Etisalat Group2Q 2016 Results Presentation
28 July 2016
Emirates Telecommunications Group Company PJSC and its subsidiaries (“Etisalat Group” or the “Company”) have prepared this presentation (“Presentation”) in good faith, however, no warranty or representation, express or implied is made as to the adequacy, correctness, completeness or accuracy of any numbers, statements, opinions or estimates, or other information contained in this Presentation.
The information contained in this Presentation is an overview, and should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary.
Where this Presentation contains summaries of documents, those summaries should not be relied upon and the actual documentation must be referred to for its full effect.
This Presentation includes certain “forward-looking statements”. Such forward looking statements are not guarantees of future performance and involve risks of uncertainties. Actual results may differ materially from these forward looking statements.
2
Disclaimer
1. Business Overview
Saleh Abdulla AlabdooliChief Executive OfficerEtisalat Group
Etisalat Group Financial Highlights
4
Revenue growth despite currency depreciation in international markets; growth mainly attributed to UAE and MT Group operations
Healthy EBITDA margin above 50% level
Strong growth in net profit attributed to lower finance charges, better share of results from associates that was partially diluted by higher depreciation expenses
Capital expenditure is flat with higher spending in the international operations
(1) Financial figures are restated to exclude the impact of discontinued operations
2Q2016 Highlights
AED Million
Revenue
EBITDA
EBITDA Margin
Net profit
Net profit Margin
Capex
Capex/Revenue
Q2 2016 GrowthYoY%
GrowthQoQ%
13,326 +2% +4%
6,799 0% +6%
51% -1pp +1PP
2,305 +51% +16%
17% +6pp +2PP
1,795 -17% +10%
13% -3PP +1pp
H1 2016 GrowthYoY%
26,178 +1%
13,222 -1%
51% -1pp
4,316 +16%
16% +2pp
3,434 0%
13% 0pp
5
Q2 2016 Highlights
Financial Highlights
Positive organic revenue growth
Stable EBITDA with margin at 50% level
Strong increase in net profit
Interim dividends of 40 fils per share
Domestic Operations
Positive trends in subscribers acquisition
Solid revenue growth mainly driven by data
Improvement in profitability
InternationalOperations
Improved performance of the Int’l operations partially weakened by currency devaluation
Stable performance in Maroc Telecom Group
Strong performance in Egypt
Enhanced results in the mobile segment in Pakistan
Strategic Priorities
Confident in delivering 2016 financial guidance
Progress on portfolio optimisation
Defend leadership position in Key markets
Focus on cash flow generation
2. Financial Overview
Serkan OkandanChief Financial OfficerEtisalat Group
58%
24% 8%
8%
2%
UAE MT Egypt Pakistan Others
64%
24% 6%
5%1%
UAE MT Egypt Pakistan Others
Etisalat Group Financial Highlights
7(1) Financial figures are restated to exclude the impact of discontinued operations (Zantel & Canar)
Revenue Breakdown 2Q 2016 (AED m) EBITDA Breakdown 2Q 2016 (AED m)
UAE +3%
MT Group +3%
Egypt -3%
Pakistan -6%
UAE +3%
MT Group -1%
Egypt 0%
Pakistan 0%
YoY Growth YoY Growth
+2% 0%
13.3bn
6.8bn
(LC +12%)
(LC -4%)
(LC +20%)
(LC +3%)
Represents others
(LC +2%) (LC -2%)
Int’l Operations Financial Highlights 2Q 2016
8(1) Financial figures are restated to exclude the impact of discontinued operations
Revenue (AED m)/EBITDA (AED m) /EBITDA Margin (%)
YoY Growthin AEDMaroc Telecom Group
Revenue +3%3,201
EBITDA -1%1,631
EBITDA Margin -2pp51%
Etisalat Misr
Pakistan
Revenue -6%1,039
EBITDA 0%372
EBITDA Margin +2pp36%
2Q 2016
YoYGrowth in AED2Q 2016
Revenue & EBITDA (AED m) /EBITDA Margin (%) / YoY Growth %
Growth in MAD
-4%
+3%
+2pp
YoYgrowth in
PKR
Revenue -3%1,052
EBITDA 0%420
EBITDA Margin +2pp40%
YoYGrowth in AED2Q 2016
+12%
+20%
+2pp
YoYgrowth in
EGP
+2%
-2%
-2pp5,535 5,480 5,458
2,4872,364 2,459
Q2'15 Q1'16 Q2'16
Revenue EBITDA
45%
43%
45%
59%
19%
19%
UAE58%
Int'l41%
Others1%
Domestic vs. Int’l
13,124 13,326
239 81
37 71 10
Q2'15 UAE MT Group Egypt Pakistan Others Q2'16
Group Revenue
9Note: “Others revenues” consist of domestic non-telecom operations, other international operations, management fees, etc.
In Q2’16 consolidated revenue increased Y/Y by 2% attributed to UAE and MT Group operations
Growth in the UAE is attributed to higher fixed and mobile broadband
Revenues from international consolidated operations decreased by 1%, resulting in 41% contribution to Group revenues, 1 point lower than Q2’15 attributed to currency devaluation
― Growth in MT Group mainly driven by int’l operations
― Revenue growth in Egypt impacted by currency devaluation
― Revenue growth in Pakistan negatively impacted by increased competition in international traffic segment
Highlights
Revenue (AED m) and YoY growth (%) Sources of Revenue growth – Q2’16 vs Q2’15 (AED m)
Revenue by Cluster (Q2’16)
International
13,124 12,853 13,326
6% 1% 2%
Q2'15 Q1'16 Q2'16
Revenue YoY growth %
MT59%
Egypt19%
Pakistan19%
Others3%
UAE64%
Int'l36%
Group EBITDA
10
In Q2’16 consolidated EBITDA remained flat Y/Y at AED 6.8 billion
EBITDA in the UAE positively impacted by higher revenue and lower cost of handsets and marketing expenses.
EBITDA of consolidated international operations decreased Y/Y by 1%, resulting in 36% contribution to Group EBITDA, mainly due to currency devaluation.
― Positive contribution from Maroc Telecom, Egypt and Pakistan that grew in local currencies and diluted by currency devaluation
6,810 6,424 6,799
52% 50% 51%
Q2'15 Q1'16 Q2'16EBITDA EBITDA Margin
Highlights
EBITDA (AED m) & EBITDA Margin Sources of EBITDA growth – Q2’16 vs Q2’15 (AED m)
EBITDA by Cluster (Q2’16)
Domestic vs. Int’l International
6,810 6,799
17
2
137
Q2'15 UAE MT Group Egypt Pakistan Others Q2'16
Note: “Others EBITDA” consist of domestic non-telecom operations, other international operations, management fees, etc.
141
MT66%
Egypt17%
Pakistan15%
Others2%
Group CAPEX
11
2,166
1,6391,795
17%13% 13%
Q2'15 Q1'16 Q2'16
CAPEX CAPEX/Revenue
CAPEX (AED m) & CAPEX/Revenue Ratio (%)
In Q2’16 consolidated capex decreased Y/Y by 17% resulting
in Capex/ Revenue ratio of 13%.
Lower capital spend in the UAE
Capital expenditure in international operations decreased by
5% and contributed 67% of consolidated Group Capex
― Lower capex spend in MT Group due to 4G License
acquisition in Morocco in the prior year
― Higher capex spending in Egypt focused on network
expansion
HighlightsCAPEX by Cluster (Q2’16)
Domestic vs. Int’l International
Sources of Capex growth – Q2’16 vs Q2’15 (AED m)
10%
2,166 1,795
292 74
84
27 61
Q2'15 UAE MT Group Egypt Pakistan Others Q2'16
Note: “Others Capex” consist of domestic non-telecom operations and other international operations
MT Group52%
Egypt
23%
Pakistan24%
Others1%
UAE33%
Int'l67%
14%
Net cash position (AED m) Jun’15 Jun’16
Operating 5,576 4,862
Investing (3,419) (3,484)
Financing (2,170) (3,552)
Net change in cash (13) (2,173)
Effect of FX rate changes (251) 99
Reclassified as held for sales (1) (17)
Ending cash balance 18,277 19,332
Group Balance Sheet & Cash Flows
12
Balance Sheet (AED m) Dec-15 Jun-16
Cash & bank Balances 21,422 19,332
Total Assets 128,265 126,077
Total Debt 22,080 23,897
Net Cash / (Debt) (658) (4,566)
Total Equity 59,375 58,529
(1) Moody’s changed its view on the outlook of the UAE sovereign and consequently GRI.
Investment Grade Credit Ratings
Strong liquidity position
Maintained low net debt to EBITDA level
Operating cash flow impacted by change in working capital
Maintained high credit ratings; Outlook change is triggered
by Moody’s revised outlook of the UAE sovereign.
AA-/Stable
Aa3/Negative (1)
Highlights
Debt Profile: Diversified debt portfolio
13
Borrowings by Currency Q2 2016
Debt by Source Q2 2016 (AED m)
Borrowings by Operation Q2 2016 (AED m)
Repayment Schedule
15,322
5,023
2,2801,272
Group MT Group Egypt Pakistan
14,766
8,334
332 466
Bonds BankBorrowings
VendorFinancing
Others
1,298
5,004
1,178
16,418
2016 2017 2018 Beyond 2018
Euro40%
USD23%
MAD15%
EGP9%
Others13%
Group Dividends: Proposed dividend for H1 2016 of AED 40 fils per share
14
Interim Dividend Payout RatioInterim Interim Dividends and Dividends Per Share
HighlightsInterim Dividend & Earnings Per Share (AED)
Etisalat’s Board approved interim dividends of 40 fils per
share to be distributed from 14 August 2016 to the
shareholders registered in the shareholders’ register on 7
August 2016
(1) Represents diluted earnings per share
H1'12 H1'13 H1'14 H1'15 H1'16
DPS 0.25 0.35 0.35 0.40 0.40
EPS (1) 0.42 0.44 0.52 0.43 0.50
53.8%
72.8%
61.1%
93.7%
80.6%
2012 2013 2014 2015 2016
Payout Raio
1.98
2.77 2.77
3.48 3.48
0.25 0.35 0.35 0.40 0.40
2012 2013 2014 2015 2016
Interim Dividends (AED bn) DPS
15
Country by Country Financial Review
UAE: Growth in both top and bottom-line
16
Q2’15 Q1’16 Q2’16QoQ
GrowthYoY
Growth
Subs(1) (m) 11.3 12.0 12.1 +1% +7%
Revenue (AED m) 7,479 7,290 7,718 +6% +3%
EBITDA (AED m) 4,195 3,896 4,336 +11% +3%
EBITDA Margin 56% 53% 56% +3pp 0pp
Net Profit 1,864 1,885 2,057 +9% +10%
Net Profit Margin 25% 26% 27% +1pp +2pp
CAPEX 898 428 605 +41% -33%
CAPEX/Revenue 12% 6% 8% +2pp -4pp
Strong subscriber growth Y/Y driven by mobile and eLife segments
Revenue growth Y/Y attributed to growth in mobile and fixed broadband and growing subscriber base
EBITDA in absolute terms improved Y/Y due to higher revenue and lower cost of devices; Q/Q growth is due to higher revenue, lower staff costs and strict cost controls
Maintained stable EBITDA margin Y/Y
Net profit improvement Y/Y due to higher EBITDA and finance income partially diluted by higher depreciation expenses
Lower capital spending focused on modernisation of mobile network
(1) Subscriber numbers calculated as aggregate number of GSM, fixed, fixed broadband and eLife lines generating revenue during the last 90 days.
Highlights
1.42 1.84 1.90
7.46 8.23 8.32
115 110 112
Q2'15 Q1'16 Q2'16
Postpaid Prepaid Blended ARPU
UAE: Steady growth in subscribers base
17
0.93 0.84 0.82
133136 144
Q2'15 Q1'16 Q2'16
Fixed ARPL
(1) Mobile ARPU (“Average Revenue Per User”) calculated as total mobile voice, data and roaming revenues divided by the average mobile subscribers.(2) ARPL (“Average Revenue Per Line”) calculated as fixed line revenues divided by the average fixed subscribers.(3) Fixed broadband subscriber numbers calculated as total of residential DSL (Al-Shamil), corporate DSL (Business One) and E-Life subscribers.
Mobile Subs (m) & ARPU(1) (AED)
Fixed Broadband(3) Subs (m)
Fixed Subs (m) & ARPL(2) (AED)
eLife Subs – Double & Triple-Play (m)
0.82 0.89 0.91
404 389 404
Q2'15 Q1'16 Q2'16
E-Life (2P & 3P) ARPL
1.03 1.07 1.08
499 489 500
Q2'15 Q1'16 Q2'16
Fixed BB ARPL
Morocco62%
Int'l38%Morocco
62%
Int'l43%
Others-5%
Maroc Telecom: Recovery in Morocco while maintaining steady growth in Int’l subsidiariesMorocco, Benin, Burkina Faso, CAR, CDI, Gabon, Mali, Mauritania and Togo
18
Subscribers (m) Revenue (AED m) (1) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
50.8 53.1 53.0
Q2'15 Q1'16 Q2'16
3,122 3,119 3,201
53% 50% 51%
Q2'15 Q1'16 Q2'16
Revenue EBITDA %
Domestic vs. Int’l
Revenue Breakdown Q2’16
Int’l
712
779
638
24% 25%20%
Q2'15 Q1'16 Q2'16
CAPEX CAPEX/Revenue
Domestic vs. Int’l
Capex Breakdown Q2’16
Int’l
Historical subsidiaries
63%
New subsidiaries
37%
Historical subsidiaries
31%
New subsidiaries
69%
13% 14%
196
153
280
18% 13%27%
Q2'15 Q1'16 Q2'16
CAPEX CAPEX/Revenue
Egypt: Strong performance in local currency muted by currency devaluation
19
Total Subscribers (1) (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
1,090 1,165
1,052
38%35%
40%
Q2'15 Q1'16 Q2'16
Revenue EBITDA %
Revenue growth Y/Y impacted by currency devaluation
― Maintained strong revenue growth momentum in local currency at 12% level
Revenue growth is mainly attributed to continued upward trend in data revenues and higher voice contribution
EBITDA margin improvement on lower network costs
Increase in capex spending is attributed to acceleration in network rollout
Highlights
95 94 95
24% 24% 24%
Q2'15 Q1'16 Q2'16
Subscribers Market Share
(1) Subscribers and market share data as per statistic published by the Ministry of Information and Technology
22.0
24.9 23.6
Q2'15 Q1'16 Q2'16
1,111
1,028 1,039
33% 34% 36%
Q2'15 Q1'16 Q2'16
Revenue EBITDA %
313
212
286
28%21%
27%
Q2'15 Q1'16 Q2'16
CAPEX CAPEX/Revenue
Pakistan: Recovery in the mobile segment
20
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Subscriber growth Y/Y driven by mobile segment
Revenue growth Y/Y impacted by price competition in international voice segment and lower terminal sales that offset
the strong contribution from mobile data
EBITDA in absolute terms and EBITDA margin improvements as a results of cost optimization initiatives
Lower capex spending with relatively stable intensity ratio
Highlights
22.8 21.8
22.3
Q2'15 Q1'16 Q2'16
1,042 1,083 998
13% 14% 13%
Q2'15 Q1'16 Q2'16
Revenue EBITDA %
38
47
87
4% 4%
9%
Q2'15 Q1'16 Q2'16
CAPEX CAPEX/Revenue
Nigeria: Growth impacted by challenging regulatory and uncertain macro economic environments
21
Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%)
Subscriber growth Y/Y in Q2 is impacted by subscriber disconnections in compliance with the regulatory mandatedregistration process.
— Resumed Q/Q subscriber growth in Q2
Revenue growth Y/Y in local currency of 1% impacted by lower subscriber base, lower data prices and decline in handset sales
EBITDA in absolute term is flat in local currency due to higher interconnection and termination costs, and higher rental charges; resulting in similar EBITDA margin
Capex spend resulted in intensity ratio of 9%
Highlights
2016 Actual Against Guidance: Confident in delivering the full year management guidance
22
Revenue Growth %
EBITDA Margin%
CAPEX / Revenue %
Stable
~ 48% - 50%
Financial KPI
Guidance 2016In AED
Low single digits
~ 18%
Guidance 2016Constant
Currencies (1)
+1%
13%
ActualH1 2016In AED
+3%
Actual H1 2016Constant
Currencies
51%
(1) Constant currency: Financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for thecomparable prior-year period. In order to compute our constant currency results, we multiple or divide, as appropriate, our current AED results by the current year monthly average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year monthly average foreign exchange rates.
23
Etisalat Group Investor RelationsEmail: [email protected]
Website: www.etisalat.com/en/ir/index.jspr