Engaging business and people Annual Report
Reports and Consolidated Financial Statements for the year ended 31 December Contents 2 Chairman s Statement 4 Board of Directors and Executive Committee 6 Group Highlights 8 Chief Executive Officer s Statement 10 Management Review 12 UAE Highlights 14 Market View 24 Network 28 Etisalat Services Holding 31 Human capital 32 Corporate Social Responsibility 34 Consolidated Financial Statements 35 Independent Auditors Report to the Shareholders 36 Consolidated Income Statement 37 Consolidated Statement of Comprehensive Income 38 Consolidated Statement of Financial Position 39 Consolidated Statement of Changes in Equity 40 Consolidated Statement of Cash Flows 41 Notes to the Consolidated Financial Statements 74 Notice of Meeting Head Office: Etisalat Building Intersection of Zayed The 1st Street and Sheikh Rashid Bin Saeed Al Maktoum Street P.O. Box 3838 Abu Dhabi, UAE Telephone: +971 2 6283333 Fax: +971 2 6317000 Telex: 22135 ETCHO EM etisalat.ae Regional Offices: Abu Dhabi, Dubai, Northern Emirates
Engaging business and people 135 million Aggregate Subscribers 0.60 AED Dividends 5.8 AED billion CAPEX 31.9 AED billion Revenue 0.97 AED EPS 14.6 AED billion Operating Profit before Federal Royalty Enabling Reach 1
Chairman s Statement Dear Shareholders, It is time once again to present the annual performance of Emirates Telecommunications Corporation (Etisalat), for the year ended December 31,. 2
Engaging business and people This year was a transitional year for the Corporation, in which we faced several challenges that have prepared us to operate in a new environment under diverse circumstances and a shift in global conditions. These changes, collectively with a maturing market and increased competition, have compelled Etisalat to take strategic measures to protect its leadership position, diversify its revenue base, and effectively optimise costs in order to continue enhancing the returns to you, our shareholders. The following is an overview of the main operational and financial indicators for the year : Aggregate subscribers, including subsidiaries and associates, grew annually by 24% to reach 135 million by December Revenues increased by 2% to reach AED 31.9 billion Net income decreased 14% to AED 7.6 billion corresponding to AED 97 fils per share Net cash position of AED 3.9 billon composed of AED 10.3 billion in cash and AED 6.4 billion in borrowings Capital spending for the year was AED 5.8 billion Our main success story for the year was unequivocally the growth achieved by our international operations. This year Etisalat has witnessed positive growth in new customer acquisition, revenues, and earnings. In Egypt, for example, Etisalat Misr celebrated its 15 million customer milestone, and the subsidiary reached breakeven point after only three years of operations. Among consolidated operations where we exercise management control, the customer base has increased by 30% while revenues increased 46%. It is notable that our international operations today make up 23% of the Group s top-line results. Etisalat s international success story continued with Mobily, our associate company in the Kingdom of Saudi Arabia, contributing healthy earnings following another year of outstanding performance. The growth was offset though by the revenue and earnings decline in our flagship UAE operation which is natural and expected as our home market has entered an advanced stage of saturation and maturity. As a result, mobile and fixed services witnessed a modest decline in operations. Etisalat UAE management has taken proactive measures to meet this new challenge. In line with past years, Etisalat has maintained its very strong cash position, a strategy that is especially relevant given the recent state of financial turmoil worldwide. Our healthy balance sheet has served as a cushion against the recent financial shocks, and allowed us to comfortably finance our operations and capital investments. As a testament to our financial health, we maintained our investmentgrade credit rating and positive outlook from the three major credit rating agencies (AA- by Standard & Poor s, Aa3 by Moody s, and A+ by Fitch). This will prove vital in securing financing at favourable rates should the need arise. In order to establish a well-balanced funding platform that is aligned with the Corporation s funding strategy, Etisalat listed its Global Medium Term Note (GMTN) and Sukuk programmes in November. The establishment of the two programmes will facilitate Etisalat in accessing a large pool of global investors to diversify its funding sources and manage its debt maturity profile effectively. We carried on our strategy of investing rationally in our network infrastructure to capture organic, demand with AED 5.8 billion in capital expenditure. Notably, we continued to invest in our country-wide fibre optic network as part of our commitment to keep the UAE at the global forefront of state-of-theart telecommunication services. Internationally, we invested rationally in our telecommunication networks to enhance customer experience and affirm our reputation as technology leader. Our advanced, innovative networks and products have bolstered Etisalat s reputation as a leading global telecom player. The Corporation maintained its prudent approach to evaluating acquisition opportunities that are in line with its strategy to expand internationally and add value to its operational portfolio. As well as several strategic stake increases to our existing assets, one of the main opportunities in was our conditional offer to acquire 46% and effective majority control of Mobile Telecommunications Company Zain. We believe such an acquisition will catapult Etisalat onto the global stage and cement our foothold in the Middle East, increasing our presence to five additional countries. In addition, the Corporation is in the process of evaluating and preparing for entry into new markets such as Syria, when investment opportunities become available that would generate returns for shareholders, subscribers, and the sector. Further to our efforts to include our shareholders in the benefits, we have proposed a final dividend of AED 0.35 per share, bringing the total dividends for the year to AED 0.60, in line with our policy in previous years. This represents a dividend yield of 6% at the year-end stock price. We are pleased that total share returns for the 12-month period ended December 31,, including capital gains and dividends, were a healthy 13%. As a model for corporate citizens, Etisalat believes that social responsibility towards the community is no less important than our operational and financial success. Despite the economic slowdown, the Corporation continued its full-fledged corporate social responsibility programme. Etisalat is considered among the most active socially responsible corporations in the region. Before I conclude, I take this opportunity to reiterate my personal trust in our executive management and employees, who have performed exceptionally against the backdrop of a prevailing challenging environment, capitalising on these challenges and converting them to opportunities. Their dedication and commitment to deliver resulted in the Corporation meeting its ambitious goals. Finally, I would like to thank you for your continued faith and support in our Board of Directors and Management team. I am confident that the Corporation is on the threshold of surmounting the current challenges and will be a major catalyst for the economic recovery in all the markets where we operate. Sincerely, Mohammed Hassan Omran Chairman and Managing Director 22 February 2011 3
Board of Directors and Executive Committee H.E. Mohammad Hassan Omran Chairman and Managing Director Chairman Executive Committee H.E. Hamad Mohammad Al Hurr Al Suweidi Member H.E. Khalaf Bin Ahmed Al Otaiba Vice Chairman H.E. Saeed Mohamed Al Sharid Member H.E. Sheikh Ahmed Mohammad Sultan Bin Suroor Al Dhaheri H.E. Mubarak Rashed Al Mansouri Member Member Executive Committee Member Member Executive Committeee 4
Engaging business and people H.E. Omar Saif Mohammad Al Huraiz Member H.E. Abdul Rahman Hassan Al Rostomani Member H.E. Shoaib Mir Hashim Khoory Member Member Executive Committee H.E. Abdulla Mohammad Saeed Ghobash Member H.E. Ahmad Bin Eisa Bin Nasser Alserkal Member Member Executive Committee Mr. Isam Meccawi Suliman Akrat Corporation Secretary 5
Group Highlights 8% Telephone 10% Internet 12% Data Services 51% Mobile 10% Interconnect 9% Others Breakdown of Revenue Group (Year Ended December 31, ) Africa Atlantique Telecom, Moov Canar Etisalat Misr EMTS Etisalat Nigeria Zantel Middle East Etisalat, UAE Etihad Etisalat (Mobily) Thuraya Etisalat Services Holding - Etisalat Academy - Tamdeed Project - Etisalat Directory Services - Etisalat-Real Estate (E-RE) - E-Marine - Etisalat Facilities Management L.L.C (E-FM) - Emirates Data Clearing House (EDCH) - Ebtikar Card Systems Asia Etisalat Afghanistan Etisalat DB PT XL Axiata Tbk PTCL Etisalat Lanka 6
Engaging business and people 31,334 31,929 8,511 8,836 6,764 29,360 7,297 7,631 5,760 21,340 5,860 3,661 16,290 3,460 1,432 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 Revenue (AED millions) Net Profit (AED millions) Capex (AED millions) 7
Chief Executive Officer s Statement I am pleased to present Emirates Telecommunications Corporation s (Etisalat) annual performance for the year ended December 31,. 8
Engaging business and people Etisalat continued its strong track record given the challenges during, exhibiting strong performance in the period under review. We are confident that Etisalat is poised to dynamically adapt to the evolving industry landscape and our business environment. Some of the highlights for UAE operations for the year ended in December 31, : Mobile subscribers reached a total of 7.76 million Fixed line subscribers stand at 1.24 million Internet subscribers totalled 1.32 million AED 24.3 billion in revenues Capital expenditure totalled AED 2.2 billion In general, the global telecommunication industry witnessed a slowdown due to various conditions that impacted an already highly saturated UAE market, where penetration levels are the highest in the region. This consequently affected overall performance. In response to this effect Etisalat has been working on innovating new packages and services such as value-added and broadband services, which should lead to balancing revenues and profits. That being said, Etisalat faced local competition under scrupulous regulations, including increasing pressure on international tariffs from competition and Voice over Internet Protocol (VoIP) usage. The market also witnessed competition in mobile data, with a focus on smart phones, which led to voice revenue disruption in favour of data revenues a natural phenomenon in light of the technological advancement and introduction of a new generation of services and handset equipment. Etisalat has proactively introduced selected value propositions that responded to relevant, current and future market needs, focusing its efforts on stabilising our market share as the major service provider after the entrance of the new competitor in the country. To recapitulate on the major offerings launched during the year, Etisalat introduced My Plan and Business Edge, two new postpaid plans targeting individual and corporate consumers respectively. The plans offer international and national minutes and data with a variety of bundles and add-ons. We also delivered elife, offering customers the option of connecting through optical fibres to broadband, fixed voice and TV services, with higher speeds and bundled voice minutes all at competitive rates. Furthermore, Etisalat launched 3-D TV to its customers, making the UAE amongst the first five countries in the world to do so. With BusinessOne Super, Etisalat has made high-speed broadband easily accessible to the entire SME landscape. BusinessOne Super broadband service offers speeds ranging from 4 Mbps up to 100 Mbps, which is a landmark development in the evolution of broadband in the UAE and across the region. We believe high-speed broadband is integral to the overall economic development of the UAE, which concentrates on developing the infrastructure that in turn will spur increased online business activity. Etisalat will offer business customers VoIP solutions, following the legalisation of the service by the UAE Telecommunications Regulatory Authority. With the growth in IP networks, there is a significant opportunity for business enterprises to leverage the advantages of an integrated network and the convergence of voice and data through a VoIP solution. We welcomed the positive step towards telecom infrastructure-sharing that has been authorised by the Telecommunications Regulatory Authority. Etisalat has one of the best networks in the world and has invested a lot in developing the network in order to fulfil the various service requirements for the present and the future. Etisalat will now extend the benefits of its fixed-line and broadband services to both individual and business customers who currently do not have access to Etisalat s wide array of services. Etisalat will expand its reach within Dubai s Free Zones, such as Dubai Internet City, TECOM and the new residential areas, through innovative products and services that provide a strong differentiation and superior value. To that end, Etisalat launched a strategic partnership with Jebel Ali Free Zone (JAFZA) to deliver enhanced telecom and ICT services to JAFZA tenants in the Free Zone, with direct access to Etisalat services on a priority basis. As a main player, Etisalat is investing prudently to achieve excellence in customer experience for the UAE. This commitment was highlighted by the further development and roll-out of the Fibre-To-The-Home network. Etisalat is on track to reach its goal of covering all of the UAE with its fibre network by 2012. We have also begun a commercial trial of Long Term Evolution (LTE), an important step towards 4G technology. Etisalat has successfully combined the protection of the environment and advanced technology by investing in optical fibre networks that enhance the energy efficiency of our networks and reduce our carbon footprint and operating cost. Accordingly we have also begun an initiative to implement environmentally-friendly green building policies. Facing a mature market that is highly saturated and characterised by revenue erosion and pressure on profit margins, the top management team embarked on an ambitious cost optimisation programme to reinforce Etisalat s competitive position. Etisalat underwent a thorough cost analysis exercise to scrutinise current expenditures and review areas for improving efficiency. As a result, business priorities have shifted towards value creation and profitability, infrastructure-sharing, outsourcing, and shared services. Etisalat has already begun implementing these steps during the last quarter of and we expect to capture the full benefit of the programme over the coming two years. We are lucky to be part of the new digital era that enables us to deliver state-of-theart communication services. We believe that wise leadership and vision yield positive returns. Under Etisalat top management s guidance, the right choices and world-class execution should generate lucrative returns. We will continue determinedly to differentiate ourselves and excel through our advanced networks and innovative product offerings and value propositions in our quest to align our performance with the expectations of our shareholders, customers, and employees. Finally, I take this opportunity to extend my deep appreciation to the Board of Directors, who gave us all the resources and support needed to make our tasks easier and more efficient. I also extend my appreciation to our employees at every level across all departments and regions for their dedication and contribution to our success. Respectfully yours, Nasser Bin Obood Acting Chief Executive Officer 22 February 2011 9
Management Review Financial Results Etisalat continues to maintain a strong financial position supported by sustainable cash flows, a conservative balance sheet, and ample liquidity that enabled it to fund core strategic investments, despite the challenging market conditions. The following table shows selected historical data for the year ended December 31, and. Selected Financial Data As of December 31 or for the year ended Change % Income Statement Data Revenue 31,334 31,929 2% Operating Profit before federal royalty 17,651 14,627-17% Net Profit 8,836 7,631-14% Balance Sheet Data Total assets 71,379 75,607 6% Total liabilities 30,989 33,042 7% Total equity 40,389 42,565 5% Net debt (1) (6,808) (3,877) -43% Cash Flow Data Net cash flow from operating activities 10,125 7,807-23% Net cash flow used for investing activities (6,771) (4,853) -28% Net cash flow used for financing activities (3,407) (4,372) 28% Earnings per share and dividends per share data EPS (AED) 1.12 0.97-13% DPS (AED) 0.60 0.60 0% Number of issued shares (million) 7,187 7,906 10% Notes: 1. Net debt represents Borrowings less Cash and cash equivalents 10
Engaging business and people For the fiscal year ended December 31,, Etisalat revenues totalled AED 31,929 million, representing growth of 2% compared to. Operating profit before federal royalty stood at AED 14,627 million, an impressive operating margin of 46%. Net profit for the year (attributable to equity holders of the Corporation) was AED 7,631 million after federal royalty, taxes and net finance income. Group revenues increased slightly in spite of the challenges faced by the UAE operation owing to Etisalat s diversified portfolio. However, earnings margins have decreased due to a sizeable increase in operational costs, the effect of an increase in contribution to Group results from international operations that operate in lower-margin industries compared to the UAE. A number of these international operations are still at an early stage of operation and are expected to improve their contribution as they mature. In terms of cash flows, Etisalat generated AED 7,807 million in net cash from operating activities in. Uses of cash included AED 5,760 million to fund capital expenditure, representing a capital intensity ratio of 18%, primarily related to international network expansion and fibre network roll-out in the UAE. Compared to, capital spending fell by AED 1,004 million. Borrowings and financing obligations increased by AED 1,899 million to reach AED 6,400 million, while cash and equivalents remained sturdy at AED 10,277 million. This represents a healthy net cash position of AED 3,877 million. In addition, Etisalat successfully extended the Corporation s average debt maturity through a recent refinancing of Etisalat Misr s loan facility. During the last quarter of, the Corporation listed its Global Medium Term Note (GMTN) and Sukuk programmes on the London Stock Exchange for USD 7 billion and USD 1 billion, respectively. This listing will give Etisalat more flexibility when accessing capital markets to fund potential investments at more preferential rates. Etisalat managed to maintain its investmentgrade credit rating and positive outlook from the three major credit rating agencies, despite the downturn of the local economy. In May, S&P upgraded Etisalat s long-term credit rating to AA- due to strong liquidity and financial flexibility, while Fitch and Moody s reaffirmed their credit rating post annual credit review. Moody s had downgraded Etisalat s rating to Aa3 earlier in the year due to its revised view of the UAE sovereign ratings and Government support. The Corporation paid AED 4,492 million in total dividends, an increase of 15% from the same period last year. This figure is composed of final dividends of AED 0.35 per share and interim dividends of AED 0.25 per share. The Board of Directors has proposed final dividends of AED 0.35 per share, bringing the total dividends for the year to AED 0.60 per share, in line with previous years. The proposed dividend will be submitted for approval at the Annual General Meeting of Shareholders on March 22, 2011. 11
UAE Highlights 7,285 7,741 7,764 1,285 1,325 1,358 1,309 1,237 1,331 1,323 17,770 19,410 18,252 3,769 3,989 4,158 3,847 1,153 6,372 15,650 15,996 3,369 5,520 875 660 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 Mobile Subscribers (thousand subscribers) Fixed Line Subscribers (thousand subscribers) Internet Subscribers (thousand subscribers) National Calls (million minutes) International Calls (million minutes) 12
Engaging business and people 10% Telephone 12% Internet 7% Interconnect 48% 15% Data Services Mobile 8% Others Breakdown of Revenue UAE (Year Ended December 31, ) 13
Management Review continued Market View Innovation has been key to Etisalat s roadmap for customers and business alike, providing great new offerings and value-added services to match the growing demand for mobile and fixed line broadband. 14
Engaging business and people The year also saw the introduction of several on-net offerings in the form of preferred rates, as well as many other commercial offers meeting each customer segment s needs. In Egypt, Etisalat successfully re-launched the prepaid plan Kol al Nas and Kol al Nas +, which enables customers to call any national number at a competitive flat rate. Also launched were regional plans Mohafazat and Alexandria for customers calling from local areas and the Green Line package for high users, giving unlimited calls and data. In Nigeria, Etisalat revamped its flagship product Easy Starter package, giving customers bonuses on incoming calls and preferred numbers at competitive rates, while the new proposition EasyLife focused on competitive call prices to any network. Etisalat Nigeria customers also had their share of the latest innovations with the Samsung Galaxy tab, the first tablet computer introduced by a mobile operator in the country. More broadly, Etisalat continued to leverage on its footprint to offer products and services across several operations. For example, competitive international call offers were introduced within the West African footprint and between Pakistan and Afghanistan. A new offer targeting Middle Eastern customers roaming across Arab countries was also launched, as was the opportunity for roaming UAE customers to recharge their prepaid account from Egypt, KSA and vice versa. Etisalat India launched commercial operations under the brand of Cheers in New Delhi and has further expanded into more telecom circles. The successful rebrand of Etisalat s Sri Lankan operation occurred in February, launching new prepaid packages that have been well received in that market. It was also the first time the market was offered a whole new concept of buckets for postpaid packages in Sri Lanka. Africa Atlantique Telecom (AT) AT maintained its role as the challenger in all countries where it operates. While initiatives aimed at reducing competitive disadvantage are still to be realised, market share rose, with Cote d Ivoire in particular performing well owing to aggressive and timely commercial offers. The year saw the launch of a major network expansion to be completed by the end of the first quarter 2011. This will resolve radio capacity bottlenecks (mainly Cote d Ivoire and Benin) and expand the core network in Cote d Ivoire, Togo and Niger to improve geographical and population coverage. By the year end, population coverage had improved to 54% on average, with the number of sites on air increasing by 40% during the year. Moov continued to excite consumers with another successful launch of the Moov in offer targeting the youth segment, per second billing in three countries (Benin, Gabon and CAR), and the launch of BlackBerry services in all Moov markets. For the first time in the West African market, the Moov passport was introduced for all prepaid outbound roaming customers, where calls are charged at a local rate wherever they are within the AT territory. The main contributors to market-share gains were Cote d Ivoire (CDI) and Togo. In CDI, in-depth market segmentation studies and tailored commercial offers paid off. Togo had been adversely affected in by a network closure (from August to early January ) due to a legal dispute with the government on the licence renewal terms, but it recovered well in thanks to aggressive offers. These resulted in a 20% turnover growth for the year, and a 2% rise in the EBITDA margin. Etisalat increased its ownership in AT from 88% to 100% in February, demonstrating its strong belief in AT and continuing growth in this continent of high potential. Canar Teledensity continues to be very low in Sudan in comparison with surrounding markets in this highly populated region. Canar continued its focus on International Services, Wholesale capacity, Enterprise Solutions and Data Services. Two major data campaigns were launched, giving a stable revenue stream, whereas voice revenue remained at similar levels as. By expanding the fibre optic network inside Khartoum and introducing a new internet gateway, Canar attracted new corporate customers in the oil, banking and education sectors. Further enhancements should ensure continued growth as new technologies are introduced such as Wi-Max and Wi-Fi, catering for the SME segment and other high ARPU customers. In August, Canar took the decision to introduce per second billing on international calls, and to enhance the Canar Go bundling. This is Evolution Data Optimised based wireless access technology (EVDO) for broadband, with maximum throughput of 3.1 Mbps providing mobile wireless broadband facility through data card and USB modems. It is offered to the postpaid and prepaid market segments at various entry levels. The Tayman Plus offering, targeting residential and SME customers, also saw a revamp introducing new monthly rental charges, favourite numbers at preferential rates, and on-net rates. Moov Canar, Sudan Etisalat continued to leverage on its footprint to offer products and services across several operations. Moov continued to excite consumers with another successful launch of the Moov in offer targeting the youth segment, per second billing in three countries (Benin, Gabon and CAR) and the launch of BlackBerry services in all Moov markets. By expanding the fibre optic network inside Khartoum and introducing a new internet gateway, Canar attracted new corporate customers in the oil, banking and education sectors. 15
Management Review continued Etisalat Misr Etisalat Misr s strategy focused on driving subscriber numbers in the youth segment and expanding regionally. Sustaining a strong technological platform and roll-out, the 2G network now covers 99% of the population and the 3G network covers 87%, placing the 2011 target of 100% firmly in reach. Further deployment of High Speed Packet Access (HSPA) was undertaken across more than 160 sites. Etisalat Misr is the innovation leader in the country, achieving rapid network roll-outs through turnkey projects. Attention to timely implementation and quality control with its commercial launches has enabled the operation to be first-to-market in many instances. By leveraging key strengths in mobile broadband, innovation, and the Group footprint, Etisalat Misr has consistently been associated with attributes of innovation, straightforwardness, best value and transparency. This has resulted in stronger customer loyalty through brand association, consideration and awareness. The company is now perceived as the mobile broadband leader and market driver, while its competitors are in reactive mode. The operation was able to reinforce Etisalat s brand positioning as the Smart Choice, adopting an aggressive leadership strategy in market movers across all segments. Preferential rates, such as on-net, per second billing at given times on international and local calls, as well as unlimited usage packages for mobile data and broadband were all introduced during. Postpaid customers saw additional value in tariff schemes with monthly rewards consisting of bonus minutes. Setting up value-added services for key users (such as HSPA, mobile VPNs and data card) Etisalat Misr was among the first to offer bundled services for both mobile and fixed broadband, improving point-of-sale service and bill payment processes. Increasing training for all sales and customer support staff set a new standard for customer service and care for Etisalat Misr. With a strong technological platform and the continued strategy of being first-to-market, Etisalat Misr is gearing to further expand its presence in the Egyptian market through innovative ICT services such as m-commerce, mobile advertisement, mobile applications and mobile payments. The operation plans to become the brand of choice by further associating itself with those attributes that deliver the highest return to customers and the company. Etisalat Nigeria (EMTS) Etisalat Nigeria s strategy has always been to offer the best quality network and innovative products and services to attract subscribers. The company has successfully asserted itself in the Nigerian marketplace as an innovator in commercial products and services, and is on track to expand its customer base. The company is already seeing a positive trend in its ARPU expansion, and expects more rapid growth in ARPU in 2011 as its focus turns to innovative data-centric products. This focus on innovation is Etisalat s key point of differentiation in the predominantly voice revenue market. Etisalat Nigeria retains its position as market leader in terms of Brand Awareness as reported by the Nigerian Telecommunications Commission. The Easy Starter proposition was enhanced and several other on-net propositions were launched to the market. Easy Starter added two more features, one being the Bonus On Incoming Calls, which gives the customer one minute free for every three minutes on incoming calls, whereas the You & Me element gives customers free talk time on on-net selected numbers. Similar trade-offs were launched to increase the subscriber base and support ARPU levels. Network expansion continued in Lagos and other major cities, in addition to a pilot of 3G services in preparation for commercial launch in Q2 2011. As the 3G network becomes operational in 2011 there will be greater commercial focus on higher-value, data-centric offerings to attract consumers and drive up ARPU. Etisalat Nigeria will continue to establish the Nigerian operation by addressing key strategic areas such as network expansion, network quality of service (QoS) management, network infrastructure expansion, and the management and capabilities needed to drive commercial propositions and enterprise efficiency. Zantel With eight competitors in Tanzania, operators have been involved in a price war to acquire market share from one another. To avoid competing on price and further damaging the market, Zantel instead switched its strategy to focus on value. Adopting a segmented approach, Zantel has focused on customer retention and loyalty in Zanzibar, growing high-value segments in Dar es Salaam and acquiring new customers in the remainder of the country. Through clear value propositions and brand focus, the operation offered packages with dedicated bandwidth for the SME segment and for students, which resulted in Zantel gaining broadband leadership and solid financial returns. Further, by driving propositions firmly based on strategy, Zantel acquired and retained customers with offerings such as Twanga and Mzuka, which are directed to a greater mass market and lower-end customers. In partnership with Zain and TIGO, a joint project was started in deploying a national backbone, cross-border and metropolitan network to be co-run and co-shared. Cost-savings were made by optimising the network, outsourcing maintenance work in telecom and non-telecom parts, and further site OPEX reductions. Zantel is the first mobile operator to partner with EASSy landings and operations and is poised to land an additional submarine cable, acting as host for the Government of Seychelles. The operation can then offer submarine capacity for both national and international operators. Zantel became a game changer for the operators in terms of the number of points of sale, which now exceeds 1500. Increasing the coverage of the availability of UMTS, Zantel captured a larger share of the mobile broadband subscribers, both impacting the financial results and a strong financial performer in the Tanzanian market. Etisalat Misr, Egypt EMTS - Etisalat Nigeria Zantel, Tanzania Etisalat Misr is the innovation leader in the country, achieving rapid network roll-outs through turnkey projects. Etisalat Nigeria s strategy has always been to offer the best quality network and innovative products and services to attract subscribers. By driving propositions firmly based on strategy, Zantel acquired and retained customers with offerings such as Twanga and Mzuka, which are directed to a greater mass market and lower-end customers. 16
Engaging business and people Etisalat competes on the quality of its service by maintaining the highest network standards for sound quality, signal strength, coverage and fewest dropped calls. 17
Management Review continued The continuous roll-out of the Fibre- To-The-Home (FTTH) network across the UAE enabled launches of e-life services to new areas in the country, offering customers higher broadband speeds and TV services bundled with attractive voice rate plans. 18
Engaging business and people Middle East Etisalat Etisalat UAE has maintained its position as market leader as the demand for broadband and value-added services continues to grow and competes on the quality of its service by maintaining the highest network standards for sound quality, signal strength, coverage and fewest dropped calls. A clear focus on customer loyalty has seen the expansion and enhancement of the full range of product and service offerings and marketing and promotional strategies. Etisalat has also continued to develop its distribution channels, particularly in the highest customer-value segments of the retail and corporate markets. The continuous roll-out of the Fibre-To-The- Home (FTTH) network across the UAE enabled launches of e-life services to new areas in the country, offering customers higher broadband speeds and TV services bundled with attractive voice rate plans. In addition, High Definition TV and 3D television were launched through e-vision in another first-to-market. With near full roll-out of the FTTH network, greater efficiencies and network cost effectiveness will help contain operating costs and capital expenditure. This will be an important factor in an increasingly competitive market with challenging macro-economic conditions. Several offers have been launched with good response from the market, such as My Plan for the postpaid segment. My Plan offers free international and national minutes, data at various levels, and a wide choice of optional add-ons. The Homeland Plan for prepaid, offering attractive rates for customers to India and Pakistan among others, had a similar impact in this segment. Offers to the UAE market are designed not only to stem increasing competition on the international tariffs but also to combat the loss of Voice over IP traffic. The dedicated business solutions unit continued to work closely with enterprise customers to provide complete end-to-end telecommunications and ICT services involving a combination of network, hardware, software and service solutions. New products such as Business Edge, My Business Plan and Business Super One were launched to these groups to further meet their needs. Etisalat s strategy in involved building best-in-class customer experience with a strong focus on streamlining and simplifying processes and enhancing the skills of customer-facing employees. In addition, large groups of employees participated in the Regulatory Compliance Programme to ensure adherence to regulatory policies at all times. The customer distribution network was also expanded, adding to the number of Etisalat contact points. Etisalat Etihad (Mobily) Mobile penetration continues to rise in the Kingdom of Saudi Arabia along with Mobily s growth in market share year on year. This is largely fuelled by the consistent launch of new innovative products and faster and wide-reaching networks built across the country. Today Mobily has the largest active HSPA+ base in the world with 2,000,000 active subscribers and total usage exceeding 90 Terabytes a day. This is in line with the strategy of pursuing broadband opportunities, which are growing at a fast rate in all customer segments. The network has thus become one of the busiest mobile data networks in the region. As an operator and a well-known brand name in the Kingdom, Mobily s strategy centres on three key pillars of growth: Efficiency; Differentiation in providing best-in-class customer experiences; Continuously introducing the latest technology and services. Whilst offering a number of new services to consumer and enterprise segments, the key first-to-market launches included the new application store for customers to buy locally developed applications, the Hajj iphone application enabling pilgrims to access all the information and steps needed to complete their pilgrimage, and the full-fledged gaming portal to create an online gaming community. Mobily prides itself in being first-to-market in many device launches such as the iphone, the Nokia N8, and Ferrari-branded products. Mobily ended the year with growth in subscribers and revenues across all of its operating segments. The year-on-year growth percentage is a landmark among all mobile network operators, not only in the GCC but in the world. Thuraya A provider of both aerial and nautical satellite solutions for remote areas, Thuraya is today the undisputed leader in the handheld satellite voice market with about 65% market share in its coverage area. One of the key contributors to its success has been the Thuraya XT, which has so far exceeded market expectations. Mobile broadband solutions continue to grow in the satellite market as increased bandwidth becomes available for broadband usage. Thuraya has enhanced and stabilised IP services and improved the overall performance of its systems on the ground. At the end of and into, Thuraya re-launched the brand and proposition of Stay Close. Focusing only on carefully selected trade publications and online and mobile advertising, the re-launch was a great success, with the online segment of the campaign alone creating over 95 million impressions and over 100,000 click-throughs. Thuraya is now being recognised in its targeted circles, and its products can meet exacting requirements. Etisalat A clear focus on customer loyalty has seen the expansion and enhancement of the full range of product and service offerings and marketing and promotional strategies. Etihad Etisalat (Mobily), KSA Today Mobily has the largest active HSPA+ base in the world with 2,000,000 active subscribers and total usage exceeding 90 Terabytes a day. Thuraya, UAE A provider of both aerial and nautical satellite solutions for remote areas, Thuraya is today the undisputed leader in the handheld satellite voice market with about 65% market share in its coverage area. 19
Management Review continued Asia Etisalat Afghanistan Moderate stabilisation of the country and some economic growth have contributed to telecommunication penetration rates in Afghanistan continuing to rise to just over 45% in. Continued unrest is expected in parts, and reforms provisioned in the Afghanistan National Development Strategy (ANDS) will be challenging to implement. However, investment from the government and coalition forces is expected to increase, bringing more stability to the people and businesses of Afghanistan. Etisalat Afghanistan undertook a major branding exercise to position the operation as a beacon of the future. This confirmed the Corporation s long-term commitment to the country both as an investor and an enabler. This is further demonstrated in the continuous technological upgrades and roll-outs undertaken to meet the changing and growing needs and requirements of the market. New pricing plans were introduced to differentiate the offerings for the general, youth, and other segments. The organisation also streamlined processes in its marketing and sales organisations to further drive activation and increase revenue. At year end, the results can be seen in a sizeable lift in market share and healthy revenue growth, with ARPU increasing by more than 15%. Etisalat Afghanistan is best positioned by the end of the year in being the operator of choice for on-net as well as off-net propositions. paved the way for the company to be the market leader in value-for-money in 2011 and one of the top mobile network operators in Afghanistan by end of 2011. Etisalat DB Telecom Pvt. Ltd Improved network infrastructure in India has seen a sharp rise in teledensity, exceeding 51% in the past year. The launch of advanced telecom services like 3G and IPTV will continue to drive subscriber growth, and Etisalat DB is well poised to take a sizeable portion of the market in this country of over 1,150 million people. To ensure the roll-out goes as planned, in line with regulatory compliance, Etisalat DB has optimised initial investments through a strategy of sharing passive network infrastructure with the leading service and telecom infrastructure providers. The operation has also entered into Intra Circle Roaming agreements in circles with large geographic areas to speed up market coverage in the initial stages. A 100% Core (Circuit Switched) Network has been commissioned for both Access Network and for the National Long Distance (NLD)/International Long Distance (ILD) business. With Mobile Number Portability (MNP) mandated by the government, Etisalat DB has implemented the solution in its Access Network from all three vendors and successfully passed the tests conducted by DoT (the Indian licensor), thus bettering the performance of large incumbent service providers like Vodafone and Bharti-Airtel. Etisalat DB launched the brand name Cheers in March. The first promotional pack offered customers a combination of discounted on-net and off-net voice call and SMS for a period of six months. The alternative offer has 50 minutes of free voice calls and 50 free SMS for the first 60 days, after which a normal rate is charged. To date the subscriber base is close to 265,000. Etisalat Lanka With a full rebranding exercise, Etisalat Lanka staged its energetic launch in the local marketplace and the media in March. With the promise of being the first to offer exciting new products and solutions, the operation introduced two new prepaid price propositions for consumers. By keeping the communication bold and upfront, customers were quick to accept the new player and it being part of a much larger global company. This helped ensure the smooth transition from Tigo to Etisalat Lanka. Among the most notable product launches were the 2-for-1 offer on prepaid; new prepaid per minute price plan with floor prices introduced; a no-monthly rental on postpaid package; 100 Dial IDD plan; and 2 Friends service. The strategy is to build the postpaid market as well as building considerable market share for products such as BlackBerry. On the network front, work has started on the migration to the Next Generation Network (NGN) and changing from Time Division Multiplexing (TDM) transmission to IP technology. Etisalat Lanka plans to continue on the positive wave created with the launch as a preferred operator, offering better alternatives and strong network capabilities to this growing market with a healthy growth potential. Etisalat Afghanistan Etisalat, Lanka Etisalat Afghanistan undertook a major branding exercise to position the operation as a beacon of the future. This confirmed the Corporation s long-term commitment to the country both as an investor and an enabler. Etisalat India launched commercial operations under the brand of Cheers in New Delhi and has further expanded into more telecom circles. Etisalat Lanka plans to continue on the positive wave created with the launch as a preferred operator. 20
Engaging business and people With a full rebranding exercise, Etisalat Lanka staged its energetic launch in the local marketplace and the media in March... by keeping the communication bold and upfront, customers were quick to accept the new player and it being part of a much larger global company. 21
Management Review continued Pakistan Telecommunications Company Limited (PTCL) PTCL maintains its commitment to the people of Pakistan, providing voice and broadband services as well as some exciting new technology in. The operation gained a cutting-edge advantage in the market by launching the first-ever commercial Evolution-Data Optimised Network (EVDO), which allows for data transmission through radio signals. The proposition, EVO Nitro 9.3, brought a new era of broadband speed in Pakistan, generating many upgrades of existing customers as well as new subscribers. In addition, PTCL offered other new services at various speeds suitable for a wide range of consumers, and introduced a zero rent package on fixed line services. PTCL has also established itself as the first 3G wireless service provider in Pakistan by upgrading the existing fixed-line wireless platforms in major cities with CDMA-based 3G technology. Other enhancements and upgrades of the network continued in cities and remote areas. Together, these initiatives have firmly placed PTCL as the preferred broadband service provider in the country and the market leader in voice, both in subscription and ARPU. For Ufone - the mobile arm of PTCL - the network improvements further strengthened its Value Added Services portfolio, with a higher degree of flexibility in the service offerings and an increase of 13% in network coverage. The youth segment was offered several attractive offers during with fixed and mobile broadband, including unlimited internet access and free minutes as well as free e-learning cards and an open competition for all scholarship students. Ufone launched its third youth-oriented service, Uth Soch Hai Aap Ki, with attractive voice and SMS rates. The Uth portfolio has taken the segment by storm and the portfolio carries 4.5 million subscribers after just over seven months. Ufone launched the first m-commerce service using Unstructured Supplementary Service Data (USSD), which is supported by all GSM handsets. The service was launched in partnership with the largest commercial bank in Pakistan and offers an efficient low-cost mobile payment system for people without access to banks or credit cards. This, coupled with other value-added services such as Double Number Service, where subscribers can get two numbers on a single SIM card, adds healthy new revenue streams to the company. In terms of future synergies between the PTCL and Ufone businesses, the network and technology advancements have paved the way for combined GSM, data and voice products. Partnering also with Etisalat Afghanistan and offering attractive rates between the two countries has quadrupled traffic since the launch, contributing to the Pakistan success story. PT XL Axiata Tbk With cost leadership and customer intimacy at the core of its strategy, XL has achieved a more in-depth understanding of its customers, at almost street-level. With such insights, and a concentrated focus on dealing with customer complaints, the operation has enhanced the customer experience and improved customer advocacy with positive results and feedback. XL firmly understands its customers preferences and meets their needs by offering relevant choices routed through a single portal with streamlined and simplified registration. The portal offers a mix of voice, SMS and data to suit customer preferences. This success has helped to position XL as best-in-class in execution and the market leader of industry vision, strategy, and execution. It is known to be always one step ahead of competitors on network roll-out, pricing, and distribution strategies. As a result XL has seen a healthy and steady growth in revenue streams and earnings. XL delivered higher value to shareholders and outpaced industry growth by targeting a higher share in the stabilising core business of voice and SMS, while also seizing opportunities from the rise of the data service industry and other markets with high growth potential. The operation maintained a balanced focus on top-line growth, operating profitability and asset productivity, and was ranked 8th amongst the top 50 fastest-growing companies in Indonesia by Fortune magazine. PTCL PT XL Axiata Tbk For Ufone - the mobile arm of PTCL - the network improvements further strengthened its Value Added Services portfolio, with a higher degree of flexibility in the service offerings and an increase of 13% in network coverage. XL delivered higher value to shareholders and outpaced industry growth by targeting a higher share in the stabilising core business of voice and SMS, while also seizing opportunities from the rise of the data service industry and other markets with high growth potential. 22
Engaging business and people The proposition, EVO Nitro 9.3, brought a new era of broadband speed in Pakistan, generating many upgrades of existing customers as well as new subscribers. 23
Network Africa Atlantique Telecom, Moov, West Africa moov.com Operational in 6 countries Licence type Mobile Etisalat ownership 100% Population 57 million Penetration rate 58% average across all countries Number of operators Mobile 2-5 per country Network coverage, population 56% EMTS Etisalat Nigeria etisalat.com.ng Licence type Mobile Etisalat ownership 40% Population 155 million Penetration rate 57% Number of operators Mobile 5 Network coverage, population 59% Etisalat Misr, Egypt etisalat.com.eg Licence type Mobile and Internet Etisalat ownership 66% Population 80 million Penetration rate 92% Number of operators Mobile 3 Network coverage, population 99% Canar, Sudan canar.sd Licence type Fixed Etisalat ownership 89% Population 44 million Penetration rate Fixed 1% Number of operators Fixed 2 Network coverage, population 31% Zantel, Tanzania zantel.com Licence type Mobile and Fixed Etisalat ownership 65% Population 41 million Penetration rate Mobile 43% Fixed Line 0.4% Number of operators Mobile 6 Fixed 2 Network coverage, population 42% Middle East Etisalat, UAE etisalat.ae Licence type Mobile, Fixed and Internet Etisalat ownership 100% Population 5 million Penetration rate Mobile 241% Fixed 26% Internet 27% Number of operators 2 Network coverage, population 100% Thuraya, UAE thuraya.com Licence type Satellite telecommunication Etisalat ownership 28% Population - Number of operators Satellite 4 Network coverage, population - Network coverage, geographical 140 countries 24