REG - Telecom Egypt S.A.E - Q3 2014 Consolidated Results <Origin Href="QuoteRef">ETEL.CA</Origin>

Telecom Egypt Co SAEAnnouncement

12/11/2014 08:30

RNS Number : 8002W
Telecom Egypt S.A.E
12 November 2014
Telecom Egypt Announces Q3 2014 Consolidated Results
Cairo, November 12 2014:Telecom Egypt (te) (Ticker: ETEL.CA; TEEG.LN), today announced its consolidated interim financial results for the third quarter, ending 30 September 2014. The financial statements have been prepared in accordance with Egyptian Accounting Standards.
Highlights & CEO Statement
 
Highlights
 Total Consolidated Revenues were EGP 9,149 million up from EGP 8,356 million in 9M 2013. 
 EBITDA was EGP 3,181 million, delivering a margin of 35%. 
 Net Profit After Tax was EGP 1,794 million, representing a net profit margin of 20%. 
 Earnings Per Share (EPS) for the period were EGP 1.01. 
 Retail ADSL market share of 65% delivering record nine month revenues of EGP 1,437 million. 
 Capex for the period of EGP 1,120 million. 
 Net cash position of EGP 2,254 million, as at 30 September 2014. 
Chief Executive Officer's Statement
"In the third quarter 2014, we experienced continued revenue growth across most of our business units, in particularour core retail business units. The management maintained decisive control, successfully steering the business forwards as we await the final mobile award.
"Importantly, the growth trend in our broadband offering was exceptional. Broadband services made a significant contribution to te's retail revenues for the period and reached a record levels of subscribers. This reinforces our ongoing efforts to become a total telecom operator and redresses the balance between our wholesale and retail revenues.
"Our Wholesale business experienced another good quarter, with revenue growth year-on-year from both our Domestic Wholesale and International Carriers Affairs. While our International Customers & Networks revenues are lower than the previous quarter, year-to-date performance has exceeded management's expectations. The nature of this business is that there is no specific quarterly trend that can be followed, and the completion of specific projects in individual quarters, such as the AAE1 
and SMW5 submarine cable projects in Q2 2014, will always create an uneven distribution of recognized revenues throughout the course of any given year.
"We remain committed to our customer-centric approach, purposefully orientating our business to the way in which our customers use telecommunications services. This approach continues to prove commercially beneficial and is having a positive impact on customer satisfaction levels across our home, enterprise and wholesale segments." 
Revenues by Lines of Business:
___________________________________
Business Unit for the nine month period
Percentage (%)


Home Services
25.5
Enterprise Solutions
16.5
Domestic Wholesale
19.9
International Carrier Affairs
25.2
International Customers & Networks
12.9
Home Services Business Unit:
___________________________
(In EGP Millions)
9M 2014
9M 2013
Change%
Q3 2014
Q32013
Change%
HS BU
2,335
2,228
4.8%
792
764
3.7%
KPI
Unit
9 Month Period Ending Sept.
Quarter Comparison
9M 2014
9M 2013
Q3 2014
Q3 2013
Home Voice Revenue Growth
%
-16.8
-18.4
-16.8
-15.1
Home Data Revenue Growth
%
29.8
27.7
25.8
32.2
Home Fixed Line Subscribers
Mn
5.56
5.74
5.56
5.74
Home ADSL Subscribers
000's
1,814
1,448
1,814
1,448
Home ARPU
EGP/Month
25.04
26.32
24.99
26.71
The Home Services business unit reported a 3.7% year on year increase in revenues for the third quarter 2014, and a 4.8% rise when compared to the nine month period in 2013. The increase is primarily attributable to growing demand for broadband services.
The business unit achieved its target for the period, largely due to the successful rollout of its modern fiber technologies replacing the deployed copper-based cable technologies, which had a direct impact on revenues.
 
Through closely working with its regional offices to respond to customers' needs, the business unit was able to positively affect the expansion of its access network, increasing sales and market share. 
The business unit continued the broadband growth momentum achieved in the first six months of the year. During the quarter there were 98 thousand net ADSL subscriber additions, taking te's retail ADSL market share to a record 64.8% as at 30 September 2014, when te's ADSL subscriber base - across both home and enterprise segments - stood at 1.93 million.
Enterprise Solutions Business Unit:
________________________________
(In EGP Millions)
9M 2014
9M 2013
Change%
Q3 2014
Q3 2013
Change%
ES BU
1,508
1,340
12.6%
495
418
18.5%
KPI
Unit
9 Month Period Ending Sept.
Quarter Comparison


9M 2014
9M 2013
Q3 2014
Q3 2013
Enterprise Service Revenue Growth
%
-6.6
-14.6
1.0
-25.0
Enterprise Data Revenue Growth
%
11.4
20.1
7.9
25.2
Other Subsidiary Revenue Growth
%
-13.9
-1.7
0.5
-21.9
Enterprise Fixed Line Subscribers
Mn
1.08
1.06
1.08
1.06
Enterprise ADSL Subscribers
000's
116
94
116
94
Enterprise ARPU
EGP/Month
65.46
73.24
62.76
71.37
During the third quarter 2014, te's Enterprise business unit, which primarily services the Egyptian SME sector, public sector bodies and financial industries, experienced a year-on-year increase in revenues of 18.5%. 
The negative variance with Q2 2014 of 15.1% is primarily attributable to a one-time recognition of EGP 181 million in Q2 2014, attributable to the business unit's progression with commercializing new urban developments.
The business unit continued to capitalize on the requirement for high speed and heavy applications with both voice and video capabilities. Total ES-BU revenue from data increased when compared with Q2 2014, driven by new fiber models now installed in many Egyptian banks. Furthermore, a number of other new urban community development projects were finalized during the quarter under review, realizing around EGP 73 million.
Domestic Wholesale Business Unit:
_________________________________
(In EGP Millions)
9M 2014
9M 2013
Change%
Q3 2014
Q3 2013
Change%
DW BU
1,818
1,632
11.5%
590
507
16.3%







KPI
Unit
9 Month Period Ending Sept
Quarter Comparison
9M 2014
9M 2013
Q3 2014
Q3 2013
Domestic Revenue Growth
%
20.5
6.5
21.6
-3.7
International Revenue Growth
%
-1.8
3.7
7.9
-18.1
International Outgoing Minutes Growth
%
-12.2
-12.6
-2.0
-26.3
Revenues for the Domestic Wholesale business unit rose year on year by 16.3%, to EGP 590 million for the third quarter 2014. When compared to Q3 2013, the increase was driven by the rise in demand for national transmission services for MNOs and domestic ISPs.
Revenues for the third quarter versus Q2 2014 fell from EGP 687 to EGP 590 million, a decline of 14%. This was due to a number of factors, most notably a drop in the outgoing traffic due to the rapid growth of free mobile calling applications in Egypt and discounts offered to ISPs. 
International Carriers Affairs Business Unit:
_________________________________________ 
(In EGP Millions)
9M 2014
9M 2013
Change%
Q3 2014
Q3 2013
Change%
ICA BU
2,302
2,419
-4.8%
751
728
3.2 %
KPI
Unit
9 Month Period Ending Sept
Quarter Comparison
9M 2014
9M 2013
Q3 2014
Q3 2013
International Settlement Revenue Growth
%
-4.8
36.9
3.2
26.2
International Incoming Minutes Growth
%
-11.3
15.6
-0.7
-0.7
Revenues for the International Carriers Affairs (ICA) business unit increased 3.2% compared with Q3 2013, but saw a decline of 8.4% when compared with the previous quarter in 2014. 
The drop in quarter on quarter revenues was primarily due to the ongoing effects of illegal bypass, which is reaching a critical trend.This phenomenon has had a very negative impact, particularly when combined with the active rise of OTTs taking a sizeable share of the traditional business.
International Customers & Networks Business Unit:
_______________________________________________
(In EGP Millions)
9M 2014
9M 2013
Change%
Q3 2014
Q3 2013
Change%
IC&N BU
1,184
737
60.7%
88
449
-80.4%
KPI
Unit
9 Month Period Ending Sept
Quarter Comparison
9M 2014
9M 2013
 Q3 2014
 Q3 2013
IC&N Revenue Growth





Cable Projects
%
160.2
8.4
-100.0
1101.4
Ancillary Services (O&M)
%
13.0
19.5
4.3
6.4
Capacity Sales
%
-37.8
36.5
-31.5
220.1
The nature of the International Customers & Networks (IC&N) business unit revenues, particularly as they relate to wholesale capacity sales, is highly dynamic. IC&N results for the cumulative nine month period exceed management targets for the period, with 60.7% year on year revenue growth. 
The IC&N-BU reported decline in the third quarter when compared to either the previous quarter or the comparable quarter last year as there were no new Cable Projects recognized during the quarter, other than the growing and recurring Capacity Sales and Ancillary Services (O&M) revenues. All new cable projects year-to-date were recorded in the first half of the year. 
The business is focused on building greater market share of the International capacity market where competition is intensifying. The company is in talks with several international operators to establish new cable projects.
te Financial Highlights:
_____________________
Income Statement -Summary:
____________________________
(In EGP Millions exclude Per share Data)
9M 2014
9M 2013
Change%
Q3 2014
Q3 2013
Change%
Sales Revenue






Home Services
2,335
2,228
4.8%
792
764
3.7%
Enterprise Solutions
1,508
1,340
12.6%
495
418
18.5%
Domestic Wholesale
1,818
1,632
11.5%
590
507
16.3%
Int'l Carriers Affairs
2,302
2,419
-4.8%
751
728
3.2%
Int'l Customers & Networks
1,184
737
60.7%
88
449
-80.4%







EBITDA
3,181
2,920
8.9%
646
1,134
-43.0%
EBITDA Margin %
34.8%
34.9%

23.8%
39.6%








EBIT
2,218
2,489
-10.9%
409
844
-51.5%
EBIT Margin %
24.2%
29.8%

15.1%
29.4%








NPAT
1,794
2,403
-25.3%
251
650
-61.4%
NPAT Margin %
19.6%
28.8%

9.2%
22.7%








EPS
1.01
1.41
-28.2%
0.15
0.38
-61.4%
Costs:
______
Costs increased year-on-year by EGP 338 million, or 20%. This was due to a number of factors. During the third quarter an additional amount of EGP 140 million was paid to the NTRA, over and above the regular annual fee as a result of delayed settlements for license fees. Advertising expenses linked to campaigns during the Holy Month of Ramadan and te's 160th anniversary also had an impact on the cost base. Interconnection costs and volume call and transmission discounts extended to local operators amounted for an additional EGP 89 million in cost. Furthermore, there was a statutory accumulated cost increase of EGP 101 million during the period, which related to the 10% annual salary increase and the newly structured incentive rewards program, both of which came into effect as of the first quarter 2014. 
EBITDA:
________
EBITDA for the third quarter 2014 was EGP 646 million, a decrease of 43.0% compared to the Q3 2013, directly attributable to lower revenues and higher costs. Margins on annual basis are still in line with management's expectations and the guidance announced earlier for mid-30s.
Income from Investments:
_______________________
Total Income from investments, mainly representing te's stake in VFE, rose to EGP 228 million, up 4.5% year-on-year and 4.3% quarter-on-quarter.
During the period under review, VFE generated revenues of EGP 3,379 million, flat year-on-year. Closing customers as at 30 September stood at 39.7 million, down 5.4% on previous quarter.
(Note: Vodafone Egypt's financial year is from 1 April to 31 March). 
Vodafone Egypt Financial Highlights:-
__________________________________
(In EGP Millions)
Second Quarter Ending Sep.
Previous Quarter Comparison

Sep. 2014
Sep. 2013
% Change
Q214/15
Q1 14/15
% Change







Total Revenue
6,756
6,713
0.64%
3,379
3,377
0.1%







Net Profit
993
1,054
-5.82%
507
486
4.3%







CAPEX
1,417
873
62.26%
780
637
22.4%
Vodafone Egypt Operational Highlights:-
_____________________________________

Second Quarter Ending Sep.
Previous Quarter Comparison

Sep. 2014
Sep. 2013
% Change
Q214/15
Q1 14/15
% Change
Closing Customers (000's)
39,679
41,512
-4.4%
39,679
41,938
-5.4%







Net Adds (000's)
-2,394
3,256
-173.5%
-2,259
-135
1567.1%







Total Voice Minutes (millions)
46,568
45,954
1.3%
23,265
23,303
-0.2%







Net Profit:-
_________
Directly attributable to lower sales revenues and higher costs, te's consolidated Net Profit After Tax for Q3 2014 reached EGP 251 million versus EGP 650 million in Q3 2013, an 61.4% decline. This represents a NPAT margin of 9.2%. 
Balance Sheet - Summary:
_________________________
(In EGP Millions)
9M 2014
FY 2013
Change%
Current Assets
10,093 
11,030 
-8.5%




Net Fixed Assets
10,882 
11,243 
-3.2%




Long Term Investments
9,244 
8,693 
6.3%




Other Long Terms Assets
1,818 
1,672 
8.7%




Total Assets
32,037 
32,638 
-1.8%




Current Liabilities (Excl. STD)
4,370 
3,727 
17.3%




CPLTD
84 
107 
-21.7%




LTD
405 
475 
-14.8%




Other Non-Current Liabilities
5 
12 
-56.9%




Total Liabilities
4,864 
4,322 
12.6%




Total Shareholder Equity
27,173 
28,316 
-4.0%




Total Liabilities & Shareholder Equity
32,037 
32,638 
-1.8%
Cash Flow - Summary:
_____________________
(In EGP Millions)
9M 2014
9M 2013
Change%
Net Cash Provided By Operating Activities
1,203 
1,345 
-10.6%




Net Cash Flows from Investing Activities
-1,776
-305
483.1%




Net Cash Flows from Financing Activities
-2,344
-2,324
0.9%




Net Change In Cash and Cash Equivalents during the Period
-2,917
-1,283
127.3%




Translation Differences of Foreign entities
-1
5
-128.9%
Cash & Cash Equivalents at the Beginning of the Period
5,644
6,325
-10.8%




Cash and Cash Equivalents at the End of the Period
2,726 
5,047 
-46.0%
Investment in Infrastructure / Capital Expenditure:
_______________________________________________
Capital expenditure for Q3 2014 reached EGP 445 million an increase of 18.4% on the previous quarter Q2 2014 and in line with management expectations. Taken over a cumulative nine month period, capital expenditure in 2014 totals EGP 1,120 million, representing 12.23% of total revenues. The higher level of capital expenditure is primarily attributable to the previously announced investments being made to upgrade te's nationwide access network, from copper-based technologies to modern fiber-based technologies.
Net Debt Position:
_________________
te continues to boast a very healthy balance sheet, with a net cash position of EGP 2,254 million at Q3 2014, a reflection of the cash generative nature of te's business.
To download a complete copy of te's Q3 2014 Consolidated Financial Results Statements and notes to these statements, please refer to the attached pdf: http://ir.te.eg/FinancialStatements
To download a complete copy of te's Q3 2014 Standalone Financial Results Statements and notes to these statements, please refer to the attached pdf:http://ir.te.eg/EarningRelease
- Ends -
For Further Information:
Investor Relations Contacts
Mohamed Kamal
General Manager of Investor Relations
Tel: +202 3131 5219
Fax: +202 3131 6115
E-mail: investor.relations@te.eg
Notes to Editors:
.
Within this statement, we may make forward-looking statements regarding future events or the future performance of the Company. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. When relying on forward-looking statements, you should carefully consider the political, economic, social and legal environment in which Telecom Egypt operates. Such forward-looking statements speak only as of the time of this release today. Accordingly, Telecom Egypt does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise other than as required by applicable laws, the Listing Rules or Prospectus Rules of the United Kingdom Listing Authority, the Egyptian Financial Supervisory Authority or The Egyptian Exchange. The documents filed from time to time with these authorities may identify important factors that could cause actual results to differ materially from those contained in any forward-looking statements.
About Telecom Egypt:
..
Telecom Egypt (te), Egypt's incumbent telecommunications operator, started its operations in 1854 with the first telegraph line in Egypt. Then it was corporatized in 1998 to replace the former Arab Republic of Egypt National Telecommunication Organization (ARENTO). The Company is the largest provider of fixed-line services in the Middle East and Africa with 6.64 million subscribers as at 30 September 2014.
te provides retail telecommunication services including access, local, long distance and international voice, Internet and data, and other services. The company also provides wholesale services including bandwidth capacity leasing to ISPs, and national and international interconnection services. te's services also include the provision of narrowband and broadband internet access through its subsidiary TE Data. TE Data has active operations in Egypt and Jordan.
te currently participates in the mobile segment in Egypt by providing mobile interconnectivity through its current, increased 44.95% holding in Vodafone Egypt, one of the three existing Egyptian mobile operators.
TE's shares and GDRs (Ticker: ETEL.CA; TEEG.LN) are traded on The Egyptian Exchange and the London Stock Exchange.

This information is provided by RNS
The company news service from the London Stock Exchange
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