Emirates Telecommunications Corporation Etisalat

Transcription

1 Emirates Telecommunications Corporation Etisalat Earnings Release Fourth Quarter th February 2015, Abu Dhabi

2 Financial Highlights for Q Aggregate subscriber base reached 169 million representing net addition of 21 million subscribers during the last 12 months; Consolidated revenues for the fourth quarter amounted to AED 13.0 billion and increased year over year by 33%; Consolidated EBITDA for the fourth quarter totaled AED 5.6 billion, representing an increase of 28% year on year and resulting in EBITDA margin of 43%; Consolidated net profit after Federal Royalty amounted to AED 2.1 billion resulting in a net profit margin of 16% and increased year over year by 47%; and Consolidated capital spending increased 28% to AED 2.79 billion, representing 21% of the fourth quarter consolidated revenues; Financial Highlights for FY2014 Consolidated revenues amounted to AED 48.8 billion and increased year over year by 26%; Consolidated EBITDA totaled AED 23.4 billion, resulting in EBITDA margin of 48%; Consolidated net profit after Federal Royalty amounted to AED 8.9 billion and increased year over year by 26%; Consolidated capital spending increased 41% to AED 8.9 billion, representing 18% of the consolidated revenues; and Proposed final dividend payout of 70 fils per share for 2014, representing a dividend payout ratio of 62% and a dividend yield of 6%. In addition, the Board of Directors has proposed issuance of 10% bonus share. Key Developments in FY2014 Etisalat successfully completed the acquisition of 53% stake in Maroc Telecom Etisalat successfully issued its inaugural bond under the GMTN programme listed on the Irish Stock Exchange and the proceeds used to repay the bank syndication facilities; Etisalat and Maroc Telecom signed Sale Purchase Agreement related to Etisalat s shareholding in the operating companies under Atlantique Telecom in West Africa; Credit Ratings Agencies S&P, Fitch and Moody s affirmed Etisalat high credit Ratings at AA-/A+/Aa3 with stable outlook ; Ufone acquired 3G license and was the first operator to launch 3G services in Pakistan Etisalat Nigeria and IHS signed tower sale & lease back agreement. Etisalat UAE s mobile network first in the region to upgrade to 700 Mbps 4G LTE tri-band carrier aggregation technology. Etisalat showcases for the first time in the region, 5G mobile broadband services at Gitex Technology Week. 2 P a g e

3 Statement from Eissa Mohamed Al Suwaidi, Chairman of Etisalat Group Etisalat Chairman H.E. Eissa al-suwaidi said: 2014 was an auspicious year for Etisalat, It is one where the company has experienced growth across the business, which has seen increased revenues and profits, as well as growth in the number of subscribers, but also seen our footprint grow internationally. This is a landmark moment in our history and a considerable achievement towards our objective of being recognised as the leading operator in emerging markets. I want to thank the leadership of the UAE, who have always unwaveringly supported Etisalat. With the commitment of our world-class employees across 19 operations, the continued support of our investors, and the input and cooperation of our millions of subscribers, 2015 will no doubt continue this pattern of success. Statement from Ahmad Abdulkarim Julfar, CEO of Etisalat Group Ahmad Julfar, Group Chief Executive Officer, Etisalat, commented: 2014 was a milestone year for Etisalat. It was a year where we have taken the Group forward in terms of our objective to be recognised as the leading telecoms operator in emerging markets. Our expansion in Africa, which increased our international presence to 19 markets across the MENA region, was accompanied by strong figures in our international operations the continuance of steady growth for our operations in the UAE, and an accelerated effort to spearhead the development of 5G technology through leading global partnerships. Our aim is to not only realise financial benefits, but to enact real, transformational change for the millions of customers we serve. We are building trust within these communities, which will allow us to be the most reliable partner in these markets when the time comes to deliver the next round of technological achievements. This long-term commitment is what underpins our current success, but strengthens our ability to prosper in the future. Our growth in these emerging markets will help to secure long-term success for Etisalat, but it is the rapid growth of data usage that holds the key to the future of our industry. New, transformative platforms such as M2M and mobile identities, as well as the digitisation of traditional forms of information transfer are taking the industry to exciting new levels. In 2014 Etisalat was the first operator in the Middle East to offer Embedded SIM technology in line with a standard specification. Etisalat is also leading the way in the efforts to agree a common international Embedded SIM specification, ultimately allowing devises to be connected anywhere in the world. The future is full of challenges, but Etisalat is well placed to meet them. With the continued support of the UAE Government, our shareholders, and our customers, I have no doubt that we are up to the task of continuing the impressive track record of success that has been our hallmark. Update on Corporate Actions Etisalat, Atlantique Telecom SA ( AT ) and Etisalat International Benin Limited ( EIBL ) successfully completed the sale of Etisalat s shareholdings in its operations in Benin, the Central African Republic, Gabon, Cote D Ivoire, Niger, Togo and Prestige Telecom to Maroc Telecom. The final consideration in return for Etisalat s equity in and receivables (including shareholder loans) from these seven companies amounts to 474 million. 3 P a g e

4 Subscribers % % % Nigeria evidenced strong subscriber growth in the year with year over year growth of 24% by adding 4.1 million net additions and closing the year with 21.1 million subscribers. In Pakistan, subscriber base declined by 7% year over year to 26.3 million impacted by the subscriber registration exercise mandated by the industry regulator and the intense competitiveness of the mobile segment. Q4'13 Q3'14 Q4'14 Aggregate Subscribers (Mn) YoY % Revenue Etisalat Group aggregate subscribers as at the fourth quarter of 2014 was at 169 million reflecting a 14% increase year over year. The net addition of 21 million subscribers in the year was mainly a factor of the acquisition of Maroc Telecom as well as good subscriber growth in the UAE and Nigeria. Quarter over quarter subscribers declined by 6% due to alignment of definition in one of the operating companies within the Group definition. In the UAE the active subscriber base grew to 11.0 million subscribers in the fourth quarter of 2014 representing a year on year growth of 6% and quarter over quarter growth of 2%. Subscriber growth was mainly driven by strong growth in the mobile and elife segments. The mobile subscriber base grew year on year by 7% to over 9.0 million subscribers representing a net addition of 0.6 million subscribers of which 34% was in the high quality postpaid segment. Fixed line subscriber segment contracted 5% year on year as we continued our efforts to migrate subscribers to the elife segment that continued to drive consistent growth with 16% year on year increase. Total broadband segment grew by 8% year on year to 1.0 million subscribers. For Maroc Telecom the subscriber base exceeded 40 million customers as at 31 December 2014, representing a year over year growth of 8%. This growth is mainly attributable to international operations that grew by 17%. 15% % 33% % 25% Q4'13 Q3'14 Q4'14 FY'13 FY'14 AED Bn YoY % Etisalat Group s consolidated revenue for the fourth quarter of 2014 amounted to AED 13.0 billion with growth accelerating by 33% in comparison to the same period last year. Full year consolidated revenue increased by 25% to AED 48.8 billion driven by strong performance of domestic operations and the consolidation of Maroc Telecom operations. Excluding Maroc Telecom, consolidated revenue in the fourth quarter of 2014 increased by 4% to AED 10.1 billion, and by 5% to AED 40.7 billion for the full year. In the UAE, revenue in the fourth quarter grew year on year by 11% to AED 7.0 billion and 3% quarter over quarter. For the full year revenue increased 9% to AED 27.1 billion, as a result of growth of the subscriber base with increased bundled propositions (voice and data) to consumer and enterprise segments. In addition, we witnessed significant 4 P a g e

5 increase in handset sales benefiting from the launch of iphone6. International consolidated operations was impacted by the consolidation of Maroc Telecom Group and discontinued operations of one of our subsidiaries. As a result, revenue for the fourth quarter of 2014 from International consolidated operations increased year over year by 72% to AED 5.9 billion, representing 45% of Group consolidated revenue. Full year revenue generated internationally grew year-onyear by 55% resulting in 44% contribution to Group revenue up from 35% for the full year In Egypt, revenue for the fourth quarter of 2014 was AED 1.3 billion, a 3% decrease in comparison to the same period last year impacted by currency devaluation, while increased 8% from the third quarter of Revenue for the full year 2014 was AED 4.8 billion, increasing by 2% from the prior year mainly attributed to growth in the data segment. Maroc Telecom consolidated revenues for the fourth quarter of 2014 amounted to AED 3.0 billion and for the full year 12.7 billion increasing by 2% year-onyear. Revenue growth is mainly attributable to double digit revenue growth in the international operations and lower revenue decline in Morocco. In Pakistan operations, revenue for the fourth quarter increased by 4% to AED 1.1 billion as compared to the same period in 2013, while it declined by 2% as compared to the third quarter of Revenue growth was driven by data services, especially broadband due to the strong growth in DSL and EVO segments whose subscribers base increased yearover-year by 24% and 46% respectively. Revenue for the full year of 2014 was AED 4.7 billion, a decline of 1% from the prior year on falling international incoming traffic that was not fully compensated by the strong performance of the fixed and wireless broadband. Operating Expenses 64% 61% Consolidated operating expenses for the fourth quarter of 2014 was AED 9.5 billion, an increase of 51% from the same quarter of the previous year. For the full year, consolidated operating expenses increased by 30% from AED 31.8 billion in 2013 to AED 31.8 billion in This increase was mainly due to the consolidation of the results of Maroc Telecom Group. expenses are: 73% % % Q4'13 Q3'14 Q4'14 FY'13 FY'14 AED Bn YoY Key components of operating Staff expenses increased 41% to AED 1.9 billion for the fourth quarter of 2014 as compared to the same period of last year. For the full year 2014, staff expenses increased by 21% to AED 6.2 billion. This increase is due to the consolidation of Maroc Telecom Group and adjusting the salaries to account for inflationary level on some of our operations. As a percentage of revenue staff costs remained flat year over year at 13%. Direct cost of Sales increased year over year by 29% to AED 2.7 billion in the fourth quarter of 2014, and by 21% to AED 10.5 billon for the full year. However, as a percentage of revenues it declined by 1 point to 21% of revenues in comparison to the same quarter of last year. Depreciation and Amortization expenses doubled to AED 2.4 billion in the fourth quarter of 2014 as compared to the same period in 2013, and increased by 50% to AED 6.8 billion for the full year. As a percentage of revenues, depreciation and amortization expenses increased 2 points to 14% of 2014 full year revenue. 5 P a g e

6 Network costs increased 49% to AED 0.7 billion in the fourth quarter of 2014 as compared to the same period in 2013 and represented 5% of revenues. Full year network costs increased 32% to AED 2.8 billion and represented 6% of revenues. Marketing expenses increased by two folds to AED 0.6 billion in the fourth quarter of 2014 as compared to the same period in 2013 and represented 5% of the quarter revenues. Full year marketing expenses increased 46% to AED 1.3 billion and represented 3% of revenues for Other operating expenses increased 57% to AED 1.6 billion in the fourth quarter as compared to the same quarter of last year. Full other operating expenses increased by 60% to AED 4.7 billion, while as a percentage of revenues it increased 2 points to 10% of revenues for EBITDA 45% % % % 48% Q4'13 Q3'14 Q4'14 FY'13 FY'14 AED Bn EBITDA Margin Group Consolidated EBITDA for the fourth quarter of 2014 increased by 28% to AED 5.6 billion while EBITDA margin declined 2 points to 43% year on year. EBITDA decreased 20% with the EBITDA Margin declining 10 points as compared to the third quarter of This was due to a number of oneoffs related to Voluntary Separation Scheme in Pakistan, provisions for disputes on interconnection rates in Egypt and provisions for bad debts and tax audits in other operations. For the full year, EBITDA grew to AED 23.4 billion representing a year-over-year growth of 24% in 2014, while EBITDA margin declined 1 point to 48%. EBITDA growth was mainly due to consolidation of Maroc Telecom operations and continued strong growth in the domestic operations. Excluding Maroc Telecom, EBITDA in the fourth quarter of 2014 was AED 3.6 billion, while full year EBITDA was AED In the UAE, EBITDA in the fourth quarter of 2014 was AED 3.5 billion increasing year-over-year by 5% leading to an EBITDA margin of 51% in comparison to 53% in the previous year. EBITDA declined 8% with EBITDA margin down by 6 points in comparison to the third quarter of 2014 mainly attributed to a change in revenue mix that was impacted by a record sales of handsets that have low margins, as well as higher interconnection costs. Full year EBITDA in 2014 increased by 6% to AED 15.0 billion resulting in EBITDA margin of 55%. EBITDA of International consolidated operations increased year over year by 146% to AED 2.2 billion in the fourth quarter, resulting in a 40% contribution to Group consolidated EBITDA, an improvement of 20 points compared to similar prior period. For the full year EBITDA increased by 107% to AED 8.4 billion contributing 36% to Group Consolidated EBITDA. For Egypt, EBITDA in the fourth quarter increased year on year by 2% to AED 0.4 billion and EBITDA margin improved by 1 point to 31%, while declined by 16% quarter over quarter and EBITDA margin by 9 points. EBITDA in the fourth quarter was impacted by one-off provision for disputes on interconnection rates with one of the operators in Egypt. Adjusting for this item, EBITDA margin in the fourth quarter would have been 38%. EBITDA for the full year was AED 1.8 billion with an EBITDA margin of 37%, 3 points higher than 2013 prior to the adjustment. This improvement in EBITDA is driven by improved revenue trend coupled with cost optimization. In Pakistan EBITDA in the fourth quarter of 2014 declined year on year 93% to AED 0.03 billion. This decline is mainly attributed to a one-off provision related to the Voluntary Separation Scheme (VSS). 6 P a g e

7 Adjusting for this item, EBITDA margin would have been 29% in-line with the third quarter EBITDA margin. EBITDA for the full year declined year over year by 25% to AED 1.3 billion with EBITDA margin declining by 9 points to 27%. Adjusting for VSS impact, EBITDA margin would have been 33%, down 2 points from prior year mainly due to lower revenue from international calls and higher network and staff costs. Maroc Telecom s consolidated EBITDA for the fourth quarter amounted to AED 1.5 billion, resulting in EBITDA margin of 53%. Full year EBITDA amounted to AED 6.9 billion with EBITDA margin declining 3 points to 54%. This decline is mainly due to lower EBITDA in Morocco that declined by 6% in MAD reflecting the increase in interconnection costs; however, it was partially offset by increase in the EBITDA level of the international operations that grew by 5%. Federal Royalty Net Profit & EPS Q4'13 Q3'14 Q4'14 FY'13 FY'14 Net Profit (AED bn) EPS Consolidated net profit after Federal Royalty increased year over year by 47% to AED 2.1 billion in the fourth quarter of 2014 resulting in higher profit margin of 2 points to 16%. Full year net profit increased by 26% to AED 8.9 billion resulting in profit margin of 18%. The increase in profit is attributed to higher EBITDA level, lower royalty and impairment charges that was partially offset by higher depreciation and amortization expenses, lower share of results of associates, higher finance costs and forex losses (0.1) Earnings per share (EPS) amounted to AED 0.27 in the fourth quarter of 2014 and AED 1.12 for the full year of Q4'13 Q3'14 Q4'14 FY'13 FY'14 (AED bn) Federal Royalty for the fourth quarter of 2014 amounted to a negative of AED 0.1 billion, representing a year over year decline of 112%. Federal Royalty for the year amounted to AED 5.3 billion, representing a year over year decline of 13%. Effective royalty rate as a percentage of net profit before Federal Royalty reached 37% a decline of 9 points from the prior year level. On 25th of February 2014 the Board of Directors has resolved to propose a final dividend for the second half of 2014 at the rate of 35 fils per share, bringing the full year dividend to 70 fils per share. In addition, the Board of Directors has proposed a 10% bonus share. This proposal is subject to shareholder approval at the Annual General Meeting scheduled for the 24th March Final dividend to be paid on 13th of April 2015 to the shareholders registered as at the closing of the register on Sunday, 5th April P a g e

8 Capex 8.9 expenditure. Full year capital expenditures in consolidated international operations amounted to AED 6.3 billion, an increase of 48% from year 2013 level. 22% 14% % % 18% Q4'13 Q3'14 Q4'14 FY'13 FY'14 Capex Intensity Consolidated capital expenditure increased year over year by 28% to AED 2.7 billion in the fourth quarter of 2014 resulting in a capital intensity ratio of 21%. This increase is due to consolidation of Maroc Telecom as well as to higher capital spending in the UAE operation. Full year capital expenditure increased by 41% to AED 8.9 billion resulting in capital intensity ratio of 18% compared to 16% in the prior year. This increase in capital spending is impacted by the 3G license acquisition and 2G license renewals in Pakistan and consolidation of Maroc Telecom. Adjusting for these items, capital expenditure would have been AED 5.8 billion and capital intensity ratio 14%. In the UAE, capital expenditure in the fourth quarter was committed to mobile network modernization and coverage in addition to expanding FTTH/eLife footprint. Capital expenditure during the quarter amounted to AED 0.9 billion, a 79% increase in comparison to the same period last year. Capital intensity ratio was 13%, 5 points higher than the same quarter of the prior year and also 3 points higher as compared to the third quarter of Capital expenditures in consolidated international operations in the fourth quarter of 2014 increased by 12% to AED 1.8 billion compared to the same period last year and represented 66% of total Group capital In Egypt capital expenditure for the fourth quarter decreased by 30% year over year to AED 0.3 billion resulting in a capital intensity ratio of 26%. Full year capital expenditure exceeded AED 1.0 billion resulting in a capital intensity ratio of 21%. Capital spending focused on capacity enhancement to address the increased demand for data. In Pakistan, capital spend was significantly higher in the year due to acquisition of a 3G licence and renewal of the 2G licence as well as the rollout of the network. Capex in the fourth quarter amounted to AED 0.4 billion representing a 22% decline compared to the same period last year. For the full year, capital expenditure was AED 3.0 billion, up 113% year on year and capital intensity ratio of 63%. Adjusting for the license acquisition and renewal, capital intensity ratio would have been 32%. In Maroc Telecom, capital expenditure for full year amounted to AED 2.0 billion, resulting in a capital intensity ratio of 17%. International operations contributed 31% to total capital expenditures and increased year over year by 29%. Capital expenditures in Morocco focused on increasing coverage and improving service quality of voice and data traffic. Debt Q4'13 Q3'14 Q4'14 (AED bn) Total consolidated debt amounted to AED 22.2 billion as of December 2014, as compared to AED 5.9 billion 8 P a g e

9 as at 31 December 2013; an increase of AED 16.4 billion reflecting primarily the issuance of bonds to finance the acquisition of 53% stake in Maroc Telecom and the first-time consolidation of Maroc Telecom s results. Consolidated debt breakdown by operations as of 31 December 2014 is as following: Etisalat Group (AED 14.2 billion) Maroc Telecom (AED 1.9 billion) Etisalat Misr (AED 1.5 billion) PTCL Group (AED 1.5 billion) Etisalat Afghanistan (AED 1.5 billion) Atlantique Telecom (AED 1.4 billion) Etisalat Sri Lanka (AED 0.3 billion) 57% of the debt balance is of long-term maturity that is due beyond Consolidated cash balance amounted to AED 18.6 billion as of 31 December 2014 leading to a net debt position of AED 3.7 billion. Currency mix for external borrowings is 52% in Euros, 23% in US Dollars,5% in Egyptian Pounds and 20% in various currencies 9 P a g e

10 Profit & Loss Summary (AED m) Q4 13 Q3 14 Q4 14 QoQ YoY Revenue 9,774 13,244 13,044-2% +33% EBITDA EBITDA Margin 4,372 6,977 5,583-20% +28% 45% 53% 43% -10pp -2pp Federal Royalty 532 1,720 (65) -104% -112% Net Profit 1,453 2,219 2,141-4% +47% Net Profit Margin 15% 17% 16% 0pp +2pp Balance Sheet Summary (AED m) Dec 13 Dec 14 Cash & Cash Equivalents 15,450 18,543 Total Assets 85, ,585 Total Debt Net Cash / (Debt) 5,872 22,229 9,579 (3,686) Total Equity 49,593 60,927 Cash Flow Summary (AED m) FY 13 FY 14 Operating 12,974 17,209 Investing (4,854) (24,102) Financing (6,585) 9,162 Net change in cash 1,535 2,268 Effect of FX rate changes (19) 834 Ending cash balance 15,450 18, P a g e

11 Average Rates Closing Rates Foreign Exchange Rates Q4 13 Q4 14 YOY Q4 13 Q4 14 YOY EGP - Egyptian Pounds % % SAR - Saudi Riyals % % CFA - Central African Francs % % TZS - Tanzanian Shillings % % NGR - Nigerian Naira % % PKR - Pakistani Rupees % % AFA - Afghanistan Afghani % % LKR Sri Lankan Rupees % % SDG - Sudanese Pounds % % MAD - Moroccan Dirham % % Reconciliation of non-ifrs Financial Measurements We believe that EBITDA is a measurement commonly used by companies, analysts and investors in the telecommunications industry, which enhances the understanding of our cash generation ability and liquidity position, and assists in the evaluation of our capacity to meet our financial obligations. We also use EBITDA as an internal measurement tool and, accordingly, we believe that the presentation of EBITDA provides useful and relevant information to analysts and investors. Our EBITDA definition includes revenue, staff costs, direct cost of sales, regulatory expenses, operating lease rentals, repairs and maintenance, general financial expenses, and other operating expenses. EBITDA is not a measure of financial performance under IFRS, and should not be construed as a substitute for net earnings (loss) as a measure of performance or cash flow from operations as a measure of liquidity. The following table provides a reconciliation of EBITDA, which is a non-ifrs financial measurement, to Operating Profit before Federal Royalty, which we believe is the most directly comparable financial measurement calculated and presented in accordance with IFRS. EBITDA Depreciation & Amortization Exchange Gain/ (Loss) (AED m) Q4 13 Q3 14 Q4 14 FY 13 FY 14 Share of Associates and JV s results 4,372 6,977 5,583 18,901 23,365 (1,253) (1,738) (2,382) (4,607) (6,796) (47) (60) 320 (141) (12) (1,171) 1,754 (461) Impairment and other losses - - (156) (1,374) (932) Operating Profit before Federal Royalty 3,634 5,168 2,194 14,533 15, P a g e

12 Disclaimer Emirates Telecommunications Corporation and its subsidiaries ( Etisalat or the Company ) have prepared this presentation ( Presentation ) in good faith, however, no warranty or representation, express or implied is made as to the adequacy, correctness, completeness or accuracy of any numbers, statements, opinions or estimates, or other information contained in this Presentation. The information contained in this Presentation is an overview, and should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. Where this Presentation contains summaries of documents, those summaries should not be relied upon and the actual documentation must be referred to for its full effect. This Presentation includes certain forward-looking statements. Such forward looking statements are not guarantees of future performance and involve risks of uncertainties. Actual results may differ materially from these forward looking statements. About Etisalat Etisalat is an international, blue-chip organisation with operations in 19 countries across the Middle East, Africa and Asia. It is one of the leading telecom operators with one of the largest market capitalization among Middle East, African and Asian telcos. It is a highly rated telecom company with ratings from Standard & Poor s, Moody s and Fitch (Aa3/AA-/A+). Etisalat s shareholding structure consists of 60% held by the Emirates Investment Authority and 40% free float. Etisalat (Ticker: Etisalat) is quoted on the Abu Dhabi Stock Exchange (ADX). Investors: Investor Relations ir@etisalat.ae Website: 12 P a g e