May be Sally we will take two minutes before for the usual legal disclaimer that we state before the starting of the presentation.

Transcription

1 Third Quarter 2011 Earnings Release Conference call Sponsored by EFG Hermes Mobinil Q Results Cairo: 26 th October 2011 Time: Cairo Time. Marise Ananian Good morning, good afternoon everyone this is Marise Ananian from EFG Hermes and I would like to welcome you all to Mobinil 3Q 2011 results conference call that we re very happy to hosting today. From Mobinil we have with us Mr Alex Shalaby the company s chairman and CEO, Mr the company s CFO and for the first time we have the pleasure to have Mr Yves Gauthier the company s future CEO who will be on silent mode only. We also have the Mobinil team from the Cairo office with us. The call with start with a quick presentation and will be followed by Q and A session. Now with no further delay I would like to hand back the call to Mobinil, thank you very much. May be Sally we will take two minutes before for the usual legal disclaimer that we state before the starting of the presentation. Mohamed Tolba Ok first all I m going to read the safe harbour statement. That is remarks that we make about future expectations, plans and prospects for the company constitute a forward looking statement. Such statements are not actual facts and include expressions about managements opinions and the results of its strategies. Although Mobinil believes its expectations are based on reasonable assumptions these forward looking statements are subject to numerous risks and uncertainties and actual figures may differ materially from those indicated by those forward looking statements as a result of various important factors. Now the call will be handed over to Mr Shalaby. Alex Shalaby Good day to you all, I m Alex Shalaby the chairman but for a short period the CEO until my friend Yves Gauthier who as you heard is on the call but on a silent mode just to get is feedback. Yves was with us in Cairo and met with the management team and spent a week a few days went back to we welcome Yves but you have a chance to hear more from him on the next call god willing. I ll just do a very brief introduction, you have the presentation which has a lot of detail and Kais will be taking us through this presentation. I m pleased to report kind of a silver lining in this quarter s results some improved commercial results especially the previous quarter we ve added a million net subscribers to our network and managed to keep our revenue pretty much flat compared to the last quarter. Given the very tough conditions we re operating under in Egypt this is not a big surprise, there are a whole host of reasons for some of the results that will be discussed as we move on and I m sure through your Q and A you ll be asking and listening to in more detail the conditions that have caused some of the results that we have announced. I think I ll stop here and I ll be happy to come back in the Q and A session but I ll turn it over to Kais and the presentation that has been distributed through our site, thank you.

2 2 Good morning, good afternoon everyone. I will be using the investor presentation that was put on the company site and distributed to each of you. It was a v2 that was sent to be considering this one for the call. In the slide number three we're giving a snapshot in the general environment in the country, the sector situation as well as the company so from a country perspective we re still even if we re not always on the screen of the TV we re still in a unstable I would say general environment, you have been following several protests and certain social movements. Security situation is more or less at the same level as we were in Q2, definitely we re not yet back to what I would call a normal situation as the one before the first quarter. The tourism despite the fact that the Q3 is usually a high quarter for the tourism activity we are still at quite low levels and we re seeing very small signs of recovery but far from the usual level and we will see this later when we get to the figures of the roaming revenues. From a sector perspective on a high level basis the Q3 has been extremely dynamic from a commercial activity and this says I would say usual because we have two main events we have the summer period and we have as well the Ramadan that has been moving over the years, you know it s moving 11 days per year so this year it was in the month of August from the 1st to the 30th, there were many offers on the market both on data broadband as well as on mobile and I will get back to the details. We have been in the beginning of this quarter subject to the events that many of you know and Mobinil was in a certain manner attacked in August and July and from September we have been seeing stronger attenuation of this phenomena and I think we have been extremely active to absorb any elements related to this adverse market conditions will come later on. And as you know and as Alex announced we have a reshuffle, well a change in the top management of the company. As of September 21st Yves Gauthier was announced to be the new chief executive officer of the company and he is as was said before present with us during this call of course on a silent mode as he is getting more and more familiar with the company the various business issues. Next slide number four, number four and five will be going back and forth between the two slides. You see here mainly the major components of the commercial activity and the different offers that Mobinil put in the market during this quarter. We have several promotions focused on data through either pushing the MBB offers or putting in place competitions with the quite significant prices to incentivise people and to advise people to buy into this project and to stimulate as well their usage. Ramadan has been as it is the case in every year extremely dynamic. We put in place the El Kol 14 offer which provides a voice offer at 14 price per minute gross net in addition to a bundled bucket of on net minutes that s where what was specifically designed to be used in to a certain time where we believe it is wise to absorb the level of traffic and we have as well launched something called Ramadan offer that provides a bucket of on net minutes during the fasting hours. There s also as well quite well designed you know the two I would say use the network capacity at a time where the use is not necessarily high. We continued our activity in the market by doing what we call the happy Friday, you know it s a concept we have launched a few months ago and it is quite successful and its various specific offers or promotions or trial or products that are made available to clients on a one day basis with specific objectives either of retention acquisition or simulation or trial of new products and services and we as well launched I think it was an important element as well, we launched the CSR campaign called toward a better life which give a promise of employing 200,000 of hands we call it this way of Egyptian of a certain period of time and I think this has been a quite well received from the market mainly in the

3 current situation of the country where there s elements of social activity are extremely valuable. 3 Slide five as I said is giving really a little bit more of colour to the sales of what I was describing so I will move directly to slide six to talk a little bit about figures and so in the third quarter we have registered a level of revenues for Mobinil of 2,490 MEGP Egyptian pounds which was slightly below the level of last quarter and minus 8% below the level of first quarter 2010, I will come later to detail what is driving this, we can even do this now as we re getting to the charts. I think the main element behind this is that there were a certain challenge actually and this is a reality of nature due to Ramadan because the more the month of Ramadan gets into the summer the more it eats out of the vacation and this created a certain, and we know that during Ramadan the usage and the revenues are lower than the other month so this has created a certain pressure on the revenues and there was also a certain level of output illusion that was mainly linked to the various commercial initiative that were launched in the market and force fed the subscriber base. For LDN we re continuing seeing an important revenue growth supporting the success of the broadband and the data services in the market. We have registered a 17.9% growth year over year to move the revenues from 95 million to 112 million EGP and we have also registered a slight improvement compared to the quarter before. As far as the EBITDA is concerned I think the initiative, the various commercial initiatives that were taken during this period and I think it was extremely important for the company by the way to go into this road in the environment and the adverse market conditions that we live it was extremely important to protect the company s position. You remember very well that during Q2 I had indicated that even if we registered a low level of net adds the revenues increase much more than the competition, here we as the management we felt it was more important in the situation of the summer to push towards the protection of the days in order to again come back or drive the value because if you lose on the volume you lose on the long term on the value as well. So that had led to a certain level of pressure on the EBITDA during this quarter, we have registered the level of 859 million which is below the figures of the third quarter of 2010 minus 20.9% and minus 9.1% quarter over quarter to support the commercial activity. As far as LDN is concerned the level of course the figures are much smaller, the EBITDA level of the Q3 was at the level of 4 million to be compared to 6 million registered last year and 8 million registered in the second quarter of 2011 and this is mainly due to the removal of a certain connectivity discount from Telecom Egypt with one year retroactive effect that in a certain manner the EBITDA of this quarter. From a Capex perspective we have continued more or less on the same trend than the one of Q2. You know that we have been quite late in deployment during the first quarter for the reasons you know and we have accelerated in Q2, we continues acceleration in Q3 to catch part of the delay registered in Q1 and we had a 476 million EGP of Capex which is 10.9% higher than the same quarter of last year and 20% higher than the last quarter. We ve been able also to achieve and I think this is good news too, better working capital management the cash flow level of 456 million during the Q3 which is to be compared to 168 for the same quarter of last year and a negative free cash flow for the second quarter that was driven by an uncertain and delays as you remember of payment that moved from the first quarter to the second quarter as a result of the revolution. If we move to slide seven, a snapshot of what is driving these financial figures. You see in the first chart on the left the evolution of the base as Alex indicated in the beginning we ve been able to acquire more than one million net adds and I think was extremely

4 important for the company during the environment that we lived in during this period of time and this level is as you see substantially higher than what was registered for Q1 and Q2, of course this good commercial results that we believe are important on the medium and long term, has a certain cost on the short term, we believe that we manage the ARPU dilution which is at 25.8 lower than the Q2 but remains higher than the Q1 and we believe that the volume in a certain manner absorbed a certain part of the dilution of the ARPU leading to the level of revenues to be more or less at the same level of last quarter. If we move to slide eight we have more or less the financial figures expressed in a more visual chart as far as the revenue and the EBITDA is concerned and I will say two words about the next profit. So on revenues it think we commented the various elements as I describe it here as far as the EBITDA so take the opportunity here to focus more on the net result. That was the subject of a long discussion and a series of Q and A during the last quarter. We tried really here to show the net results for the various quarters before and after the new tax regime, so you will see that if I put aside the impact of the new tax regime we would have got a net result moving from 54 in Q1 to 92 in Q2 to 49 in Q3. When I add on it the new tax regime there is a one shot hit that described in Q2 of 190 million in which there is 172 one shot and 18 which is the applicability of the 5% additional tax on the net result and the 18 during this quarter is the equivalent of the 18 during this quarter is the 8 million of course the one shot hit is behind that so we have registered as Mobinil a net result of 42 million compared to the negative 98 million and as I said before I commented on the free cash flow. Next slide nine, we provide here the evolution of the internet business of LDN with a quite an important overall growth. If we look over the year we have a base today that has been increasing by 3,000 subscribers from 238 to 241 and revenues that increase slightly from 111 last quarter to 112. There s figures reflect also an important level of growth when we compare of course year over year we had 12% in terms of revenue growth and we are as well slightly higher than 10% from an evolution of the base perspective. The ARPU of the DSL is in a certain manner as you see in the chart fluctuating between, if I put aside the very specific and exceptional period which is Q1 we see now fluctuating between 103 and 110 depending on the dynamics of the market and the market activities. Next slide which is slide 10. We re giving a little bit more information for the outlook is concerned. We re starting now we re starting to evaluate more or less the whole year 2011 even if I believe that there is still unstained or instability in the market but we have announced today that the year 2011 was quite exceptional on many fronts. We have been seeing a revolution, we have been seeing a certain boycott and attack by the competition, we have been seeing a low tourism activity and even if the telecommunications is a resilient business it cannot avoid not being affected by this element. We have seen as well a significant increase in the general competitive intensity in the market and this is valid I think for all the players, for all the mobile players in the Egyptian market, so I think we ve deployed substantial effort in order to contain it, absolve the erosion of revenues and we believe today that the landing point or as an outlook there would be a decline or an erosion of the revenues for 2011 compared to 2010 that are quite similar to the erosion of the year to day, so we re be talking in a round of 4-6% according to the evolution of the market during the next couple of months. As far as the Capex, you know I have confirmed last time the Capex for the year until having a better visibility. I think today taking into account the evolution of the traffic we believe that we can revise down the level of Capex while maintaining of course the same level of quality of the network, we can revise it this down we will be something in the range of 5-10% below the level of last year and this will allow of course to absorb part from a free cash flow perspective to absorb part of the erosion of the revenues and the 4

5 margins as well. So this is in a nutshell really the high level view of the result of the third quarter. You have much more detail in the various documents that were distributed and I will open the session for the Q and A so please feel free to ask any questions you may have. Operator We do already have a question and it comes from the line of Delilah, please go ahead your line s now live. Delilah Heakal Good morning, good afternoon everyone thank you for the call this is Delilah from Pharos securities. I have a few questions, the first is actually related to the development of your subscriber base, you may have partially answered this question when you said that you had to focus on volume once again temporary during the quarter because of what s happened but I noticed your post-paid subscriber base declined. Relatively also to the subscriber base you did add a million prepaid subscribers but the access to subscriber base declined from around 92% in Q2 to around 90% in Q3 so does that mean we re at risk of seeing may be disconnections resulting from the boycott coming into effect during Q4? I think on the development of the subscriber base what you said is completely right. We took a certain orientation during Q3 in order to protect the base and the market share. Of course your comment is valid on the development of the post-paid, the main reason is that in the work that we re engaging towards value we are focussing on a lot of segmenting and analysing each piece of base and we have a certain what I would say clean-up of certain parts of the subscriber base which was related to post-paid and which has been of course it explains the difference you were imagining and you see it by the way when you look at the output of the post-paid moving from a level of 164 in Q to 168 in Q As far as your second question is concerned, I think you are right as well there is a certain level of I would say reduction of the activity of the number of active subscribers that was related in to the events and the boycott that you ve seen in Q3 that are not yet translated in terms of churn but had a certain impact on the active base that increased by 11 which is lower than the increase of total base. Definitely this will be seen in the fourth quarter even if we believe that we have deployed substantial effort to absorb as much as we can from any potential future loss of subscribers by building an important amount of stock. Delilah Heakal But do you expect that translation into churn to be significant or should we say the majority of the impact was already hit in Q3? No I do not expect it to be significant but what I would like to say the level of churn of the market generally has increase substantially. 5

6 Delilah Heakal 6 No, was going to follow up with another question if possible. Please. Delilah Heakal On cost ability I have two questions. The effective tax rate appears to be exceptionally high on both stand alone and consolidated levels during the quarter so if there are no one off impacts like we saw in Q2 why the effective tax rate so high? And then my second question is more a general and related to year end on the outlook. Given that we have an environment of declining earnings can you provide us with any thoughts on dividend distributions for both shareholders and employees for the year and expectations or thoughts on what we can expect for 2011? On the first question if I look at, I think it s simple to look at it from only Mobinil s side because the consolidated picture contains other elements that I will be commenting as well on the consolidated picture but to explain the concept. You are right the consolidated income before tax is 81 million and after tax it is at 42 million. The main difference is related to a certain provisions that are deducted for accounted purposes and are not deducted because they are not considered by the, they do not qualify as a deductible cost by the tax authorities, so these provisions have not been deducted when we calculate the tax and this explains most of the difference between the 81 and the 42. These kind of provisions are quite, there is a substantial part I would say which is recurrent, I would say there is like more than two thirds of these provisions that are recurrent. Usually you do not see it, you have not seen them in the previous year because the level of the net result was important and when you calculate the tax rate it is not at all, it is completely diluted. Here of course when we are then here they have a higher wage so you see them in the effective tax rate. As far the dividend, distribution and employees profit share of course the dividend decision is a general assembly decision based on the recommendation of the board which bases its recommendation on of course the proposal made by the management. We usually look at many factors including the net result of the year and the liquidity and the cash situation and all the various elements. It would be unlikely if we are at the thin level of results or negative net results to proceed with a recommendation or suggestion from a management perspective but I will not go from now into this we will consider this at the end of the year and it will be discussed between the management, then the board and then the shareholders. As far as the employees are concerned, as you know there is a profit share of 10% that was historically used to fund the valuable part related to the objectives of, operational objectives of the employee. Definitely in a situation where the net result is not enough to fund this we expect to fund it from the P and L and this may have an impact on the EBITDA and the net result of the fourth quarter of the year which will be around, if I give you a quantification, a little bit higher than two points of March.

7 Delilah Heakal 7 Ok this is going to be a one off or is this going to be, it sounds similar to the IFR s statement, is that how you re going account for it going forward then? You are absolutely right, from a, if IFR doesn t make a difference of funding from the net result and funding from the P and L it is taken in the P and L, then I think in the future there s elements will be in the P and L if there is no profit share otherwise it s going to be a mix between P and L and profit share fund. Delilah Heakal Ok thank you very much. Operator Ok thank you for your question, the next question comes from the line of San Dhillion, your line s now live please go ahead. San Dhillion Hi guys San Dhillion here from Barclays Capital, a couple of questions. The first if market conditions stay as they are would your strategy continue to be one of market share, preservation of your EBITDA margin and secondly on the free cash flow which was quite high in the quarter can we expect the working capital movements to remain positive going forward or are we going to see a potential reversal of the gain in this quarter? Thanks. Ok I think that what happened in, you said if market conditions continue as they were in Q3 I have to recognise that the boycott situation is quite exceptional and we re seeing an important attenuation since the month of September. So I would say from a strategic orientation we have insisted a lot during the Q2 on the value. Strategy you know we work a lot on get, grow and keep and we move between the various levels according to the market situation. In Q2 we believe that it was important for us to focus on value. We did this in Q3 we have lived into a specific situation that requires from us a certain change of this orientation because we believe that even if this change is a short term pain financially it is a long term gain and we did this definitely we hope that such specific event that took place in Q3 and we have already noted it are not going to continue or not going to reproduce again and we will try to remove back to the same strategy that was used in Q2 which is more towards value and protection of the margins so I would say exceptional circumstances requires exceptional actions. As far as the cash flow situation is concerned I believe with in deploying as well, you know when we see a pressure on revenues and a pressure on margins imposed by specific environments we look of course at cash flow protection in an intelligent manner, this is why I think we revised down the Capex projections for the end of the year and this is why I think we worked as well on the working capital situation and we will continue working on this. Now it is a little bit difficult to give you a guidance on the working capital because we don t guide on it first and there are certain elements that are related to phasing and elements at the end of the year but what I can say is that we have a focus from a management perspective to work out that elements and optimise out.

8 San Dhillion 8 Ok cheers guys thank you. Operator Thank you, your next question comes from the line of Mark Hammoud, your line s now open please go ahead. Mark Hammoud Good evening, I ve got two questions. One you mentioned for LDN in your earnings release the removal of connectivity discount from Telecom Egypt, can you clarify a bit or explain a bit more on that and you also mentioned previously on one of the questions that was asked that you cleaning out the post paid subscribers, why would you do that, I mean they re supposed to be let s say more committed and more are higher value customers so why would you clean the post paid subscribers? Ok, the first question related to LDN, you know that any ISP business is in the countries extremely related to certain, it s based on a certain regulatory conditions and one of these conditions was for LDN as it is the case for other players benefiting from a certain what I would call discount per sub, discount on was on all the infrastructure that they re using from Telecom Egypt you know that they run these lines, they own the copper lines so there is a certain discount per sub that was renewed on a yearly basis in order to in a certain manner incentivise the ISP in the country. I think the event that the country led certain government entities in this transition period to reconsider this discount, it is something that we are supporting our subsidiary to reactivate but we prefer to adopt a conservative approach taking it out of the P and L but clearly we continue seeking obtaining this because we believe it is important for the ISP and for the internet business in the country. As far as the second question related to the Mark Hammoud Just a follow up question on that, can we know what was the discount percept in absolute number? Unfortunately we do not disclose this information but you can obtain it by just making the difference between the, may be the different elements before the quarter and this quarter but we don t disclose this information. On the second question which your comment is extremely valid as far as the fact that post paid subscribers are high value customers however we have a certain number of what they call dormant seen that they do not generate any ARPU that has been cleaned up because we consider that data specific part of the subscribers that have no value. Mark Hammoud Alright, are you witnessing some of the post paid subscribers not paying on time their bills and as a result getting disconnected?

9 9 Subscribers paying on time the bill and getting disconnected? Mark Hammoud Yes, not on time. Oh not on time, no we have a completely, we have a whole process before disconnecting anyone which may take a long period of time. we of course will not get into the details but usually the major steps is that we call the client at a certain point in time, we deactivate outgoing calls but we keep incoming calls because this is revenue for the company and then we will wait for a certain period of time trying to collect and in a bad debt really after a long period of time so we do not leave customers or make them leaving very quickly at all. Mark Hammoud Alright thank you. Operator Thank you for your question, your next question comes from the line of, please go ahead your line s now live. Thank you very much. Two short ones if that s ok? Firstly in terms of your share of gross connections or gross subscribers added on the mobile side I just wondered if you could may be give us some indication what you think your share of the market has been, I suppose for the quarter as a whole but also I suppose more importantly in terms of your exit run rate in September and where you think that share is? And the second question is just in terms of pricing, obviously you've got a slide there in your presentation with an awful lot of offers and activities that you re putting to the market in Q3. I just wonder if you can help us just simplify sort of cut to the chase a little bit and give some indication as to how do we look in terms of pricing trends as we go into the fourth quarter, are there offers out there in the market now which are on a revenue per minute basis significantly lower than where we were a) a year ago and b) I guess three months ago, and are those offers likely to stay in the market in Q4 and indeed are they likely to stay in the market going beyond Q4? Thanks. Ok thank you. Look the sale of gross adds is an extremely difficult questions in this market where it is very difficult to obtain reliable information on the way the other operator disclose their figures. We know that we are the operator that has the highest level of disclosure Vodafone & Etisalat are not listed so we have very small access to the information. The figures that are published by the regulator are unfortunately not reliable because they are completely in contradiction for example with the figures that the Etisalat was publishing in the Q when they used to disclose their Egyptian subsidiary figures where they publish it twice, the figure which was on the NTRA site and even if we can have a certain reliable level of comparison with Vodafone because we re belonging

10 into too large international company that have certain rules in terms of counting the number of subscribers, we feel that this rule is not followed by all the players in the market, so difficulty what we see because we see also players and subscribers when we look at our network and at the other networks we usually seek to obtain at least what I would call a fair market share of gross adds i.e. around or higher than one third of the gross adds. I hope that this answers, may be not 100% but to a certain extent your first question? May be I can make it just come back make it slightly easier, do you think the share is better at the end of the quarter than it was at the beginning given what you have seen in terms of the boycott? Yes definitely. I mean basically it sounds as though most of the million subscribers that you ve added in the quarter were effectively added pretty much in September I guess? No they were added mainly in August and September more or less by the way. Ok thank you. As far as the pricing is concerned, of course pricing is lower when we compare that the levels of last year however we do not see until today any significant price illusion between the current situation and the situation of the market today. I cannot say anything about the end of the quarter its depending on the market dynamics but today in the market we re not at the lower level in terms of [inaudible] compared to the Q3. Sorry just to be clear on that, right the rate at which you have, the average rate reflected in Q3 is broadly similar to what you ve seen as we start Q4 effectively, in terms of average pricing? Correct. Ok thank you. 10

11 Operator 11 Ok thank you for your question, your next question comes from the line of please go ahead your line is now live. Hello, yes since first quarter the cost of services increase like 50 million Egyptian pounds when compared over to the previous quarter so I just to know what exactly are the competence of this cost of service and why has it been increasing so much when you have been given offers? You are saying to the cost of sales? Excuse me are you referring to the cost of sales? Yes I m referring to the cost of sales during Q3. What are the major split of cost? Ok the difference between the 672 and the 630 is around 42 million, there is one part which is related to LDN, in Q if you remember there is only one month accounted for LDN because it was acquired in the beginning of September, so out of the quarter I m having the, so for the quarter I m having one month of LDN and for the quarter of this year I am having full quarter LDN and the other part is mainly related to handsets sales that were, that increased between Q and this quarter to support the business activities. And the split is more or less50/50 by the way. Ok fine, and so you mean to say there is no impact from the increased interconnection costs? No on the interconnection it is a function of the traffic and we didn t, we re still applying the same old regime. I will not come back to the dispute because with Telecom Egypt because nothing happened and since that time so we re continuing to apply the same rate. There is a small part related actually to the traffic but I think the most important elements are related to this items I guess. Ok so that means what is a view about the other companies that have been able to increase have seen such a strong net adds because now that your interconnection rates are quite low, your interconnection costs are low, so do you see a strong increase in net adds for Vodafone Egypt & Etisalat or I mean you are exceptionally better than them.

12 12 Why you are saying that the interconnection rate they didn t move at all between the previous quarters and this quarter, we re still accounting on the base of the terms and conditions of the inter connection agreement so I would, I mean not getting qualified by law, anyway to answer your question, it is extremely difficult to, you know we have a very limited amount of information on their P and L and their cost structure they do not disclose those elements so it is extremely difficult to comment on their positioning. Ok, yes what is your view on the termination rates now it looks like that it is getting revenue market share and it has got benefit of a symmetry termination rates, so have you discussed this with the regulator and is there any light on this? On this subject may be a one, you know this is we have a twice year inter connection agreement with Telecom Egypt that has been renewed in 2008, that is valid until 2013, at a certain point in time Telecom Egypt came with a new termination rate and we, and this decision was a completely unilateral decision, so we continued accounting on the same termination rate and the one that in our agreement and those figures that you re seeing here now are built on the termination rate where as we look at, sorry? So they re not going to change until the year 2013 you mean? The as per our contract is the contract has, as per our contract they are not expected to change. Now there is a dispute, this is a matter that is quite the investor community and the analyst community is quite familiar with this matter because it was disclosed several times. It is subject to a certain dispute we believe and we still believe that the position of the company is extremely solid and that the agreement in place are effective and they do not have any reason to change and we believe that this rate should apply until 2013 yes. Ok, just a bit of clarity on the tax I mean you said that the substantial part of the tax right now is recurrent, am I right or did I hear wrong? If I go back to the presentation in slide number eight you will see the recurrent part it was 18 million last quarter and it is around 8 million this quarter and that is the difference between applying 25% instead of 20% if you want. The one shot element that has been registered in Q2 is defined into this chart and it is equal approximately to 172 million Egyptian pounds. Ok, and also going forward what is the percept tax going to be, I mean is there

13 13 Going forward I will be applying 25% instead of 20% so in the next quarter I will be reporting the net result, I will continue may be to report before the new tax regime and after the new tax regime to show you the difference but after this I will just apply the 25%. Ok and one more question, on the regulations are there any updates on the international gate way licence to Mobinil? Look it s a long subject that is a matter of discussion between us and the regulator. And the Ministry as well. And the Ministry as well, there are ups and downs, it s clear that the current situation doesn t help taking quick and important decision so we seek to obtain this but not any price of course because we believe it is beneficial to the company if we have advance discussions we will of course inform of those elements I don t know if Alex if you want to? Alex Shalaby We are exchanging different approaches through this, we've made it very clear to the minister and to the regulator this 100 pounds per subscriber which means that licence will go for 3 billion plus to us is not an acceptable proposition so we re trying to reach some other more equitable grounds and various sectors to this but as Kais has indicated its very difficult to get some major decisions taken given the temporary nature of the current government. Ok and a last question what about the release of the spectrum which is supposed to happen at the end of the year, are there any updates on that? Alex Shalaby Sorry could you say that again? We did not have any information today on, let me say it is unlikely that such release will happen in the next couple of months and even I would push it that in the short term what we do is that we are ready to have this spectrum if it is made available to us, it is not a need to have in order to provide high quality network, it is a must to have, we re ready from liquidity perspective to have it now if they came within the next six months we will proceed, if they don t they don t and it is a subject that has been dragging over time now for a couple of years so it is completely outside of the hands of the management as far as this matter is concerned.

14 14 Ok but if there s any sort of capacity crunch or a degree from the quality for the calls that he makes because of this spectrum not being released is it fine? As I said it before we consider it as not at all a need to have but it is a must to have. We are running perfectly operations with the highest quality standards and by the way we ve been designed, designated by the NTRA in its last release as the highest quality from a network perspective on a certain number of criteria in the country so this is something that we need but if it is available we ll take it. What if data is going to pick up aggressively are you well equipped to handle that sort of capacity crunch? It is more related to the investment infrastructure rather than, and we can handle the increase of the data through the investment in the infrastructure, of course if we can have a higher spectrum it s going to optimise in a certain way the Capex deployment or make the Capex deployment more efficient and at the lower cost but if it is not the case we can run with the quantity of spectrum that we have today without this additional spectrum. Now of course there will be a question at a certain point in time of a 4G and LTE but this is a completely different subject with different amounts of spectrum and with different infrastructure and this is something that is in discussion in Europe so you may expect a certain amount of time to come to these matters in the Egyptian market. Ok that was very helpful thanks. Operator Thank you for your question, the next question comes from the line of, please go ahead your line is live. Sorry to keep you on the line really just a follow up on my question on pricing from earlier. Just in terms of the promotional offers that were out in the market during the Ramadan period and I guess may have sort of extended further out to the end of Q3 are any of those still in the market at the moment and if so are they likely to be rolled over or turned into some standard equivalent offer or will we see some of the more punchy offers kind of withdrawn from the market during the fourth quarter? Well if I look at the slide in page five of course the what is called new new baladna plan is still up and running, its original offer that is quite successful in the region and we believe this is a moves also to create a higher penetration in less penetrated areas than the big cities like Cairo & Alexandria the second one which is the new El Kol 14 is a tariff plan it is

15 still up and running, of course the Ramadan offer has been completely closed because it was related to a promotional item in connection with Ramadan. Those are really the three big blocks that shows a substantial part of the base. You don t anticipate any kind of similar promotions during Eid al-adha? We usually do not, I mean Ramadan is a long period of time it s a 30 day period of time and there is a certain market activity, Eid al-adha is a few days, one week even for people who extend their vacation period so it is not normal or usual in the market to go with specific I would call tariff plan or big offers so I do not expect a material element related to this. Ok thank you. Operator Thank you for your question there are no further questions waiting. Ok thank you very much, thank you for your presence and we ll see you next quarter. [END OF CALL] 15