Etisalat Group 2Q 2016 Results Presentation 28 July 2016
Disclaimer 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
1. Business Overview Saleh Abdulla Alabdooli Chief Executive Officer Etisalat Group
Etisalat Group Financial Highlights AED Million Q2 2016 Growth YoY% Growth QoQ% H1 2016 Growth YoY% Revenue EBITDA EBITDA Margin Net profit Net profit Margin Capex Capex/Revenue 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 26,178 +1% 13,222-1% 51% -1pp 4,316 +16% 16% +2pp 3,434 0% 13% 0pp 2Q2016 Highlights 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 4
Q2 2016 Highlights Financial Highlights Domestic Operations Positive organic revenue growth Stable EBITDA with margin at 50% level Strong increase in net profit Interim dividends of 40 fils per share Positive trends in subscribers acquisition Solid revenue growth mainly driven by data Improvement in profitability International Operations Strategic Priorities 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 Confident in delivering 2016 financial guidance Progress on portfolio optimisation Defend leadership position in Key markets Focus on cash flow generation 5
2. Financial Overview Serkan Okandan Chief Financial Officer Etisalat Group
Etisalat Group Financial Highlights Revenue Breakdown 2Q 2016 (AED m) EBITDA Breakdown 2Q 2016 (AED m) 24% 8% 8% 13.3 bn 2% 24% 6% 5% 6.8 bn 1% 58% 64% UAE MT Egypt Pakistan Others +2% 0% UAE MT Egypt Pakistan Others YoY Growth UAE +3% YoY Growth UAE +3% MT Group (LC +2%) +3% MT Group (LC -2%) -1% Egypt (LC +12%) -3% Pakistan (LC -4%) -6% Egypt (LC +20%) 0% Pakistan (LC +3%) 0% (1) Financial figures are restated to exclude the impact of discontinued operations (Zantel & Canar) Represents others 7
Int l Operations Financial Highlights 2Q 2016 Revenue (AED m)/ebitda (AED m) / EBITDA Margin (%) Maroc Telecom Group Revenue & EBITDA (AED m) / EBITDA Margin (%) / YoY Growth % 2Q 2016 YoY Growth in AED Growth in MAD 45% 45% Revenue 3,201 +3% +2% 43% 59 % EBITDA 1,631-1% -2% 5,535 5,480 5,458 Etisalat Misr EBITDA Margin 51% 2Q 2016-2pp YoY Growth in AED -2pp YoY growth in EGP 19 % Revenue 1,052-3% EBITDA 420 0% +12% +20% 2,487 2,364 2,459 Revenue EBITDA Pakistan 19 % EBITDA Margin Revenue 1,039-6% EBITDA 372 0% EBITDA Margin 40% 2Q 2016 36% +2pp YoY Growth in AED +2pp +2pp YoY growth in PKR -4% +3% +2pp (1) Financial figures are restated to exclude the impact of discontinued operations 8
Group Revenue Revenue (AED m) and YoY growth (%) Sources of Revenue growth Q2 16 vs Q2 15 (AED m) 13,124 12,853 13,326 13,124 239 81 37 71 10 13,326 6% 1% 2% UAE 58% Domestic vs. Int l Revenue YoY growth % Revenue by Cluster (Q2 16) Int'l 41% Others 1% International MT 59% Egypt 19% Pakistan 19% Others 3% Q2'15 UAE MT Group Egypt Pakistan Others Q2'16 Highlights 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 Note: Others revenues consist of domestic non-telecom operations, other international operations, management fees, etc. 9
Group EBITDA EBITDA (AED m) & EBITDA Margin Sources of EBITDA growth Q2 16 vs Q2 15 (AED m) 6,810 6,424 6,799 141 2 6,810 6,799 17 137 52% 50% 51% EBITDA EBITDA Margin EBITDA by Cluster (Q2 16) Q2'15 UAE MT Group Egypt Pakistan Others Q2'16 Highlights Domestic vs. Int l International In Q2 16 consolidated EBITDA remained flat Y/Y at AED 6.8 billion UAE 64% Int'l 36% MT 66% Egypt 17% Pakistan 15% 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. Others 2% Positive contribution from Maroc Telecom, Egypt and Pakistan that grew in local currencies and diluted by currency devaluation Note: Others EBITDA consist of domestic non-telecom operations, other international operations, management fees, etc. 10
Group CAPEX CAPEX (AED m) & CAPEX/Revenue Ratio (%) Sources of Capex growth Q2 16 vs Q2 15 (AED m) 2,166 1,639 1,795 2,166 292 74 84 27 61 1,795 17% 14% 13% 13% 10% CAPEX CAPEX/Revenue Q2'15 UAE MT Group Egypt Pakistan Others Q2'16 UAE 33% Domestic vs. Int l CAPEX by Cluster (Q2 16) Int'l 67% International MT Group 52% Egypt 23% Pakistan 24% Others 1% Note: Others Capex consist of domestic non-telecom operations and other international operations Highlights 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 11
Group Balance Sheet & Cash Flows Balance Sheet (AED m) Dec-15 Jun-16 Investment Grade Credit Ratings Cash & bank Balances 21,422 19,332 Total Assets 128,265 126,077 AA-/Stable Total Debt 22,080 23,897 Net Cash / (Debt) (658) (4,566) Total Equity 59,375 58,529 Aa3/Negative (1) 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) Highlights 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. Ending cash balance 18,277 19,332 (1) Moody s changed its view on the outlook of the UAE sovereign and consequently GRI. 12
Debt Profile: Diversified debt portfolio Borrowings by Operation Q2 2016 (AED m) Borrowings by Currency Q2 2016 15,322 USD 23% 5,023 2,280 1,272 Group MT Group Egypt Pakistan Euro 40% Others 13% MAD 15% EGP 9% Debt by Source Q2 2016 (AED m) Repayment Schedule 14,766 16,418 8,334 5,004 332 466 1,298 1,178 Bonds Bank Borrowings Vendor Financing Others 2016 2017 2018 Beyond 2018 13
Group Dividends: Proposed dividend for H1 2016 of AED 40 fils per share Interim Interim Dividends and Dividends Per Share Interim Dividend Payout Ratio 1.98 2.77 2.77 3.48 3.48 53.8% 72.8% 61.1% 93.7% 80.6% 0.25 0.35 0.35 0.40 0.40 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Interim Dividends (AED bn) DPS Payout Raio Interim Dividend & Earnings Per Share (AED) Highlights 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 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 14
Country by Country Financial Review 15
UAE: Growth in both top and bottom-line Q2 15 Q1 16 Q2 16 QoQ Growth YoY 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 Highlights 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. 16
UAE: Steady growth in subscribers base Mobile Subs (m) & ARPU (1) (AED) 115 110 112 Fixed Subs (m) & ARPL (2) (AED) 136 144 133 7.46 8.23 8.32 0.93 0.84 0.82 1.42 1.84 1.90 Postpaid Prepaid Blended ARPU Fixed ARPL elife Subs Double & Triple-Play (m) 404 389 404 Fixed Broadband (3) Subs (m) 499 489 500 0.82 0.89 0.91 1.03 1.07 1.08 E-Life (2P & 3P) ARPL Fixed BB 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. 17
Maroc Telecom: Recovery in Morocco while maintaining steady growth in Int l subsidiaries Morocco, Benin, Burkina Faso, CAR, CDI, Gabon, Mali, Mauritania and Togo Subscribers (m) Revenue (AED m) (1) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%) 50.8 53.1 53.0 3,122 3,119 3,201 712 779 638 53% 50% 51% 24% 25% 13% 14% 20% Revenue EBITDA % CAPEX CAPEX/Revenue Domestic vs. Int l Revenue Breakdown Q2 16 Int l Domestic vs. Int l Capex Breakdown Q2 16 Int l Morocco 62% Int'l 43% Historical subsidiaries 63% New subsidiaries 37% Morocco 62% Int'l 38% Historical subsidiaries 31% New subsidiaries 69% Others -5% 18
Egypt: Strong performance in local currency muted by currency devaluation Total Subscribers (1) (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%) 95 94 95 24% 24% 24% 1,090 38% 1,165 35% 1,052 40% 196 153 280 18% 13% 27% Subscribers Market Share Revenue EBITDA % CAPEX CAPEX/Revenue Highlights 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 (1) Subscribers and market share data as per statistic published by the Ministry of Information and Technology 19
Pakistan: Recovery in the mobile segment Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%) 22.0 24.9 23.6 1,111 1,028 1,039 313 212 286 33% 34% 36% 28% 21% 27% Revenue EBITDA % Highlights CAPEX CAPEX/Revenue 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 20
Nigeria: Growth impacted by challenging regulatory and uncertain macro economic environments Subscribers (m) Revenue (AED m) / EBITDA Margin CAPEX (AED m) & CAPEX/Revenue Ratio (%) 22.8 21.8 22.3 1,042 1,083 998 87 47 13% 14% 13% 38 4% 4% 9% Revenue EBITDA % CAPEX CAPEX/Revenue Highlights Subscriber growth Y/Y in Q2 is impacted by subscriber disconnections in compliance with the regulatory mandated registration 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% 21
2016 Actual Against Guidance: Confident in delivering the full year management guidance Financial KPI Guidance 2016 In AED Guidance 2016 Constant Currencies (1) Actual H1 2016 In AED Actual H1 2016 Constant Currencies Revenue Growth % Stable Low single digits +1% +3% EBITDA Margin% ~ 48% - 50% 51% CAPEX / Revenue % ~ 18% 13% (1) Constant currency: Financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable 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. 22
Etisalat Group Investor Relations Email: ir@etisalat.ae Website: www.etisalat.com/en/ir/index.jspr 23