Emirates Telecommunications Corporation Etisalat

Transcription

1 Emirates Telecommunications Corporation Etisalat Earnings Release Third Quarter th October 2014, Abu Dhabi

2 Financial Highlights for Q Aggregate subscriber base reached 180 million representing net addition of 36 million subscribers during the last 12 months; Consolidated revenues amounted to AED 13.2 billion and increased year over year by 38%; Consolidated EBITDA totaled AED 7.0 billion, resulting in EBITDA margin of 53%; Consolidated net profit after Federal Royalty amounted to AED 2.2 billion and increased year over year by 22%; and Consolidated capital spending increased 45% to AED 1.8 billion, representing 14% of the consolidated revenues Key Developments in Q Etisalat Group is the first in the Middle East to be compliant with GSMA Embedded SIM Specification for Machine-to-Machine (M2M) technology Etisalat Nigeria and IHS signed tower sale & lease back agreement. Etisalat Group acquired additional 20% equity in Zantel, increasing its stake to 85%. Etisalat UAE expanded its partner network for data roaming to 106 countries. Etisalat Group introduced Mobile Connect service across the majority of its global operations enabling mobile identity services to its customers for secured authentication on websites and mobile applications. Statement from Ahmad Abdulkarim Julfar, CEO of Etisalat Group Commenting on the results, Ahmad Abdulkarim Julfar, Chief Executive Officer of Etisalat Group, said: We have achieved another remarkable financial quarter by keeping our focus on delivering innovative products and services throughout our local and international operations. The continued growth in our customer base is an endorsement by consumers that we are meeting and exceeding their expectations. By consolidating our position and differentiating ourselves through innovation, customer experience and digital services, we have continued to grow in our home market, but we are also increasing our foothold and profitability in international markets. We are confident that the projected growth coming from our international operations will continue to grow on track to contribute at least 50-percent of our overall revenues in the coming years. We will continue to expand our service offering throughout our markets in order to diversify our revenue base and cement our regional leadership position. Africa remains an important strategic region for our business; we see incredible opportunity for growth as markets continue to develop and flourish. In the Kingdom of Saudi Arabia, we are entering a transformation phase with Mobily that we are confident will further add to our future growth and the strength of our offering throughout the Kingdom. 2 P a g e

3 Subscribers AFRICA: In the Africa cluster, aggregate subscriber base reached 71.1 million at the end of September 2014 representing a 156% increase year on year mainly due to the consolidation of Maroc Telecom and strong performance of Etisalat Nigeria. Excluding Maroc Telecom, subscriber base was 31.7 million, representing a 14% increase for the year and 1% increase quarter over quarter. Aggregate Subscribers (Mn) Etisalat Group aggregate subscriber base grew to 180 million by the end of September 2014 representing year over year growth of 25% and quarter over quarter decline of 1%. The Group reported net additions of 36 million subscribers during the last 12 months as a result of the consolidation of Maroc Telecom. UAE: In the UAE, the active subscriber base grew to 10.8 million in September 2014 representing year on year growth of 6% mainly attributed to the mobile and elife segments; however it declined by 4% quarter over quarter mainly due to deactivating lines as per My Identity My Number campaign being mandated by the Telecom Regulatory Authority (TRA). The mobile subscriber base grew year on year by 7% to 8.9 million subscribers. Fixed line subscriber segment contracted 5% year on year while elife and broadband segments performing well adding 69 thousand net new subscribers. elife grew by 17% year on year with the total broadband segment growing by 8% year on year. ASIA: In the Asia cluster, the aggregate subscriber base was 34.7 million at the end of September 2014, declining by 5% year on year. This is mainly attributed to Pakistan operations that had its subscriber base contracted due to lower commercial activities as a result of political unrest and implementation of the Biometric Identification System for mobile subscribers. Maroc Telecom subscriber base exceeded 39 million customers at 30 September 2014, representing a year over year growth of 10%. This growth is mainly attributable to international operations subscriber base that grew by 21% while domestic operations in Morocco posted a 1.6% year over year increase in subscriber base. Revenue % % % AED Bn YoY % Etisalat Group s consolidated revenue in the third quarter of 2014 amounted to AED 13.2 billion with growth accelerating by 38% in comparison to the same period last year. This was attributable to the consolidation of Maroc Telecom and the ongoing revenue growth in the UAE operations. Excluding the results of Maroc Telecom, consolidated revenues would be AED 10.2 billion for the quarter with an increase of 6% as compared to the same period last year. 3 P a g e

4 UAE: In the UAE, revenues of AED 6.8 billion for the third quarter of 2014 were 10% higher than the third quarter of 2013 and flat in comparison to second quarter of This was mainly as a result of good performance in data; both fixed and mobile, and growth in voice revenues. MAD grew year on year by 4% mainly attributed to strong performance of international subsidiaries and the return to growth of the operations in Morocco as a result of higher minutes of usage in the mobile segment as well as successful data offers in the fixed-line segment. Our International consolidated operations substantially increased its share in revenue year-onyear by 89% mainly due to the consolidation of Maroc Telecom. As a result, the proportion of revenues generated internationally increased to 48%, up from 35% in the third quarter of EGYPT: In Egypt, revenues for the third quarter of 2014 were AED 1.2 billion, a 7% increase in comparison to the same period of last year while the year on year revenue growth in EGP during the quarter was 10%. Revenue growth was driven by effective promotions that led to growth in the data and voice segments. Operating Expenses % 66% % ASIA: Consolidated revenues reached AED 1.5 billion, representing a decline of 6% in comparison to the same period last year and contributed 11% to Group consolidated revenues. This decline was mainly due to subdued operations in Pakistan and a highly competitive environment in Afghanistan. In Pakistan, while the year on year consolidated revenue in PKR declined during the quarter by 8%, consolidated revenues in reporting currency declined year on year by 6% to AED 1.13 billion. This decline is mainly attributed to the fall in international incoming traffic that was not fully compensated by the strong performance of the fixed and wireless broadband. AFRICA: Africa cluster benefited from the consolidation of Maroc Telecom. Consolidated revenues grew year over year by over 400% to AED 3.7 billion in the third quarter of Excluding results of Maroc Telecom, Africa Cluster revenues would have been AED 661 million, representing a year over year decline of 5% mainly impacted by Ivory Coast and Tanzania operations. Maroc Telecom s consolidated revenues for the third quarter amounted to AED 3.1 billion. Revenues in AED Bn % Revenue Consolidated operating expenses for the third quarter of 2014 was AED 8.0 billion, an increase of 31% from the same quarter of the previous year. This increase was mainly due to the consolidation of the results of Maroc Telecom Group. Excluding the results of Maroc Telecom Group, operating expenses for the third quarter would be AED 6.1 billion, at the same level of the third quarter of the previous year. Key components of operating expenses are: Staff expenses increased 29% to AED 1.6 billion for the third quarter of 2014 as compared to the same period of last year. This increase is due to the consolidation of Maroc Telecom Group and adjusting the salaries to account for inflationary level on some of our operations. As a percentage of revenues staff costs declined year over year by 3 points to 9%. Direct cost of Sales increased year over year by 30% to AED 2.8 billion in the third quarter of However, as a percentage of revenues it declined 4 P a g e

5 by 6 points to 16% of revenues in comparison to the same quarter of last year. Depreciation and Amortization expenses increased by 56% to AED 1.7 billion in the third quarter of As a percentage of revenues, depreciation and amortization expenses increased 2 points to 13% of revenues against last year. Other operating expenses increased year over year by 19% to AED 1.9 billion, while as a percentage of revenues it declined by 2 points to 15% of revenues in the third quarter of 2014 as compared to the same quarter of last year. EBITDA % 47% Group Consolidated EBITDA for the third quarter of 2014 was AED 7.0 billion representing a year over year increase of 51% and a quarter over quarter increase of 19%. Excluding the results of Maroc Telecom, EBITDA for the third quarter would be AED 5.2 billion increasing by 14% year on year and 13% quarter over quarter. This increase is mainly due to positive contribution from UAE and Egypt operations % AED Bn EBITDA Margin revenue trends and continued efforts on cost efficiencies. EBITDA of international consolidated operations increased year over year by 181% to AED 2.7 billion, resulting in a 39% contribution to Group consolidated EBITDA. Excluding Maroc Telecom, EBITDA and EBITDA margin for the third quarter of 2014 would be AED 1.0 billion and 30%, respectively, representing a 2% growth from the same period last year. EGYPT: EBITDA for the third quarter of 2014 was AED 0.5 billion and EBITDA margin of 40%, 3 points higher than the third quarter of This improvement in EBITDA is driven by higher revenue during the quarter and effective cost optimisation measures. ASIA: EBITDA for the third quarter of 2014 declined year over year by 8% to AED 0.4 billion with flat EBITDA margin at 27% in comparison to the same period last year. EBITDA performance was impacted by lower revenue and higher network and staff costs in our operations in Pakistan. AFRICA: EBITDA increased year over year ten-fold to AED 1.8 billion and EBITDA margin increased to 50% in comparison to 18% last year. Excluding Maroc Telecom, EBITDA would decline year over year by 11% to AED 0.1 billion and EBITDA margin would be 17%. Maroc Telecom s consolidated EBITDA for the third quarter amounted to AED 1.7 billion, remained flat in comparison to the same period of last year. Despite the impact of increase in regulatory charges in some international operations, EBITDA margin of Maroc Telecom remained healthy at 57% level attributed to higher revenues in local currency and effective cost control measures. UAE: EBITDA increased year over year by 8% to AED 3.9 billion and EBITDA margin was 57%, 1 point lower than the same period of last year. The increase in EBITDA in absolute terms is attributed to improved 5 P a g e

6 Federal Royalty Telecom, higher interest costs from bond issuance, higher forex losses and lower share of profits from associates Earnings per share (EPS) amounted to 28 fils in the third quarter of 2014, an increase of 22% from the same period last year. Capex Federal Royalty (AED bn) Federal Royalty for the third quarter of 2014 amounted to AED 1.7 billion, representing a year over year decline of 7%. This resulted in an effective royalty rate of 44% on net profit before Federal Royalty in comparison to 50% in the same quarter prior year % 27% 14% Capex Intensity Net Profit & EPS Consolidated capital expenditure increased year over year by 45% to AED 1.8 billion in the third quarter of resulting in a capital intensity ratio of 14%. This increase is due to consolidation of Maroc Telecom as well as to higher capital spending in the UAE and Pakistan operations Net Profit EPS Consolidated net profit after Federal Royalty increased year over year by 22% to AED 2.2 billion in the third quarter of This increase is positively impacted by the consolidation of Maroc Telecom and higher levels of EBITDA. On a quarter over quarter basis; net profit was impacted by higher financing costs associated with consolidation of Maroc UAE: Capital expenditure in the third quarter was committed to modernization and expansion of fiber and mobile networks. Capital expenditures during the quarter amounted to AED 0.7 billion, a 65% increase in comparison to the same period last year. Capital intensity ratio was 10%, 3 points higher than the same quarter of the prior year and also 3 points higher as compared to the second quarter of 2014 Capital expenditures in consolidated international operations in the third quarter of 2014 increased by 38% to AED 1.2 billion compared to the same period last year and represents 63% of total Group capital expenditure. 6 P a g e

7 EGYPT: Capital expenditures for the period decreased by 22% year over year to AED 0.3 billion resulting in a capital intensity ratio of 24%. Capital spending focused on capacity enhancement and 3G coverage expansion. ASIA: Capital expenditure for the third quarter of 2014 accelerated 27% to AED 0.4 billion resulting in a capital intensity ratio of 26%. This is mainly driven by Pakistan operations and particularly for 3G and fixed broadband networks rollout. AFRICA: Capital expenditure for the third quarter of 2014 amounted to AED 0.5 billion resulting in a capital intensity ratio of 13%. Atlantique Telecom (AED 1.6 billion) Etisalat Misr (AED 1.5 billion) PTCL Group (AED 1.3 billion) Etisalat Afghanistan (AED 0.7 billion) Zantel (AED 0.3 billion) Etisalat Sri Lanka (AED 0.3 billion) About 80% of the debt balance is of long-term maturity that is due beyond Consolidated cash balance amounted to AED 16 billion as of 30 September 2014 leading to a net debt position of AED 8 billion. Currency mix for external borrowings is 64% in Euros, 25% in US Dollars,6% in Egyptian Pounds,, and 5% in various currencies. Debt Debt (AED bn) Total consolidated debt amounted to AED 24 billion as of 30 September 2014, as compared to AED 6.1 billion as at 30 September 2013, an increase of AED 18 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.. The rest of the existing debt is related to our international operations. Consolidated debt breakdown by operations as of 30 September 2014 is as following: Etisalat Group (AED 14.6 billion) Maroc Telecom (AED 3.8 billion) 7 P a g e

8 Profit & Loss Summary (AED m) Q3 13 Q2 14 Q3 14 QoQ YoY Revenue 9,594 12,579 13,244 +5% +38% EBITDA 4,617 5,866 6, % +51% EBITDA Margin 48% 47% 53% +6pp +5pp Federal Royalty 1,844 1,778 1,720-3% -7% Net Profit 1,825 2,507 2,219-11% +22% Net Profit Margin 19% 20% 17% -3pp -2pp Balance Sheet Summary (AED m) Dec 13 Sept 14 Cash & Cash Equivalents Total Assets 15,450 15,854 85, ,613 Total Debt 5,872 23,956 Net Cash / (Debt) Total Equity 9,579 (8,102) 49,593 56,770 Cash Flow Summary (AED m) 9M 13 9M 14 Operating 7,335 10,783 Investing (3,166) (21,454) Financing (6,275) 10,453 Net change in cash (2,107) (219) Effect of FX rate changes Ending cash balance 11,939 15,854 8 P a g e

9 Foreign Exchange Rates Average rates Closing rates Q3 13 Q3 14 YOY Q3 13 Q3 14 YOY EGP - Egyptian Pounds % % SAR - Saudi Riyals % % CFA - Central African Francs % % TZS - Tanzanian Shillings % % NGR - Nigerian Naira % % PKR - Pakistani Rupees % % AFA - Afghanistan Afghani % % LKR Sri Lankan Rupees % % SDG - Sudanese Pounds % % MAD - Moroccan Dirham % % Reconciliation of non-ifrs Financial Measurements We believe that EBITDA is a measurement commonly used by companies, analysts and investors in the telecommunications industry, which enhances the understanding of our cash generation ability and liquidity position, and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool and, accordingly, we believe that the presentation of EBITDA provides useful and relevant information to analysts and investors. Our EBITDA definition includes revenue, staff costs, direct cost of sales, regulatory expenses, operating lease rentals, repairs and maintenance, general financial expenses, and other operating expenses. EBITDA is not a measure of financial performance under IFRS, and should not be construed as a substitute for net earnings (loss) as a measure of performance or cash flow from operations as a measure of liquidity. The following table provides a reconciliation of EBITDA, which is a non-ifrs financial measurement, to Operating Profit before Federal Royalty, which we believe is the most directly comparable financial measurement calculated and presented in accordance with IFRS. (AED m) Q3 13 Q2 14 Q3 14 EBITDA 4,617 5,866 6,977 Depreciation & Amortization (1,111) (1,576) (1,738) Exchange Gain/ (Loss) (60) Share of Associates and JV s results (12) Impairment and other losses - (776) 0 Operating Profit before Federal Royalty 3,947 4,024 5,168 9 P a g e

10 Disclaimer Emirates Telecommunications Corporation and its subsidiaries ( Etisalat or the Company ) have prepared this presentation ( Presentation ) in good faith, however, no warranty or representation, express or implied is made as to the adequacy, correctness, completeness or accuracy of any numbers, statements, opinions or estimates, or other information contained in this Presentation. The information contained in this Presentation is an overview, and should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. Where this Presentation contains summaries of documents, those summaries should not be relied upon and the actual documentation must be referred to for its full effect. This Presentation includes certain forward-looking statements. Such forward looking statements are not guarantees of future performance and involve risks of uncertainties. Actual results may differ materially from these forward looking statements. About Etisalat Etisalat is an international, blue-chip organisation with operations in 19 countries across the Middle East, Africa and Asia. It is one of the leading telecom operators with one of the largest market capitalization among Middle East, African and Asian telcos. It is a highly rated telecom company with ratings from Standard & Poor s, Moody s and Fitch (Aa3/AA-/A+). Etisalat s shareholding structure consists of 60% held by the Emirates Investment Authority and 40% free float. Etisalat (Ticker: Etisalat) is quoted on the Abu Dhabi Stock Exchange (ADX). Investors: Investor Relations ir@etisalat.ae Website: 10 P a g e