Emirates Telecommunications Corporation Etisalat. Earnings Release Second Quarter 2015

Transcription

1 Emirates Telecommunications Corporation Etisalat Earnings Release Second Quarter 2015 Head Office: Etisalat Building PO Box 3838 Abu Dhabi, UAE Investor Relations: 1 P a g e

2 Financial Highlights for Q Consolidated revenues for the second quarter amounted to AED 13.3 billion and increased year over year by 6%; Consolidated EBITDA for the second quarter totaled AED 6.8 billion, representing an increase of 17% year on year and resulting in EBITDA margin of 51%; Consolidated net profit after Federal Royalty amounted to AED 1.5 billion resulting in a net profit margin of 12% and decreased year over year by 39%; Proposed interim dividend for the second half of the fiscal year 2015 of 04 fils per share, representing an increase of 14% year on year; Consolidated capital spending decreased 36% to AED 2.2 billion, representing 16% of the second quarter consolidated revenues; and Aggregate subscriber base reached 168 million representing net loss of 15 million subscribers during the last 12 months; Key Developments in Q Etisalat Group successfully completes the tap issuance of US$400 million notes under its US$7bn GMTN Program; Etisalat signs SPA with Millicom for the sale of Etisalat s 85% shareholding in Zantel; Credit Ratings Agencies Standards & Poor s, Moodys and Fitch affirmed Etisalat high credit rating at AA-/Aa3/A+ with stable outlook; Maroc Telecom Group awarded 4G+ license and launched commercial services in Morocco; Etisalat UAE launches Mobile Cashier - the first-of-its-kind solution in the UAE; Etisalat Group Named Operator of the Year at the 2015 TMT Finance and Investment MENA Awards; and Etisalat Group receives Global Telecoms Award for Business Service for its Mobile Connect service in conjunction with GSMA and Apigee 2 P a g e

3 Statement from Essa Al Suwaidi, Chairman of Etisalat Group Eissa Al Suwaidi, Chairman Etisalat Group, said: Etisalat continues to strengthen its position as a leading operator in emerging markets despite the challenges in some of our operating markets. This is an indicator of the Company s strong foundations and we remain committed to our long-term vision for continued success. I want to praise the decision of the Federal Government to allow institutional and foreign ownership of Etisalat s equity as this will have a positive impact both on Etisalat s shareholders and Abu Dhabi Stock Exchange and I want to thank the wise leadership for supporting the telecommunications sector. He added: Etisalat is also fully behind the Government s drive to establish the UAE as a leader in the telecommunications sector. The recent launch of a bit streaming agreement with du is indicative of an industry united in delivering the best for the nation within a healthy competitive environment. Statement from Ahmad Abdulkarim Julfar, CEO of Etisalat Group Commenting on the financial results Ahmad Julfar, Group Chief Executive Officer, Etisalat commented: Etisalat continues to deliver long-term value to its shareholders and customers across the markets it operates in. This value is being delivered through our ability to continually innovate; a key determinant to delivering what our shareholders and customers aspire to. He added: This quarter s 6% increase in revenue is an indicator that Etisalat s long-term strategy for sustainable growth in our markets is the right approach, despite the decline in profit in Quarter 2, which is due to higher depreciation and amortization charges, the impact of Mobily s additional provision for accounts receivables, higher net finance costs and incurring forex losses during the period against forex gains in the same period last year. He continued, While the future is full of exciting potential, technological innovation in the telecommunication sector is key to realising that potential. In this quarter Etisalat has taken further steps forward in developing the next generation of mobile technology. Working closely with our global partners, Etisalat continues to explore and initiate the future networks and platforms, which are critical to enabling the Smart City solutions. Whether it is more efficient public services or streaming entertainment online, Etisalat is leading the way in developing platforms that will be critical to success. It is a dynamic future that is enabled by the telecom sector, and one that Etisalat is helping to shape. He concluded: Robust financials combined with a drive for innovation is the foundation that has helped establish Etisalat as a leading and most admired telecommunication company in emerging markets. The continued success shown during 2015 bears testament to this approach and it is a strategy for success that Etisalat will continue to follow. Financial Overview 3 P a g e

4 Subscribers % 19% -8% Aggregate Subscribers (Mn) YoY Etisalat Group aggregate subscribers as at the second quarter of 2015 was 168 million reflecting an 8% decrease year over year. This decline was mainly driven by various factors including cleansing of subscriber base in few operations and regulatory imposed control measures in Pakistan and Egypt that slowed down the subscriber s acquisition. Quarter over quarter aggregate subscribers declined by 3% mainly due to operations in Pakistan and Mali. In the UAE, the active subscriber base grew to 11.3 million subscribers in the second quarter of 2015 representing a year on year growth 0.4% and was flat quarter over quarter. Subscriber growth was mainly driven by strong subscriber acquisition in mobile post-paid and in e-life segments. The mobile subscriber base grew year on year by 0.5% to 9.4 million subscribers representing a net addition of 44 thousand while postpaid segment grew by 201 thousand subscriber, representing year on year growth of 14%. Fixed line voice only subscriber segment contracted 8% year on year partially due to the migration of subscribers to elife segment that continued to drive consistent growth with 14% year on year increase. Total broadband segment grew by 9% year on year exceeding 1 million subscribers. For Maroc Telecom Group the subscriber base was 50.8 million customers at the end of the second quarter of 2015, representing a year over year growth of 32%. This growth is mainly attributable to consolidation of the newly acquired operations of Atlantique Telecom and to the operations in Burkina Faso and Mali. On a like-for-like basis Maroc Telecom s subscriber base increased by 5%. In Pakistan, subscriber base contracted by 21% year over year to 22 million impacted by the biometric verification process on the mobile segment initiated by the regulator, Pakistan Telecommunication Authority (PTA). On the fixed side; PTCL continues to grow DSL and EVO subscribers that increased year-over-year by 11% and 13%, respectively. Nigeria continues to evidence strong subscriber growth with year over year growth of 18% to 23 million subscribers as at 30 th June Quarter over quarter growth was 3%. Revenue % 30% % AED Bn YoY Etisalat Group s consolidated revenue for the second quarter of 2015 was AED 13.3 billion with growth of 6% in comparison to the same period last year. This growth is attributable to strong performance of the UAE operations and additional one more month (April-June in 2015 vs. May-June in 2014) consolidation of Maroc Telecom Group. In the UAE, revenue in the second quarter grew year on year by 9% to AED 7.5 billion and 4% quarter over quarter. This growth was as a result of strong performance in the mobile and fixed broadband, ICT segment and smartphones sales 4 P a g e

5 with the strong demand for IPhone 6 & Samsung S6 devices. International consolidated operations revenue for the second quarter of 2015 decreased year over year by 1% to AED 5.7 billion impacted by currency headwinds in some of the countries such as Morocco and Egypt, representing 43% of Group consolidated revenue. On a quarter over quarter basis, revenue increased by 2%. Maroc Telecom Group consolidated revenue for the second quarter of 2015 amounted to AED 3.1 billion. In local currency revenue grew year over year by 17% driven by consolidation of newly acquired operations and growth in historic international subsidiaries. As a result of the new acquisition, revenue from international operations increased year over year by 65%, resulting in 41% contribution to Maroc Telecom Group s consolidated revenue, an increase of 12 points compared to second quarter of On a like-for-like basis, revenue growth was flat at 0.1% year over year due to the competitive environment in Morocco that impacted revenue growth of the mobile segment while fixed segment continued to its growth. In Egypt, revenue for the second quarter of 2015 was AED 1.1 billion, a 10% decrease in comparison to the same period last year. This decline was magnified by currency depreciation that exceeded 7% level. In local currency, revenue declined yearover-year by 2% mainly driven by lower traffic, handsets sales and messaging services revenues while data services continued to perform well. In Pakistan, revenue for the second quarter decreased by 15% to AED 1.1 billion as compared to the same period in 2014, and increased by 1% as compared to the first quarter of Revenue was impacted by a highly competitive environment in the mobile segment and lower revenue stream from the long distance international business. Operating Expenses % 37% 2% AED Bn YoY Consolidated operating expenses for the second quarter of 2015 was AED 8.3 billion, an increase of 2% from the same quarter of the previous year and a 1% increase from the first quarter of Key components of operating expenses are: Staff expenses decreased 4% to AED 1.4 billion for the second quarter of 2015 as compared to the same period of last year. As a percentage of revenue, staff costs declined year over year 1 point to 10% mainly due to the Voluntary Separation Scheme (VSS) implemented in Pakistan during the last quarter of Direct cost of Sales increased year over year by 12% to AED 3.1 billion in the second quarter of 2015, and by 10% quarter over quarter. As a percentage of revenues it increased by 1 point to 23% in comparison to the same quarter of last year. Depreciation and Amortization expenses increased by 19% to AED 1.9 billion in the second quarter of 2015 as compared to the same period in 2014, and was flat as compared to the first quarter of As a percentage of revenues, depreciation and amortization expenses increased 2 points to 14% mainly due to continuing network investments in various countries and 2G/3G licenses renewed/acquired in Pakistan during the second quarter of Network costs decreased by 3% to AED 0.7 billion in the second quarter of 2015 as compared to the same period in 2014 and represented 5% of revenues. On a quarter to quarter basis, network costs decreased by 7%. 5 P a g e

6 Marketing expenses increased by 8% to AED 0.3 billion in the second quarter of 2015 as compared to the same period in 2014 and represented 2% of revenues. Compared to the first quarter of 2015 marketing expenses increased by 12%. Other operating expenses decreased by 29% to AED 1.1 billion in the second quarter as compared to the same quarter of last year and was flat quarter over quarter. As a percentage of revenues operating expenses decreased 4 points to 8% of revenues in the second quarter of EBITDA % % 51% AED Bn EBITDA Margin Group Consolidated EBITDA for the second quarter of 2015 increased by 17% to AED 6.8 billion while EBITDA margin increased 5 points to 51% year on year. Compared to the first quarter of 2015 EBITDA increased by 4% with the EBITDA Margin increasing 1 point. Growth in EBITDA was due to the continued growth trajectory of UAE operations and higher contribution from Maroc Telecom as compared to last year. In the UAE, EBITDA in the second quarter of 2015 was AED 4.2 billion increasing year-over-year by 9% leading to an EBITDA margin of 56%. This increase is mainly attributed to a higher revenue level and more rigorous cost control measures. In comparison to the first quarter of 2015, EBITDA increased by 3% with EBITDA margin maintained at the same level. International consolidated operations EBITDA increased year over year by 7% to AED 5.7 billion in the second quarter, resulting in a 37% contribution to Group consolidated EBITDA, a decline of 3 points compared to similar prior period. 97% of the consolidated international portfolio s EBITDA comes from Maroc Telecom, Pakistan and Egypt operations. Maroc Telecom Group s consolidated EBITDA for the second quarter amounted to AED 1.6 billion, leading to an EBITDA margin of 53%. In local currency, EBITDA increased year over year by 7% and is attributed to the newly acquired operations and to the performance of the historical international operations. Excluding the impact of the newly acquired subsidiaries, EBITDA growth is flat on a like-for-like basis. In Egypt, EBITDA in the second quarter declined year on year by 12% to AED 0.4 billion and EBITDA margin declined 1 point to 38%. EBITDA increased by 10% and EBITDA margin improved by 3 points quarter over quarter. The year over year decline in EBITDA is attributed to the higher network costs as a result of higher number of sites and increases in utility and electricity costs. In Pakistan, EBITDA in the second quarter of 2015 declined year on year by 20% to AED 0.4 billion. This decline is mainly attributed to lower revenue from mobile segment due to intensified competition as well as decline in the subscriber base and lower revenue stream from long distance international incoming traffic business. EBITDA margin decreased year on year by 2 points to 33%. Net Profit & EPS 6 P a g e

7 % % 10% Net Profit (AED bn) Adj. EPS Capex Intensity Consolidated net profit after Federal Royalty decreased year over year by 39% to AED 1.5 billion in the second quarter of Compared to the first quarter of 2015, net profit after Federal Royalty was down 30%. The decline in net profit after Federal Royalty is mainly attributed to one-off items recorded during the second quarter of 2014 as well as higher depreciation and amortization charges, lower share of profits from associates including the impact of Mobily s additional provision for accounts receivables, higher net finance costs, incurring forex losses during the period against forex gain in the same period of last year, and higher Federal Royalty charges Adjusted earnings per share (EPS) amounted to AED 0.18 in the second quarter of 2015; a 39% decrease from the same period last year and a 30% decrease compared to the first quarter of The Board of Directors has approved an interim dividend distribution for the six months period ended 30 June 2015 at the rate of 40 fils per share, representing an increase of 14% year on year. Interim dividend distribution of 40 fils per share will commence from 18 August 2015 to those shareholders registered in the Shareholders Register at the close of the business day on 9 August Capex Consolidated capital expenditure declined year over year by 36% to AED 2.2 billion in the second quarter of 2015 resulting in a capital intensity ratio of 16%. This decline is due to the high capex spend in the second quarter of 2014 that was attributed to the 3G license acquisition and 2G license renewal in Pakistan that amounted to AED 1.4 billion. Adjusting for this one-off in last year, capital spending would have increased year over year by 11% mainly due to the UAE operation and Maroc Telecom Group. In the UAE, capital expenditure amounted to AED 0.9 billion in the second quarter and was focused on mobile access network modernization, submarine cable system and enhancement of elife product capabilities. Capital expenditure increased by 83% in comparison to the same period last year and increased by 44% as compared to the first quarter of Capital intensity ratio was 12% in the second quarter, 5 points higher than the same quarter of the prior year and 3 points higher compared to the first quarter of International consolidated operations capital expenditure in the second quarter of 2015 declined 55% to AED 1.3 billion compared to the same period last year and represented 59% of total Group capital expenditure. This decrease was due to the last year high capital spending in Pakistan. In March 2015, Maroc Telecom was awarded 4G license in Morocco and acquisition cost is reflected in the second quarter results. Excluding one-offs related to license acquisitions and renewal, on a like-for-like basis, Capex of international consolidated 7 P a g e

8 operations contracted by 31% to AED 1.0 billion, representing Capex/ Revenue ratio of 17% in the second quarter of Morac Telecom Group s capital expenditure for the second quarter increased by 67% year over year to AED 0.7 billion resulting in a capital intensity ratio of 23%. On a quarter on quarter basis, capital expenditure increased by 128% compared to the first quarter of The increase in capital spending is mainly attributed to the acquisition of 4G license and deployment of 4G+ network in Morocco in addition to investments focused on improving mobile coverage to support growth in voice and data traffic. In Egypt, capital expenditure for the second quarter decreased by 33% year over year to AED 0.2 billion resulting in a capital intensity ratio of 18%. On a quarter on quarter basis capital expenditure increased by 17% compared to the first quarter of Capital spending was mainly focused on network rollout. In Pakistan, capital spending declined by 84% to AED 0.3 billion in the second quarter of 2015 as compared to the same period in the previous year. Compared to the first quarter of 2015, capital spending increased by 132%. The year over year decline is attributed to high capital spending in relation to the 3G license acquisition and 2G license renewal in the second quarter of last year. Total consolidated debt amounted to AED 23.9 billion as at 30 June 2015, as compared to AED 26.4 billion as at 30 June 2014; a decrease of AED 2.5 billion. In May 2015, the Group issued bonds amounting to US$400 million under the existing USD tranche due in As at 30 June 2015, the total amounts issued under the medium term note programme split by currency are US$ 1.4 billion and Euro 2.4 billion, representing a total of AED 15 billion. Consolidated debt breakdown by operations as of 30 June 2015 is as following: (AED bn) Etisalat Group (AED 15.4 billion) Maroc Telecom Group (AED 4.8 billion) Etisalat Misr (AED 2.4 billion) PTCL Group (AED 1.1 billion) Etisalat Sri Lanka (AED 0.3 billion) Consolidated cash balance amounted to AED 18.3 billion as of 30 June 2015 leading to a net debt position of AED 5.6 billion. Debt Profit & Loss Summary 8 P a g e

9 (AED m) Q2 10 Q1 15 Q2 15 QoQ YoY Revenue 12,579 12,906 13,303 +3% +6% EBITDA EBITDA Margin 5,866 6,569 6,843 +4% +17% 47% 51% 51% +1pp +5pp Federal Royalty (1,778) (1,812) (1,920) +6% +8% Net Profit 2,507 2,177 1,534-30% -39% Net Profit Margin 20% 17% 12% -5pp -8pp Balance Sheet Summary (AED m) December 2014 June 2015 Cash & Cash Equivalents 18,543 18,277 Total Assets 129, ,780 Total Debt Net Cash / (Debt) 22,229 23,898 (3,686) (5,620) Total Equity 60,927 58,604 Cash Flow Summary (AED m) H H Operating 5,145 5,449 Investing (19,867) (3,292) Financing 14,749 (2,381) Net change in cash 24 (224) Effect of FX rate changes 72 (40) Ending cash balance 15,547 18,289 Average Rates Closing Rates 9 P a g e

10 Foreign Exchange Rates Q2 14 Q2 15 YOY Q2 10 Q2 15 YOY EGP - Egyptian Pounds % % SAR - Saudi Riyals % % CFA - Central African Francs % % MAD - Moroccan Dirham % % NGR - Nigerian Naira % % PKR - Pakistani Rupees % % AFA - Afghanistan Afghani % % LKR Sri Lankan Rupees % % SDG - Sudanese Pounds % % 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. (AED m) Q2 14 Q1 15 Q2 15 EBITDA Depreciation & Amortization Exchange Gain/ (Loss) Share of Associates and JV s results Impairment and other losses Operating Profit before Federal Royalty 5,866 6,569 6,843 (1,560) (1,868) (1,859) (207) 347 (4) (215) (776) (28) (12) 4,049 4,783 4,550 Disclaimer 10 P a g e

11 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: 11 P a g e