfolio of direct distribution channels consisting of an increasing number of flagship stores, s customer-value-management systems have also supported continuous improvements in customer experience. Through customer insights and data analytics, is proud today that it understands its customers better than ever, and is able to offer products and services which effectively reflect their requirements. Finally, multiple technology enhancements have benefited customers, including the deployment of LTE Advanced technology in the UAE and the rollout of 3G services in Pakistan, Ivory Coast and Benin, which have all continued to ensure that offers the highest level of network quality to its customers. Operational Excellence While maintaining its position as one of the highest margin players in the telecom industry, nevertheless continuously strives to improve efficiency. Over the last year, significant savings have been generated as a result of s initiatives in procurement, which will continue to improve still further as a result of the company s growing scale. s focus on operational efficiency has also included cost optimisation measures in the UAE, Egypt and Nigeria which have helped sustain its high margins overall. In addition, has been working to optimize its capital structure through several initiatives, that included the issuance of its inaugural bond worth USD 4.2 billion in June. Portfolio has been a very active year for s portfolio. In line with the investment guidelines defined by its corporate strategy, has cemented its strong position in the Middle East and Africa through the acquisition of a 53% stake in Maroc Telecom in May. Maroc Telecom is the incumbent telecom operator in Morocco and owns controlling stakes in the incumbents in four French-speaking West African countries (Burkina Faso, Mali, Mauritania and Gabon). Each of these companies boasts an integrated fixed and mobile operation, as well as number one positioning in most markets, with the combined entity providing strong synergies for Group. In addition, and Maroc Telecom also signed a Share Purchase Agreement for the sale of s shareholding in operations in Benin, Central African Republic, Gabon, Ivory Coast, Niger and Togo. In parallel, continues to assess potential opportunities to improve positioning and create value across its footprint, such as the tower sale and leaseback transaction realized between Nigeria and IHS. One Company continues to believe that significant value can be created for a large organization by operating consistently across the portfolio with a common set of processes and systems. In, many important improvements have been made in this regard. In addition to the substantial financial synergies brought about by leveraging s economies of scale, the company has also placed strong emphasis on deploying various Group-wide programs to enhance consistency and collaboration. Such programs include the deployment of regulatory compliance systems and the identification and resolution of revenue leakage across the group. In the future, these programs will also be extended to Maroc Telecom. People & Culture recognizes that people are one of its most important assets. As such, it continues to deliver on its objectives in this regard to strengthen the company s leadership, empower its employees and focus on execution. Talent development initiatives such as the Top 100 Talent and High Potential Program, have been enhanced this year, and our survey results indicate that employee engagement in the organization continues to rise. As an indicator of the strength of s management, several key management positions in our operating companies in Nigeria, Sri Lanka, Ivory Coast, Canar and Tanzania have been supplied with internal resources. 18 Annual Report 19

12 Key events of the year April October Ufone acquires 3G licence Ufone was one of 4 mobile operators in Pakistan to bid in the country s initial 3G auction. Ufone; a wholly owned subsidiary of PTCL was allocated 5 MHz band on 2100 MHz band. Accelerating interoperable mobile money service partners with 8 other telecom operators to accelerate the implementation of interoperable mobile money services across 48 countries in Africa and Middle East. This is part of the GSMA Mobile Money Interoperability programme. May Acquisition of 53% of Maroc Telecom successfully completes acquisition of 53% shareholding in Maroc Telecom for a final consideration of billion. Additionally, and Maroc Telecom sign a Share Purchase Agreement (SPA) for sale of s shareholding in French-speaking operations in West Africa (Benin, the Central African Republic, Gabon, the Ivory Coast, Niger, Togo and Prestige Telecom). These transactions will establish the largest Franco-phone West Africa telecom cluster. June US$ 7 billion Global Medium Term Note Programme lists its US$ 7 billion GMTN on the Irish Stock Exchange and issues 4 bond tranches consisting of: 5-year tranche (US$ 500 million), 7-year tranche ( 1.2 billion), 10-year tranche (US$ 500 million) and 12-year tranche ( 1.2 billion). This bond issue is the biggest corporate issue ever in the region. Credit Ratings Credit Ratings Agencies S&P, Fitch and Moody s affirm high credit Ratings at AA-/A+/ Aa3 with stable outlook. S&P at the same time affirmed the AA- senior unsecured debt ratings on s US$7 billion GMTN program. August Nigeria and IHS sign tower sale & lease back agreement Nigeria signs sales and leaseback agreement with IHS Holding Limited as part of its strategy to drive improvement in the quality of network performance and to accelerate roll out of 2G and 3G coverage and new services to its customers. The transaction is the first by a major GSM operator in Nigeria. s Mobile Network First In The Region To Begin Upgrades To 700 Mbps 4g LTE Tri-Band Carrier Aggregation Technology has tested and started a phased upgrade of it its network to the futuristic 4G Advanced (LTE-A) tri-band technology based on carrier aggregation technology, for the first time in the region. A live testing on the network was successfully concluded, making way for ultra-speeds of 700Mbps mobile broadband connectivity and ensuring network readiness once handsets are commercially available. showcases 5G mobile broadband at Gitex and Huawei have jointly showcased 5G mobile broadband services at Gitex Technology Week in Dubai. This is the first time 5G technology has been presented in the region. The demonstration showcased an 115 Gbps data transmission rate capability, which is faster than current mobile networks. An increase of capability will support the connection requirements for the Internet of Things, 4D film, MirrorSys and Vehicular Telematics. December Group CEO elected as GSMA Deputy Chair The GSMA Board has elected Ahmad Abdulkarim Julfar, CEO of Group as Deputy Chair for a two-year period from January 2015 through December The newly elected board will oversee the strategic direction of the organisation, which represents nearly 800 of the world s mobile operators, as well as more than 250 companies in the broader mobile ecosystem. 20 Annual Report 21

13 Delivered Strong Operational and Financial Performance Operational Highlights Subscribers EBITDA Group aggregate subscribers grew by 14% on an annual basis to 169 million in. The net addition of 21 million subscribers in the year was mainly a factor of the consolidation of Maroc Telecom as well as good subscriber growth in the UAE and Nigeria. In the UAE, the active subscriber base grew to 11.0 million subscribers from 8.4 million in, representing year on year growth of 6%. Subscriber growth was mainly driven by strong growth in the mobile and elife segments. The mobile subscriber base grew year on year by 7% to over 9.0 million subscribers representing a net addition of 0.6 million subscribers of which 34% was in the high quality postpaid segment. Fixed line subscriber segment contracted 5% year on year as we continued our efforts to migrate subscribers to the elife segment that continued to drive consistent growth with 16% year on year increase. Total broadband segment grew by 8% year on year to 1.0 million subscribers. In the International operations, Nigeria evidenced strong subscriber growth in the year with year over year growth of 24% by adding 4.1 million net additions and closing the year with 21.1 million subscribers. In Pakistan, subscriber base declined by 7% year over year to 26.3 million impacted by the subscriber registration exercise mandated by the industry regulator and the intense competitiveness of the mobile segment. For Maroc Telecom the subscriber base exceeded 40 million customers as at 31 December, representing a year over year growth of 8%. This growth is mainly attributable to international operations that grew by 17% EBITDA (AED Bn) Group consolidated EBITDA grew to AED 23.4 billion representing a year-over-year growth of 24% in, while EBITDA margin declined 1 point to 48%. EBITDA growth was mainly due to consolidation of Maroc Telecom operations and continued strong growth in the domestic operations. EBITDA margin was impacted by a number of one-offs related to Voluntary Separation Scheme in Pakistan, provisions for disputes on interconnection rates in Egypt and provisions for bad debts and tax audits in other operations. In the UAE, EBITDA in increased by 6% to AED 15.0 billion resulting in EBITDA margin of 55%. EBITDA growth is due to higher revenue growth while EBITDA margin was slightly lower year over year due to change in revenue mix and higher marketing expenses and interconnect costs. EBITDA of international consolidated operations in increased by 107% to AED 8.4 billion contributing 36% to Group Consolidated EBITDA. In Egypt EBITDA for the full year was AED 1.8 billion with an EBITDA margin of 37%, 3 points higher than. In Pakistan, EBITDA for the full year declined year over year by 25% to AED 1.3 billion with EBITDA margin declining by 9 points to 27%. This decline is mainly attributed to a one-off provision related to the Voluntary Separation Scheme (VSS). Adjusting for this item, EBITDA margin would have been 33%, slightly lower than the prior year. EBITDA of international operations benefited from the consolidation of the results of Maroc Telecom Group effective from May. Revenues Net Profit and EPS 48.8 billion 38.9 billion Revenues (AED Bn) Group s full year consolidated revenue increased year on year by 26% to AED 48.8 billion driven by strong performance of domestic operations and the consolidation of Maroc Telecom operations. In the UAE, revenue increased 9% to AED 27.1 billion, as a result of growth of the subscriber base with increased bundled propositions (voice and data) to consumer and enterprise segments. In addition, we witnessed significant increase in handset sales benefiting from new product launch such as iphone6. International consolidated operations was impacted by the consolidation of Maroc Telecom Group and discontinued operations of one of our subsidiaries. Full year revenue grew year-on-year by 55% resulting in 44% contribution to Group revenue up from 35% for the full year. In Egypt, revenue for was AED 4.8 billion, increasing by 2% from the prior year mainly attributed to growth in the data segment. In Pakistan, revenue for was AED 4.7 billion, a decline of 1% from the prior year on falling international incoming traffic that was not fully compensated by the strong performance of the fixed and wireless broadband. Our results benefited from the consolidation of Maroc Telecom Group financials effective May Net Profit (AED Bn) EPS (Fils) Consolidated net profit after Federal Royalty increased by 26% to AED 8.9 billion resulting in profit margin of 18%. The increase in profit is attributed to higher EBITDA level, lower royalty and impairment charges that was partially offset by higher depreciation and amortization expenses, lower share of results of associates, higher finance costs and forex losses. Earnings per share (EPS) amounted to AED 1.12 for the full year of. On 25th of February the Board of Directors has resolved to propose a final dividend for the second half of at the rate of 35 fils per share, bringing the full year dividend to 70 fils per share. In addition, the Board of Directors has proposed a 10% bonus share. This proposal is subject to shareholder approval at the Annual General Meeting scheduled for the 24th March Annual Report 23

14 Operational Highlights CAPEX Profit and Loss Summary CAPEX (AED Bn) Consolidated capital expenditure increased by 41% to AED 8.9 billion resulting in capital intensity ratio of 18% compared to 16% in the prior year. This increase in capital spending is impacted by the 3G license acquisition and 2G license renewals in Pakistan and consolidation of Maroc Telecom. Adjusting for these items, capital expenditure would have been AED 5.8 billion and capital intensity ratio 14%. In the UAE, capital expenditure in increased by 25% to AED 2.5 billion while capital intensity ratio increased 1 point to 9%. Capital expenditure was committed to mobile network modernization and coverage improvement in addition to FTTH/ elife deployments to improve footprint. Capital expenditure in consolidated international operations amounted to AED 6.3 billion, an increase of 48% from year level. In Egypt, capital expenditure exceeded AED 1.0 billion resulting in a capital intensity ratio of 21%. Capital spending focused on capacity enhancement to address the increased demand for data. Pakistan operations capital expenditure was AED 3.0 billion, up 113% year on year and capital intensity ratio of 63%. Adjusting for the 3G license acquisition and 2G license renewal, capital intensity ratio would have been 32%. (AED m) FY 13 FY 14 Revenue 38,564 48,767 EBITDA 18,901 23,365 EBITDA Margin 49% 48% Federal Royalty 6,115 5,333 Net Profit 7,078 8,892 Net Profit Margin 18% 18% Balance Sheet Summary (AED m) FY 13 FY 14 Cash & Cash Equivalents 15,450 18,543 Total Assets 85, ,585 Total Debt 5,872 22,229 DEBT Net Cash 9,579 (3,686) Total Equity 49,593 60, DEBT (AED Bn) Total consolidated debt amounted to AED 22.2 billion as of December, as compared to AED 5.9 billion as at 31 December ; an increase of AED 16.4 billion reflecting primarily the issuance of bonds to finance the acquisition of 53% stake in Maroc Telecom and the first-time consolidation of Maroc Telecom s results. Consolidated debt breakdown by operations as of 31 December is as following: Group (AED 14.2 billion) Maroc Telecom (AED 1.9 billion) Misr (AED 1.5 billion) PTCL Group (AED 1.5 billion) Afghanistan (AED 1.5 billion) Atlantique Telecom (AED 1.4 billion) Sri Lanka (AED 0.3 billion) 57% of the debt balance is of long-term maturity that is due beyond Consolidated cash balance amounted to AED 18.6 billion as of 31 December leading to a net debt position of AED 3.7 billion. Currency mix for external borrowings is 52% in Euros, 23% in US Dollars, 5% in Egyptian Pounds and 20% in various currencies. Cash flow Summary (AED m) FY 13 FY 14 Operating 12,974 17,209 Investing (4,854) (24,102) Financing (6,585) 9,162 Net change in cash 1,535 2,268 Effect of FX rate changes (19) 834 Ending cash balance 15,450 18, Annual Report 25

15 Group s Footprint Morocco Afghanistan Pakistan Egypt Saudi Arabia United Arab Emirates Mauritania Mali Niger Sudan Burkina Faso Nigeria Central Africa Sri Lanka Cote D ivoire Togo Benin Gabon Tanzania Regions Middle East Africa Asia Operator Country United Arab Emirates Etihad (Mobily) Saudi Arabia Maroc Telecom Group Morocco & West AFrica Nigeria Atlantique Telecom, Moov West Africa PTCL/Ufone Pakistan Sri Lanka Licence Type: Ownership Population: (million) Penetration Number of operators Network Coverage, population Mobile, Fixed and Internet 100% 9 Mobile 191% Fixed 25% 2 100% Mobile & Interent 28% % Mobile 3 99% Mobile, Fixed & Internet 53% % Mobile 3-4 / country - Mobile 40% % Mobile 5 82% Mobile 100% 66 74% Mobile 2-6 per country 59% Mobile, Fixed and Internet 23% 186 Mobile: 78% Fixed: 3% Mobile 5, Fixed 11 77% Mobile 100% % Mobile 5 98% Operator Country Licence Type: Ownership Population: (million) Penetration Number of operators Network Coverage, population Misr Egypt Mobile & Interent 66% % Mobile 3 99% Thuraya Satellite Telecommunication 28% Satellite countries Zantel Tanzania Mobile and Fixed 85% 51 62% Mobile 6, Fixed 2 45% Canar Sudan Fixed 90% 34 1% Fixed 2 31% Afghanistan Mobile 100% 31 80% Mobile 4 78% 26 Annual Report 27

16 Middle East

17 Middle East UAE Management Review Customer experience excellence, data verticals, ICT and digital services, superb government partnership, building a strong Emirati brand and engaged staff are our key strategic pillars In, reinforced its leadership position in the UAE market, driven by its customer-centric strategy built around differentiation, value for money, innovation and user experience; while leveraging the capacity of its best in class LTE and FTTH network, data centres, smart hub, country-wide coverage, and expanded footprint. Having a balanced view on market realities and future prospects, allowed us to drive our revenue profile towards data, resulting in data revenues constituting 30% of mobile service revenue. During the year, launched several segmented propositions that have been instrumental to capturing additional growth pockets. For the mobile sector, has focussed on targeted, highly diversified and value for money propositions including the introduction of FIVE a sub brand that has become the preferred option for customers that value low tariffs, per second billing and the most competitive pricing for international calls. For postpaid customers we have launched several new and enhanced mobile service packages that offered value for money, flexibility and pricing transparency, among which was the flagship business postpaid mobile package Business Ultimate designed to cater to the specific needs of SMBs and large enterprises. In the mobile data space introduced several innovative propositions including Family Pack; the first consumer shared data plan in the UAE; the Global Data Plan - first in the region with local and roaming data and unlimited Wi-Fi worldwide; and Data Boosters a product that allows customers to temporarily extend their mobile data allowance. Introduction of new 3GB and 10GB tiers, were key developments in supporting a strong revenue growth and contributing to a better customer experience by avoiding bill shock issues. Business DataShare was launched for the first time in the region, allowing business users to share one pool of data with multiple users and stay online and connected while in the office or on the go. Also fundamental to mobile data growth, was the significant expansion of UAE s smart devices portfolio and the launch of affordable smartphones to incentivise migration to 3G. By offering smartphones and tablets from all major vendors and mobile operating systems, has reaffirmed its position as the operator of choice for smart devices. has had strong revenue growth in its fixed business in, validating the strategic investment in FTTH and reconfirming global leadership in fibre adoption. With the revamping of elife packages with an increased focus on content segmentation, competitive pricing and the expansion of the elife ON multiscreen service, there has been a strong adoption of elife packages with more than 16% increase in customers. Additionally, the launch of Smart Home solutions and online gaming has cemented s position as the key enabler of home entertainment and automation in the UAE. The IPTV Customer base is now close to half a million customers, and the OTT Customer base increased by 205,000 with 17 new E-Hospitality Bulk IPTV customers. In addition the IPTV platform was upgraded to support new features and applications for high level TV entertainment with a new system implemented to measure and monitor quality of service. The OTT Platform expanded to support 400,000 customer capacity and 25 new features were launched for both ios & Android devices. The business landscape is rapidly changing and high-speed broadband connectivity is becoming a crucial requirement for increased business productivity and profitability. In, offered free broadband speed upgrades of up to 2.5 times to Business customers, that provided faster and extremely reliable fixed-line Internet connections. To address the needs of SMBs, who form the foundation of UAE s economic growth, launched Business Quick Start the first in a series of integrated Business in a Box solutions that offer SMBs high-speed fixed broadband Internet, free voice minutes and a free smart device on a single, converged bill. A dedicated, state-of-the-art call centre for SMB customers has been launched that serves more than 72,000 SMBs and offers convenient and comprehensive ICT services and support, allowing SMBs to focus on their core competencies. also partnered with a number of strategic business hubs - including Ajman, Fujairah and Ras Al Khaimah Free Zones, and the Abu Dhabi Department of Economic Development - to provide an improved telecom and ICT service experience. These partnerships aim at making it convenient and easy for businesses to set up in the UAE, increase SMBs competitiveness and position UAE high on the IT readiness and competitiveness index. launched its new Tier III Data Centre in Abu Dhabi to meet the region s rapidly growing demand for advanced data and managed services, and leverage the UAE s strategic position as a regional business hub. It offers hosting and cloud services including, collocation, hot seats, Storage-as-a-Service, Backup-as-a-Service, Managed Services and public, private & hybrid cloud computing. It also includes a round-the-clock, dedicated network operations centre with an onsite support team. launched its Smart Security and Surveillance solution, the first of its kind in the UAE. This is a fully managed security solution that provides customers with a powerful way of monitoring their assets and supports them in the expedient response to theft, vandalism, accidents, pilferage and unauthorized access. also expanded its managed security services portfolio, offering a firewall/unified Threat Management service, which includes firewall, antivirus and anti-spam services, content filtering and VPN capabilities. This service provides enterprises both on premise and in cloud options offering end-to-end management, monitoring and maintenance services to help businesses better protect their infrastructure against evolving threats. significantly expanded its exposure and presence in digital and social networks. The company now has carrier billing agreements with all the major open mobile app marketplaces, benefiting from the development of digital services by third parties and OTT players. also launched a self-service mobile app, available in all major mobile operating systems. With the UAE mobile app customers now have a more convenient way to subscribe to services, check their balance, pay their bills or recharge a prepaid line. UAE extended its global LTE roaming to 40 new international destinations, and its roaming networks to 723 partners in 207 countries, while launching its Smarthub IPX with 14 major global peering agreements and launching the Smarthub IX as a national internet exchange. In, UAE has continued its commitment to customer experience by significantly expanding its footprint through increased points-of-sale and the roll-out of its Smart shops. also expanded its indirect channels with eight shop-in-shops installed in major partner retailers, and six new franchise locations established to increase customer convenience. To increase brand awareness is rebranding independent reseller shops and participated in major commercial events such as the Ramadan Night Market, GITEX Shopper and Global Village. With this expansion, indirect channels completed almost 4 million customer interactions in. UAE s infrastructure and network will assure our leadership in the ICT and digital arena. To maintain a forward-looking perspective, mandates the continued investment in network transformation to improve customer experience, enhance operational efficiency and support new offerings that require higher capacity. significantly improved the mobile broadband Customer Experience with a multiple of initiatives, including the launch of LTE Advanced and use of six carriers on the network. These initiatives elevated to position two worldwide in Mobile Broadband ranking as per MBB World Ranking. LTE coverage was also enhanced to cover 90% of populated areas across UAE, leading to a traffic increase of 18%. As part of the modernization efforts, upgraded more than 3,648 sites with state-of-the-art single RAN technology resulting in improved broadband speeds and higher capacity to cater for increased traffic. The Fiber to Mobile Network (FTTM) was enhanced by adding 3,500 additional links for mobile network modernization & additional 1,900 links for expansion purposes. Additionally, over 70,000 voice customers and over 28,000 internet customers were offloaded from legacy equipment further enhancing customer experience on our network. Moving Forward Moving forward, UAE will continue its leadership journey through wellstructured strategies that adapt to changes in consumer behaviours, industry dynamics, and intensifying competition. We remain focused on our key strategic pillars that evolve around customer experience excellence, data verticals, ICT and digital services, superb government partnership, strong Emirati brand and engaged staff. 30 Annual Report 31