Jazira Capital - OT Equity Research Report

8/7/2019 Jazira Capital - OT Equity Research Report

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JAZIRA SECURITIES BROKERAGEMonday, June 07, 2010

ORASCOM TELECOMEquity ResearchCan Elephants Dance?

Three out of OTs top four mobile operations are in countries (Algeria,Tunisia & Egypt) which are expected to reach an average mobile penetra-tion rate of 78% by the end of 2010. This will ultimately curb additional sub-

scribers uptake growth. Leaving revenue growth more dependant on airtimeconsumption and restructuring product mix. Furthermore, although Pakistan hasa lesser mobile penetration rate of 57%, its income per capita disparity com-pared to the aforementioned markets and last two years mobile penetrationgrowth levels, we expect the Pakistani mobile market penetration growth willalso be subdued over the coming couple of years.

Tunisiana duopoly market came to an end, in the beginning of May this year,with Orange launching its fixed + Mobile operations. Orange is debuting with a3G network, which imply that Tunisiana may need to expand its capex in orderto role out its own 3G network, once its permitted to do so by Q3 FY10.

Furthermore, Tunisia with a population of 10.4 million, has over 5 milliontourist arrivals per year, which imply that Orange with 189 million worldwide

customer base under its umbrella, has great potential to capture a significantportion of the Tunisian mobile market roaming revenues and harming Tunisi-anas ARPU without even initiating local price wars.

MTN Group has been for a while in talks with OT regarding acquiringsome of the latters assets. MTN had high hopes to include Djezzy, in the port-folio of assets it acquires, but the Algerian government has since insisted onbeing the sole buyer of Djezzy and recently started formal talks with OT regard-ing Djezzys sale. MTN remain in talks regarding buying other of OTs assets,with speculations that MTN will bid on Telecel Globe alone, or along with Tu-nisiana, and even some speculations say the talks may include Banglalink too.

OT and France Telecom, conflict surrounding Mobinil has came to an end.OT is to book US$300 million this year from the compensation received for

burying the hatchet. This lump sum will bump up OTs FY10 bottom line byan estimated net of tax amount of EGP1.35 billion.

Competition in the Bangladeshs mobile market is expected to intensify inthe coming period after Bharti Airtel acquired 70% of the countrys fourthoperator, Warid Telecom, and has revealed its commitment to spend US$1billion over the coming years to boost Warids position in the market.

Wind Mobile - Canada started operations in December 2009. The Cana-dian Mobile market is totally different from OTs other playing fields. Can-ada currently has six mobile operators with a penetration of over 70%. Further-more, the market top two operators had an average ARPU and OPEX per sub ofUS$59/month and US$37/month respectively in 2009. Ultimately, we don'texpect Wind Mobile to generate positive earnings before 2014, due to the

expected massive capex and consequent debt interest burden to put thisnetwork on the map of Canadas competitive mobile market.

We have valued OT based on Sum of the parts valuation method, while utilizingDCF in attaining the valuation of each part. We also added the net of tax valueof Mobinils related US$300 million compensation fee and Linkdotnet salewhich is estimated to be at an EV of US$130 million, to come up with a con-solidated OT equity value of US$6.8 billion. (EGP7.2/OT share and US$6.4/GDR).

We created an alternative valuation scenario, based on the speculations sur-rounding the talks between OT and MTN. We see the maximum upside basedon EV/Sub. multiples for selling Djezzy, Telecel, Tunisiana and even Bangla-linkcan pull OTs value up to EGP11/share. However, we wish to highlight

that this is an extremely speculative scenario and buying should be capped at10% discount to the EGP7.2/share target price until those deals or part ofthem is confirmed and adjust accordingly.

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BUY

Market Price (EGP/share) 5.8

Target (EGP/share) 7.2

Upside 23%

Reuters Codes ORTE.CAORTEq.L

Full Name: Orascom Telecom Holding

Short Name OT

Exchange Listing EGXLSE

Index Inclusion EGX30

Number of shares (mn) 5,246

Market cap (EGP bn) 30.5

EV 2010 (EGP bn) 49.9

52 Week Low-High (EGP) 4.7 - 7.9

Average Daily Volume (52 weeks) 17.1 mn

Stock Performance Absolute / Relative to index

Three month -2% / +3%

Six month +8% / +7%

One year -17% / -19%

Shareholders Ownership stake

Weather Investment 53.5%

Free Float 46.5%

GDR Market Price (US$/GDR) 5.2

GDR Target (US$/GDR) 6.4

Share : GDR Conversion Rate 5:1

FY ending Dec. 2009a 2010e 2011f 2012f

Revenues (EGP mn) 28,435 25,685 23,348 24,454

EBITDA Margin 43.1% 41.5% 40.7% 39.8%

EPS (EGP) 0.35 0.57 0.28 0.32

DPS (EGP) 0.00 0.35 0.14 0.18

PER 16.5 10.2 20.5 18.3

DY 0.0% 6.0% 2.5% 3.1%

EV/EBITDA 4.8 4.8 5.4 5.2

Net Debt (EGP mn) 27,440 21,295 20,849 19,537

Analyst: Mohamed Fahmy

Email : [email protected]

Mobile: +2012 2157312

OT Price Chart (EGP)

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JAZIRA SECURITIES BROKERAGEJune 7, 2010

ORASCOM TELECOMEquity ResearchInside:

Djezzy stuck between a rock and a hard place Page 3

Tunisiana duopoly market comes to an end Page 4

OT to report Mobinil below EBITDA Page 5

OTs Mobinil put option & future compensation inline with our Mobinils value Page 5

Vodafone Egypt controlling stake not for sale Page 5

OT moves to developed markets with Wind Mobile Page 6

A glance on the Canadian mobile market Page 6

Wind Mobile started operation in December 2009 Pages 6&7

Globalive Communications Page 7

Talks on consolidation in Pakistans mobile market Page 7

Competition to intensify in Bangladesh Page 8

Q1 results pulled down on the back of Wind Mobiles Losses Page 9

Consolidated Assessment & Projections Page 10

Valuation Page 11

So, Can Elephants Dance? Page 12

OT in discussions to sell some of its assets to MTN Pages 12&13

The maximum upside behind MTN acquisition talks Page 13

KPIs and assumptions Pages 14, 15 & 16

Historical & forecasted financials Page 17

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ORASCOM TELECOMEquity ResearchDjezzy stuck between a rock and a hard place

Djezzy alone represented 37% and 49% of OTs consolidated revenues and EBITDA in FY09,along around over 60% of OTs value based on our model. This makes OT value very sensitiveto any change in Djezzys operations and Value.

Djezzy is currently stuck between the Algerian government which from where we are looking,seem harsh on OT and operationally in a market that is getting well penetrated accompaniedwith the general economic slowdown.

Regarding the first issue, we believe it has traces that go back a decade in time. Djezzy startedin Algeria at the beginning of the millennium, while Algeria was still plagued with politicalinstability and a fragile economy with the countrys international reserves not surpassing US$20billion. This has made Algeria grateful for any investor to come into the country, and therebygave some good incentives including tax exemptions and extended a lucrative terminationagreement with Djezzy, which made OT see its Algerian subsidiary reporting over 60%EBITDA margins until recently.

Now, Algeria has over US$150 billion of international reserves and a stable political environ-ment, making the country having an appealing business case and an obvious attractive proposi-

tion for investors with its proven oil and gas reserves putting it in the 16th

and 9th

position in theranks of the top oil and gas reserves countries respectively.

We believe that the tax backlash that Djezzy suffered regarding taxing on its tax exemptedyears, which culminated with related penalties to around US$600 million, is mainly related toAlgeria settling the account for the gains the government wasted from signing the terminationagreement back in 2001.

Orascom Construction Industries (OCIC.CA), another of Orascoms company, sale of its Alge-rian cement operations as part of its sale of all its cement operations to Lafarge in a deal worthUS$12.4 billion, back in late 2007, may have something to do with why Algeria is focused onbuying Djezzy. Talks say this created issues because Lafarge is French and Algerians are notcomfortable with the French having holdings in their country, well maybe, but surely the dealsize has something to do with why Algeria is fixated on Djezzy also. Surely, the deal value

showed the Algerian decision makers how much money can be made from their companies.There is much difference between research reports saying how much a company is worth andhaving a real transaction happening, and the Algerians seem they dont want to miss for a sec-ond time on the row. Furthermore, Algeria has its own problems that need cash to solve with abudget deficit of around 10% of GDP and an unemployment rate is over 12%.

But what does this mean in deals value? Will Algeria play fair with regards to what price to setfor the sale? and what kind of environment will it provide Djezzy?, if OT decides to remain inthe country. All those risks have resulted in us opting to add a 5% over the cost of equity usedin calculating Djezzys WACC, bringing the cost of equity up from 17.1% to 22.1% and drag-ging Djezzys enterprise value from US$6.0 billion to US$4.5 billion, reflecting a 25% decreasein our attained EV for the Algerian subsidiary.

On the operational level, we expect the Algerian mobile market penetration to grow at CAGR

of 5% over the next five years compared to 14% over the past four years, while Djezzy wouldcapture 40% of the annual net additions over the coming 5 years. Furthermore, we assumed thatDjezzys ARPU would fall 12% this year, bringing revenues and EBITDA down 7.6% and9.5% respectively in 2010.

In an ironic as it is a shameful turn of events, Djezzy suffered the ramifications of Egypt vs.Algeria football World Cup qualifying match, in November 2009. Djezzy had some of its assetsvandalized after the match, which resulted in operational interruptions and an estimated cost ofUS$55 million between the loss of revenue opportunity and damaged to stocks of SIMs, scratchcards and handsets.

Can this be a trend? Egypt national team has no scheduled matches with Algeria this year, butboth Ahly and Ismali, leading Egyptian clubs and old rivals of Algerian teams, have matches inthe CAF championship with J.S Kabylie of Algeria in July, August and September of this year.

We think Algerians will be more concerned with the World Cup and hopefully these misfortu-nate event dont repeat itself. It is worth noting, that we think that the governments obviousstance against Djezzys owner had an implicit factor toward encouraging this mob behavior.

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Djezzy represent a significantportion of OTs income andvalue

Algeria has been trying to re-cover the wasted income fromDjezzys historical lucrativetermination agreement throughtaxing exempted yearsAlgerians are attempting tokeep the value of their compa-nies locked inside the country

We lowered Djezzys value onthe back of specific politicalrisk by 25%

Algerian mobile market isentering its ex-growth phaseFootball matches are the latestaddition to our mosaic of vari-ables with regards to valuingDjezzy


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ORASCOM TELECOMEquity ResearchTunisiana duopoly market comes to an end

Orange has introduced both its fixed and mobile telephony networks in early May this year.This will create a whole different playing field for OTs Tunisian subsidiary, Tunisiana.

Orange is the worlds fifth largest mobile operator, with 189 million worldwide mobile cus-

tomer, spread over 36 countries out of which 13 are in European countries, including UK,France and Spain and 17 in Middle Eastern and African countries. This makes Orange a fiercecompetitor with regards to experience, capex roll out and operational efficiency .

Tunisia has a population of 10.4 million but over 5 million tourist enter the country per year.This will put Orange in a competitive position from day one, given its brand will relate more totourists and more importantly to those whom are Oranges customers in their home countries.

We essentially factored for the loss of roaming revenues by reducing ARPU by 32% fromUS$12.6 in 2009 to US$8.5 in 2011. On the other hand, we dont see Orange as shaking theTunisian SIM market structure much, with our expectations of Tunisiana market share to fallfrom 53.4% in 2009 to 50.5% in 2011, as we project that net of churn Tunisiana will capture20% of Tuniss new mobile subscribers in 2010 and 30% thereafter.

Furthermore, Orange announced its network will include both 2G and 3G technologies, whichwill add to its network appeal to European roaming customers. We expect that Tunisiana willmatch the upgrade and launch its own 3G network once the exclusivity for Oranges 3G licenseends by Q3 2010. Thereby, we forecast a hike in Tunisianas capital expenditure to US$118million in 2010 and US$148 in 2011 up from US$91 million in 2009.

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Orange Tunisian network willenjoy the group support in theform of efficiency and globalcustomer appealWe assumed that TunisianaARPU would fall 32% in thefirst two years of Orangesoperations driven mainly by

the loss of roaming revenues


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OT to report Mobinil below EBITDA

France Telecom and Orascom Telecom have in April 2010 settled the dispute related to Egyp-tian Company for Mobile Services - Mobinil (EMOB.CA). The outcome have gave France tele-com a relative upper hand on Mobinils management over OT, which led the latter to qualify itsinvestment in Mobinil more appropriate to be accounted for using the equity method. The newagreement was finalized in Q2 2010. We assumed that OT will account for Mobinil using itshistorical proportionate consolidation method for the whole of Q2 and start to report Mobinil inthe investment income line starting Q3 2010.

The impact of this change will amount in a drop in OTs revenues by around US$450 millionand US$960 million in 2010 and 2011. Regarding bottom line the new accounting method willresult in the same outcome as proportionate consolidation.

However, Mobinil will generate for OT an extra US$300 million this year, as France Telecomagreed to pay the amount as part of the resolutions of the agreed settlement between FT and OT.We have booked the amount in as an non-recurring revenues net of tax in the extraordinaryitems line. Furthermore, we assumed OT will remain to consolidate the management fees itcollects from its share in Mobinils management in the telecom services revenues line going

forward in our model until the company officially states were will it be booked.

OTs Mobinil put option & future compensation inline with our Mobinils value

As part of the FT/OT agreement, OT was given a put option to sell its shares in Mobinil Tele-communications and Mobinil exclusively to FT starting September 2012 with the selling priceincreasing from EGP221.7/Mobinil share once the option becomes active and increasing toEGP248.5/share in November 2013, when this put option expires.

Furthermore, if OT sells its stake to FT, in addition to the agreed price, it will receive 110 mil-lion in compensation for its 0.75% stake of Mobinils revenues that it receives each year as feesfor its share in Mobinils management.

The sum of the shares value and compensation for loss of management fee imply that in the

case of OT sells its shares to FT, it will receive an amount of US$1.5 billion. We have then as-sessed the difference between the September 2012 and November 2013 strike prices and de-duced the agreement has an implied annual price increase of 9.2%. Using this rate to discountthe US$1.5 billion amount to present time, we got a deal discounted value of US$1.21 billioncompared to our attained DCF value of OTs stake of US$1.20 billion.

What does this mean? That OT would be indifferent regarding selling or holding its stake inMobinil. However, it is understandable why its a put option, since even if its at value, it is stillcheap given its dual balance sheet leveraging. Once on Mobinil books and a second on FT orOT books, as we believe discount factors for OT and FT are much less than the conventionalinvestor. Thereby, we dont think OT will use this option unless it finds a very lucrative alterna-tive opportunity or conflicts arise again between the partners.

Vodafone Egypt controlling stake not for sale

News have emerged in mid May, that as part of Vodafone Group restructuring its oversees in-vestments, it may sell its 55% stake in Vodafone Egypt. Furthermore, Telecom Egypt whichowns the remaining 45% in VE said it would be interested to acquire VGs stake.

Following this news, OT executive chairman, stated that his company would be interested inbuying VGs stake. The NTRA on the other hand, said that OT can qualify to bid but mustforgo its management of Mobinil.

However, earlier this month, both VG and TE came out in a joint release to state they havereached a decision of keeping each of their stakes in Vodafone Egypt as is, while revealed theircommitment toward joint cooperation to insure the success of VE. Thereby putting the lid onthe subject.

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OT and FT reach a new agree-ment regarding their jointownership in MobinilOT to report Mobinil throughequity method from nowOT to receive US$300 millionas part of the new amendedagreement with FT

OT has been given a put op-tion on its Mobinil shares atEGP222/share to EGP249/share...and to receive an additionalUS$132 million for loss ofMobinils management fees inthe case of using its put option

We think the put option willexpire without being used ex-cept if OT finds an extremelyintriguing opportunity or con-flict rises again between thepartners

Talks of Vodafone Group sell-ing its Egyptian operationemerged and faded again in notimeIn the mean time, OT showedinterest in the alleged sale


ORASCOM TELECOMEquity Research


6/18

OT moves to developed markets with Wind Mobile

OTs newest mobile network is Wind Mobile which operates in all of Canada except Quebec.OT has 65% stake in Globalive Investment Holding, which owns 100% of Globalive WirelessManagement Corp. (Wind Mobile) and Globalive Telecom Holding Corp. (A fixed line opera-tor). However, due to Canadian ownership and control rules, OT only has 32% voting power in

Globalive Investment Holding and consequently in Wind Mobile, thereby will account for WindMobile utilizing the equity method.

Although Canada is considered a different market compared to OTs other operations which alloperate in developing markets, Canada can relate to OTs leading operations with respect tomobile market penetration levels.

OT has said that Wind Canada is set to spend over CAD1.5 billion (US$1.43 billion) over thecoming years, in order to set up the network, including the license fees of US$420 millionwhich has already been paid. Furthermore, in OTs May 13th, quarterly results conference callAldo, OTs CFO stated that Wind has already spent between US$600 million and US$700 mil-lion including the license fees.

Furthermore, in order for Wind to jump start its operation, OT has extended a shareholders

loan to Wind Mobile which amounted to US$695 million including compounding interest as ofend of December 2009.

A glance on the Canadian mobile market

Canada, prior to Wind Mobiles entry had 5 mobile operators, with a total of 23 million sub-scribers at the end of 2009, reflecting a penetration rate 70%. Mobile subscribers in Canadaincreased by 7%, while net additions declined to 1.5 million in 2009 compared to 1.6 million in2008. Furthermore, out of 2009 total Canadas mobile subscribers 76% were post paid.

The top three mobile operators in Canada have over 95% of the market, with Rogers Wireless isCanadas largest mobile operator with respect to subscribers with 37% market share. Rogers isfollowed by Bell Wireless and Talus Mobility with their market shares standing at 30% and29% respectively at the end of 2009. The forth and fifth operators are localized mainly in Sas-

katchewan and Manitoba provinces.

In order to understand the dynamics of the market better we looked at Rogers and Bells 2009annual reports. Rogers and bell average mobile segment ARPU came at US$59/month in 2009,while we looked at OPEX per sub in order to understand what is the operating cost in Canadasestablished operators and gain insight on what will be Wind Mobiles initial OPEX levels.OPEX per subscriber averaged US$37/month for Rogers and Bell. It is worth noting thatRogers ARPU is 19% higher than Bells.

We expect the Canadian mobile market to reach the 100% penetration by 2014, with averageEBITDA margin levels to fall from the 2009 levels of 46.5% to 45.9% by 2014.

Wind Mobile started operation in December 2009

Wind mobile started operation in December 2009, it started with aggressive roll out of packagesand has been dubbed as Canadas low cost mobile operator. Furthermore, it entered into part-nership with T-Mobile for USA roaming services at extremely competitive prices compared toCanadas established operators.

Some misfortunes may have met Winds launch as chief customer officer and the second high-est-ranked, resigned from Wind Mobile on March 4, 2010. The early-on executive resignationcan be construed as to have something to do with disappointing initial market penetration.

Low cost or not, we expect Wind to start at 50% higher OPEX per sub than incumbent opera-tors, while we expect the first years ARPU to be 30% less than market average or at US$41.7/month.

With regards to market share, we expect Wind to capture 17% of new additions in 2010 and18% thereafter, bringing Winds customers to 3.1 million with a market share of 8.3% by 2015.

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OT has a 65% economic stakein Wind Mobile-CanadaWind Mobile to spend overUS$1.4 billion over the com-ing years

OT extended a US$695 mil-lion shareholders loan to WindCanada has over 23 millionmobile subscriber with a pene-tration of 70%Rogers Mobile leads the mar-ket with 37% market share

Average ARPU of the leadingtwo operators in Canada stoodat US$59 in 2009

Wind debuted with aggressiveroll out of cheap packagesWe expect Wind to have lowerARPU than incumbent opera-tors and higher OPEX in thefirst years

while capture 8.3% of themarket by 2015




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Wind Mobile started operation in December 2009 (continued)

We expect Wind Mobile to generate positive EBITDA levels by the third year of operation(2012) and bottom line turning black by 2014, We expect Wind Mobile cumulative losses toculminate to US$406 million prior to turning positive, thereby we expect OT may need to injectfurther capital into the subsidiary to support Winds survival in its initial years and comfortlenders.

Globalive Communications

Globalive Communications, the already established part of the Globalive venture offers servicesover pre-established telephone networks, ranging from long-distance services, high-speed Inter-net, VoIP and carrier clearinghouse solutions. Globalive has over one million clients in Canadaand is said to generate over US$100 million annually. However, we didn't have enough infoabout this segment of Globalive to include in our valuation, but we estimate that it wouldn'thave an EBITDA margin of over 10%, so its net impact on OT would be minimal. Furthermore,we still dont have confirmation with regard that this is the fixed telephony part that OT re-vealed is part of its investments.

Talks on consolidation in Pakistans mobile market

Pakistan penetration rate growth have became sluggish, since penetration levels crossed the50% rate two years ago in a market that is distributed over 5 nationwide mobile operators.

Furthermore, Telenors, Pakistans second largest mobile operator after Mobilink, top officialrevealed that he believes that the market is ready for consolidation. OT commented on this re-mark, that if there is possibility for consolidation, it would be interested to investigate the po-tential.

Both Mobilink and Telenor have a cumulative 54% of the Pakistani mobile market subscribers.Whether consolidation will be between market leaders, or acquiring one of the smaller operatorsis yet to be clear.

Zong (Formally Paktel) is a subsidiary of China Mobile and has the smallest one player marketshare of 6.3%, may at the first glance, look as the most interesting M&A story in the market.The other two operators are owned by Etisalat and Warid Telecom, with market shares of 21%and 18% respectively.

Until now, no word have emerged about a seller on the market and we think it would rather be abuyer making the first move. However, as we see the Pakistani market as relatively saturated,there is little potential for organic growth, which puts growth through acquisition as the bestalternative for expansion in this market.

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Wind Mobile to turn profitableby 2014Globalive other operation in-clude added value servicesover pre-established telephonenetworks

Pakistans mobile marketlooks overcrowded

Zong is Pakistans smallestmobile operatorMost probably a buyer willmake the first move




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Competition to intensify in Bangladesh

In January 2010, Bharti Airtel acquired of 70% of Bangladeshs fourth biggest mobile operator,Warid Telecom, at a price tag of US$300 million or US$110/sub. Warid was in a dire situationfor capital injection and the Bangladeshi government have revealed that it expects Bharti tospend around US$1 billion over the coming years on Warid. This capex. commitment comingfrom an aggressive new shopper in the global mobile market indicate that the Bangladeshi mo-bile market competitive environment will heat-up in the coming period.

From its inception in 1995 to early 2009, Bharti Airtel sole telecommunications operation wasin India. However, in less than a year and a half, it expanded to Sri Lanka, Bangladesh, than itacquired Zains Sub Saharan African assets in a deal worth US$10.7 billion in March 2010, atan EV/revenues 3.7x and US$255/subscriber, with most of the transaction to be financed bydebt. Furthermore, Bharti seems keen on expanding further, as he is in talks about having aninterest in MTN Group.

Prior to Zains transaction, Bharti had a net debt of US$1.2 billion, EBIT of US$2.6 billion inFY09 ending March 2010, US$9.1 billion shareholders equity while the company is tradingwith a market capitalization of around US$22 billion. These figures imply that Bharti has the

capacity until now to fund its expansions.

Another factor that support our expectations of increased competition in Bangladesh isGrameenphone, Bangladeshs largest mobile operator, IPO late last year, with proceeds ofaround US$150 million to be directed toward fortifying the networks leading position.

All these factors have driven us to reduce Banglalinks market share of new additional subscrib-ers from an average of 36% over the past three years to 25% going forward, which will lead toits market share of the markets total mobile subscribers to stabilize at 26% over the comingyears, after years of growing its market share. Furthermore, we have accelerated ARPU declineto reach US$1.9/month in 2011, compared to US$2.4 in 2009.

On the EBITDA level, we expect EBITDA margins to remain at the 34.0% range in FY10 closeto FY09 reported margins, but significantly lower than the 42% rate achieved in Q1 FY10, since

it will be very hard for Banglalink to maintain its market share, while not subsidizing the newSIMs taxes, which amount to US$11/SIM, as it done in Q1 FY10. Furthermore, we expectEBITDA margin to fall further to 32.5% in FY11.

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Bharti is the newest big mobileplayer to enter the Bangladeshimobile marketAlthough, Bharti thirst foracquisitions continues its bal-ance sheet shows it can stillfinance its expansions andcommitted capex of US$1billion in Bangladesh

T e l e n o r s s u b s i d i a r y ,Grameenphone floated on theDhaka Stock ExchangeWe stabilized Banglalink mar-ket share at around 26% goingforwardAnd expect EBITDA levels to

decline on the back of compe-tition




9/18

Q1 results pulled down on the back of Wind Mobiles Losses

OTs first quarter results showed subscrib-ers increasing by 18.9% yoy, essentiallydriven by Mobinil and Mobilink 23% and12% subscribers annual growth, alongwith adding Namibia subscribers intoTelecel Globe after Q1 09. Global ARPUfell 13.8% yoy with the main driver for thedrop coming from Djezzy, Mobinil andMobilink ARPUs declining at a yoy rate of13.2%, 16.4% and 6.7% respectively.

Revenues and EBITDA witness a milddrop of 1% and 2% respectively in EGP.

However, bottom line dropped around25% yoy to EGP316 million, essentially asa result of OTs Q1 FY09 included the

realized gains from the sale of M-Link.

The other factors that resulted in the bot-tom line decline in Q1 FY10, was the in-creased net financing cost and loss frominvestments expanding. Both can be ren-dered to a great extent to the newly estab-lished Canadian operations. However, dueto Canadian dollar appreciating againstOTs functional currency, the USD, OTwas able to generate EGP68 million of FXgain that mitigated the Canadian operationsobligations.

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Djezzy retention programs tolimit the impact of the Novem-ber 2009 match adverse affecthas resulted in its ARPU fal-ling over 13% in Q1Q1 2009 was inflated with therealized gains from the sale of

M-linkWind Mobile losses and inter-est related burdens from fi-nancing its capital and share-holders loan drove OTs bot-tom line down



Q1 Ending March KPIs Q1 2009 Q1 2010

Subscribers (mn) 80.4 95.6

ARPU (US$) 5.8 5.0

Capex (US$ mn) 273 224

Income Statement (EGP mn)

Revenues 6,773 6,745

EBITDA 2,974 2,925

EBITDA Margin 43.9% 43.4%

EBITDA Growth -8% -2%

Depreciation & Amortization (1,328) (1,329)

EBIT 1,647 1,596

Net Financing Cost (573) (705)

Investment Income (17) (185)

Other Non-Operating Items 184 (22)

FX Gains (Losses) (380) 68

NPBT 861 751Taxes (363) (364)

Minority Interest (78) (71)

Net Income 420 316

Change -58% -25%

Net Debt (EGP mn) (34,883) (31,336)

Working Capital (EGP mn) (6,780) (5,649)

Net Debt / Total Assets 63.3% 56.0%

Source: OT earning release & Jazira calculations

Total Subscribers (000) 1Q 09 1Q 10 % Change Consolidated Revenues (US$ mn) 1Q 09 1Q 10 % Change

Djezzy 14,143 14,790 4.6% Djezzy 463 413 -10.8%

Mobilink 28,240 31,572 11.8% Mobilink 261 272 4.2%

Mobinil 21,179 26,121 23.3% Mobinil 216 225 4.4%

Tunisiana 4,303 5,400 25.5% Tunisiana 76 89 16.4%

Banglalink 10,836 14,219 31.2% Banglalink 83 100 19.9%

Telecel Globe 991 2,280 130.1% Telecel Globe 16 24 49.5%

Korylink 19 126 554.2% Korylink 4 9 102.5%

Alfa 661 1,089 64.7% Total (GSM) 1,120 1,132 1.1%

Grand Total 80,373 95,598 18.9% Ring 42 35 -16.2%

Other 12 25 111.9%

ARPU (US$) 1Q 09 1Q 10 % Change Total Telecom Services 54 60 12.1%

Djezzy 10.6 9.2 -13.2% Internet Services 24 24 1.2%

Mobilink 3.0 2.8 -6.7% Consolidated Revenues 1,198 1,216 1.6%

Mobinil 6.7 5.6 -16.4%

Tunisiana 11.3 10.6 -6.2% Consolidated EBITDA (US$ mn) 1Q 09 1Q 10 % Change

Banglalink 2.5 2.3 -8.0% Djezzy 281 229 -18.3%

Korylink 24.7 21.3 -13.8% Mobilink 94 106 13.2%

Alfa 66.7 37.5 -43.8% Mobinil 106 85 -19.8%

Global ARPU 5.8 5.0 -13.8% Tunisiana 41 47 13.3%

Banglalink 21 42 103.3%

Capex (US$ mn) 1Q 09 1Q 10 % Change Telecel Globe -2 4 n/a

Djezzy 41 48 17.1% Korylink 0 6 n/a

Mobilink 27 25 -7.4% Total (GSM) 541 519 -4.1%

Mobinil 78 59 -24.4% Ring -1 5 n/a

Tunisiana 16 18 12.5% Other -3 6 n/a

Banglalink 26 58 123.1% Total Telecom Services -4 11 n/a

Others 85 55 -35.3% Internet Services 1 5 n/a

Total Capex 273 263 -3.7% OT Holding & Other -12 -13 14.2%Consolidated Capex 225 224 -0.4% Consolidated Revenues 526 521 -1.0%

Source: OT earning release


10/18

Consolidated Assessment & Projections

With OTs main mobile operators have reached a phase of subscriber growth slowdown alongwith each operator struggle with local competition, ARPUs are going down faster than sub-scriber uptake growth. OT revenues started a downward trend in 2009 that we expect to con-tinue through to 2011. Furthermore, the elimination of Mobinil out of revenues and EBITDA

will pull revenues downward by US$460 million in 2010 and by US$960 million in 2011. Weexpect revenues and EBITDA to decline with an average of 9.7% and 13.1% in 2010.

By excluding Mobinils revenues from OTs historical consolidated revenues, we expect OTsconsolidated revenues and EBITDA to witness no growth neither in 2010 nor 2011, on a pro-forma basis.

By the beginning of 2012, we expect both revenue and EBITDA to start to pick some positivegrowth momentum, driven by our expectations that the global economic situation will havestarted another expansionary cycle. This will result in a general relative improvement in sub-scribers uptake and reducing the pace of ARPU decline.

Furthermore, Tunisian mobile market would have started to relatively stabilize after three yearsof Orange entry to the market. In addition, we expect Pakistans subscriber uptake slowdown

will start to subside as the economy improves. With all these factors we project, revenue andEBITDA to expand by 4.7% and 2.4% respectively in 2012. From 2013 to 2015, we expectrevenues and EBITDA to witness a CAGR of 5% and 3% respectively.

Furthermore, we have projected that the Egyptian pound would depreciate by 1.5% per annumfrom 2011 to 2015, which resulted in our EGP projections to reflect a slight magnified changecompared to the USD percentage change levels.

Although we projected moderate growth levels up to the EBITDA levels over the forecastedperiod, we have expectations of the bottom line to grow at a CAGR of 31% from 2011 levels to2015. This will be driven by both investment income improvement and decline in financial bur-dens. Off course the latter projection is due to the fact that we have no assumption in our modelof OT expanding outside its current operations.

We expect Wind Mobile to make US$118 million loss in 2010, only to increase in year two onthe back of higher interest expense, while losses would start to decline by 2012 and the com-pany to turn profitable by 2014. Given its 65% stake in Wind Mobile, OT will book onlyUS$77.3 million or EGP433 million of Winds losses in 2010.

However, since we expect OT to book Mobinils 2H FY10 earnings also in the investment in-come line, net investment income is expected to reach a loss of EGP217 million.

In 2011, although Wind Mobile losses will expand, the booking of a whole year of OTs earn-ings from Mobinil will result in the income from investments to report a positive EGP49 mil-lion. From thereafter, based on our expectations of Mobinils earnings to start picking up from2012, driven by operations improvement and decline in debt service levels, along with Windlosses declining and then turning into a profit by 2014, we expect investment income to record aCAGR of 149% from 2012 to 2015.

We booked the compensation OT will receive from FT amounting to US$300 million as per theagreement signed between both parties in April 2010, as a non-recurring income net of tax in2010. Furthermore, we booked EGP26 million as capital gain from the Linkdotnet sale. Theamount was totally arbitrary. All the information we have about the transaction is that it is at anenterprise value of US$130 million. We assumed that half of EV is in debt due to the capitalintensive nature of internet operations and then assumed half of the remaining will be capitalgain, which we then netted tax on capital gains from it.

Between OTs general debt repayments during 2010, which are estimated on a consolidatedlevel to be over EGP5.4 billion, along the with removal of OTs proportionate stake of Mo-binils debt burden, we expect net debt to fall to EGP21.3 billion at the end of 2010 comparedto EGP27.4 billion reported at the end of 2009.

The combined impact of the decline in net debt and the rights issuance issued at par in Q1 2010,

which increased paid in capital from EGP889.1 million to EGP5.25 billion, have resulted in netdebt to equity to decline from over 4x at the end of 2009 to 1.7x expected by the end of FY10.

10

We expect the weakening ofOTs operational KPI to ex-tend through to 2011We expect the global eco-nomic recovery to start to havea positive impact on OTs op-erations starting 2012Along with Tunis mobile mar-

ket normalizing by 2012The expected Egyptian poundgradual depreciation will am-plify US$ based growth ratesInvestment income and declinein financial expenses are ex-pected to be the main driversfor OTs bottom line growthstarting 2012

The full year booking of OTsearnings from Mobinil in 2011may lead to better investmentincome level but at the accountof lesser EBITDA figures

We booked the US$300 mil-lion compensation from Mo-binil and an assumed amountof Linkdotnet capital gain as anon-recurring income in 2010OTs gearing ratios improve

significantly after the Q1rights issuance




11/18

Valuation

In order to value OT, we have utilized sum of the parts valuation method, were we valued eachof OTs key operations separately, using DCF valuation approach. We have utilized each opera-tions RFR as it reflects the economic and political risk of each venture, furthermore, we haveadded a market risk premium of 8.5% over the RFR and utilized a beta of 1x.

Furthermore, we have added a further 5% specific political risk premium over Djezzys cost ofEquity, given the pressures we believe are surrounding the operation and its sale from the Alge-rian government. The additional market risk premium resulted in a 25% decline in enterprisevalue for Djezzy. This also reflect our concern that OT wont be able to get the best deal out ofthe Algerian government if the latter continues to create hardships for Djezzy.

Furthermore, this week, an unconfirmed news came out that OT may pay the Algerian govern-ment to forgo its preemptive right and sell Djezzy on the market. Again, this would yield a dis-count to EV given the portion of the sales value the Algerian government will garner.

We have added Linkdotnet expected sale to Mobinil at an EVof US$130 million value to OTvaluation, net of our assumed taxes on capital gain. While we dont have the exact impact theventure has on OTs internet services figures, we assumed it represents 85% of the internet ser-

vices revenues and reduced this representation from our FY11 internet services revenues.

We have also added the Mobinils related US$300 million compensation fee value net of taxover the operations value since it will be booked below net operating profit, so the DCF modelswont sense it.

We came with OTs SOP value of US$6.8 billion (EGP37.5 billion). It is apparent from thetable below how OT is sensitive to Djezzys value as it represent over 64% of its value. How-ever, selling Djezzy would create enough cash to settle the stand alone debt, while leavingabundance of cash for future expansions.

11

Utilized DCF to value opera-tions using country specificRFR and a market risk pre-

mium of 8.5%

The additional discount weapplied on Djezzy can workfor what price the Algeriangovernment will put on thetable or OT return after theAlgeria has its cut of Djezzyssale if it agrees its sale to aninvestor

We attained an SOP for OT ofUS$6.8 billion



Source: Jazira Capital projections and valuation

OT ValuationEnterprise

Value(US$ mn)

EV/EBITDA

2009

EV/EBITDA

2010

EV/EBITDA

2011

Net Debt(US$ mn)

ShareholdersEquity Value

(US$ mn)

OTStake

OT Value(US$ mn)

OT Value(EGP mn)

% oftotal

Value

% of GSMValue

Value PerOT Share

(EGP)

Djezzy 4,542 4.3x 4.7x 4.9x (108) 4,434 97% 4,293 24,124 64.3% 53.8% 4.60

Mobilink 2,086 5.4x 5.3x 5.3x (798) 1,288 100% 1,288 7,239 19.3% 16.1% 1.38

Mobinil 4,344 4.8x 5.8x 5.6x (889) 3,454 35% 1,197 6,729 17.9% 15.0% 1.28

Tunisiana 1,098 2.9x 3.6x 4.6x (75) 1,022 50% 511 2,873 7.7% 6.4% 0.55

Banglalink 526 4.5x 4.0x 3.9x (373) 153 100% 153 862 2.3% 1.9% 0.16

Telecel Globe 301 n/a 11.9x 8.8x (121) 180 100% 180 1,014 2.7% 2.3% 0.19

Korylink 237 13.8x 6.0x 4.7x (118) 119 75% 89 501 1.3% 1.1% 0.10

Wind Canada 1,017 n/a -17.8x -51.9x (602) 415 65% 271 1,525 4.1% 3.4% 0.29

Total MobileOperations

14,152 4.9x 5.5x 5.6x (3,085) 11,067 75% 7,984 44,868 119.5% 100.0% 8.55

OT Stand Alone / Tele-com & Internet Services

155 -2.3x -696.1x -46.2x (1,758) (1,603) 100% (1,603) (9,009) -24.0% (1.72)

Mobinil Compensation 240 1,349 3.6% 0.26

Linkdotnet Sale Value 130 (65) 65 100% 59 329 0.9% 0.06

Total 14,437 5.1x 5.4x 5.7x (4,908) 9,529 73% 6,679 37,536 100.0% 7.16

6.40GDR Value per Share (US$)


12/18

So, Can Elephants Dance?

What are the available opportunities for OT on the global telecom markets to create furthergrowth? Limited they are!

However, as Louis Gerstner showed in his book Who Says Elephants Cant Dance? which

was talking about IBMs turnaround in the 1990s, illustrating that big companies can go biggereven after reaching some kind of a road block.

It is too early to discount OT as a company with mature key operations, little potential forgrowth and threats of new entrants into its key markets. OTs management has a good trackrecord of prevailing in the past, and as the company creates more cash and higher equity, it isable to leverage even further its balance sheet, which can provide OT with relatively betterIRRs from ventures with less attractive return on invested capital (ROIC).

Stating the above, Wind Mobile is the only company in OTs current ventures that we see candemand relatively significant cash outlays over the coming period. Most of the other venturesare doing well on their own, and even are expected to provide good dividends to the parentcompany.

But there is another way to look at this argument, maybe OTs shareholder are whom will dance

all the way to the bank to collect high cash dividends from the sale of some of OTs operations,with...

...OT in discussions to sell some of its assets to MTN

South Africas MTN Group has been in talks with OT and Weather Investments with respect toacquiring some of the OTs mobile operations or the whole of it. It is believed that, at first,MTN was hoping to acquire all of OTs African Subsidiaries, then OT reached an agreementwith France Telecom, in which OT was bind not to sell its stake in Mobinil to non but FranceTelecom. Then, the Algerian government have put itself as Djezzys sole potential buyer. Thisleaves Tunisiana and Telecel Globe operation as targets for MTN. Furthermore, some talks indi-cated that MTN may be interested also in Banglalink.

In a first statement surrounding the negotiations value, Naguib, OTs Chairman, was quoted onReuters last week that MTN was offering US$7.8 billion for Djezzy. Regarding why would hecome out with this figure at this time? It is most probably to put a benchmark to the Algeriangovernment on what price he sees agreeable for selling his Algerian venture.

MTN had an interest coverage ratio of 5.5x in FY09 and net debt to equity was at 17%. Further-more, MTNs South Africas subscribers declined on the back of fierce competition althoughtotal subscribers grew by 31% to 116 million at the end of 2009, spread over 20 countries out ofwhich 14 are in Sub Saharan Africa, along with Sudan in the North.

Given MTN footprint and stronghold in Sub Saharan Africa, Telecel Globe would be a perfecttarget for expanding its coverage since it doesnt have any operations in Telecels four coun-tries.

Using Bharti acquisition of Zains African operations at US$255/sub. as an indicator for theprice MTN would put on Telecel Globe, it yielded an EV of US$581 million for Telecel Globevs. our DCF valuation of US$301 million. So, we can consider the EV/sub. value as the highend of pricing while our DCF value to be the low end and the transaction would happen any-where in between.

We prefer to use EV/sub. in markets in its initial phases or were EBITDA growth is still in thefuture. However, with regards to a mature market such as that of Tunisiana, DCF value wouldbe more appropriate.

However, given the global market limited opportunities and the fact that with adding Tunis toMTNs African portfolio, it would make MTN with operations in all four corners of the Africancontinent, and having its first operation on the Northern African coast. MTN may feel the need

to go more aggressive with regards to discount rates given its capability to leverage the transac-tion to a great extent.

12

OT current upside is limited

OT can still leverage expen-sive transactions to creategood IRRs from less intriguingROICsOr maybe, cashing out some

of its mature investment canprove a more rewarding optionMTN is interested in all ofOTs African assets andmaybe more

OTs chairman says MTN wasoffering US$7.8 billion forDjezzyMTN had a net debt of US$1.6billion and shareholders eq-uity of US$9.4 billion at theend of 2009

We used Bhartis acquisitionof Zains African operationsEV/Sub as an indicator ofTelecel maximum deal valueHaving its first market on therelatively richer Northernshores of Africa may lead

MTN to pay higher price forTunisiana




13/18

OT in discussions to sell some of its assets to MTN (Continued)

Using OTs chairman revealed deal value for Djezzy, which imply an EV/sub. of aroundUS$527 based on Q1 reported Djezzy subscribers. Tunisiana EV would soar to US$2.9 billionup from US$1.1 billion in our model. This is expensive, but MTN has been know to be an ag-gressive shopper, as in the hay days of 2006, MTN have bought Investcoms 4.9 million sub-scribers (mostly located in Sub Saharan Africa and Sudan) in a deal worth US$5.5 billion or anEV/sub. of US$1,122.

Just in case, it happens and MTN bids also on Banglalink, we assumed the Bharti bid on Waridas an indicator for the value of the deal, which imply an enterprise value of US$110/sub. to bemultiplied in Banglalinks 14.2 million subscribers as reported in Q1 2010 earning release tobring the operations enterprise value up to US$1.6 billion up from our DCF value of US$526million.

The maximum upside behind MTN acquisition talks

We see these acquisition multiples are the high end of the potential said transactions. However,

given limited available opportunities in the global mobile market and MTNs leveraging capac-ity, we have plugged them to adjust our model just to illustrate the maximum upside behind themuch talked about negotiations between OT and MTN. Ultimately, an announcement of suchacquisitions would increase our OT equity value to US$50 billion or EGP 9.5/share.

If OT can fall through with selling Djezzy, at the said value by OTs chairman. We assume thatOT will pay the Algerian government up to 25% of the deals enterprise value to let go of itspreemptive condition. A transaction at US$7.8 billion would yield, a net of the Algerian govern-ment assumed cut from the deal, an EV of US$5.9 billion, still considerably higher than ourvalue of US$4.5 billion for Djezzy and closer to the value without the political specific riskadditional discount of US$6.0 billion. This would change OTs valuation dramatically and thevalue per share, assuming the sale of the other operations we mentioned above too, would jumpto over EGP11/share.

But stock buyers, beware! Buying on such an acquisition story and hopped targets is an

extremely speculative venture and accumulating your target positions should be at lowprices prior to the stock heating up once the market picks up the beat of a deal closing...We recommend buying to be caped at a 10% margin below the original OT target price ofEGP7.2/share, since deals have this distinct characteristic of sometime failing!

13

MTN has been know as anaggressive shopper

And we also assumed Bangla-link can be part of the talks

A sale of Tunisiana, Teleceland Banglalink would bringOTs value to US$50 billion

If OT manages to sell Djezzyto MTN or an Arab investor asmentioned in the media today,we expect the Algerian gov-ernment may take up to 25%of the deals valueWe recommend buying below

our SOP price of EGP7.2/share and adjust further as anypart of those deals is con-firmed.



OT ValuationEnterprise

Value(US$ mn)

EV/EBITDA

2009

EV/EBITDA

2010

EV/EBITDA

2011

Net Debt(US$ mn)

ShareholdersEquity Value

(US$ mn)

OTStake

OT Value(US$ mn)

OT Value(EGP mn)

% oftotal

Value

% of GSMValue

Value PerOT Share

(EGP)

Djezzy 4,542 4.3x 4.7x 4.9x (108) 4,434 97% 4,293 24,124 48.4% 42.2% 4.60

Mobilink 2,086 5.4x 5.3x 5.3x (798) 1,288 100% 1,288 7,239 14.5% 12.7% 1.38

Mobinil 4,344 4.8x 5.8x 5.6x (889) 3,454 35% 1,197 6,729 13.5% 11.8% 1.28

Tunisiana 2,8481 7.4x 9.4x 12.0x (75) 2,773 50% 1,386 7,791 15.6% 13.6% 1.49

Banglalink 1,5622 13.3x 11.8x 11.5x (373) 1,189 100% 1,189 6,683 13.4% 11.7% 1.27

Telecel Globe 5813 n/a 23.0x 17.0x (121) 461 100% 461 2,588 5.2% 4.5% 0.49

Korylink 237 13.8x 6.0x 4.7x (118) 119 75% 89 501 1.0% 0.9% 0.10

Wind Canada 1,017 n/a n/a n/a (602) 415 65% 271 1,525 3.1% 2.7% 0.29

Total MobileOperations

17,218 6.0x 6.7x 6.8x (3,085) 14,133 72% 10,174 57,180 114.7% 100.0% 10.90

OT Stand Alone / Tele-com & Internet Services

155 n/a n/a n/a (1,758) (1,603) 100% (1,603) (9,009) -18.1% (1.72)

Mobinil Compensation 240 1,349 2.7% 0.26

Linkdotnet Sale Value 130 (65) 65 100% 59 329 0.7% 0.0

Total 17,503 6.2x 6.5x 6.9x (4,908) 12,595 0% 8,870 49,849 100.0% 9.50

8.50GDR Value per Share (US$)

Source: Jazira Capital projections and valuation1

Based on OTs Chairman said acquisition value for Djezzy at an EV/sub. of US$5272 Based on Bharti acquisition value for Warid Bangladeshi's operation at an EV/sub. of US$1103 Based on Bharti acquisition value for Zains African operation at an EV/sub. of US$255


14/18

14

Source: OT earning releases & Jazira Capital estimates


ORASCOM TELECOMEquity ResearchOT KPIs & JC Assumptions

Subscribers By Country (000) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Algeria 21,807 24,610 26,881 28,817 30,602 32,188 33,531 34,590

Pakistan 89,841 97,779 104,165 113,122 125,190 138,546 150,460 160,286

Egypt 40,589 52,697 60,157 66,810 72,837 77,923 81,777 84,988

Tunsia 8,330 9,758 10,337 10,846 11,271 11,598 11,818 12,042

Bangladesh 44,557 51,817 58,871 65,094 70,654 75,256 79,394 82,954

Telecel Globe Countries n/a 5,976 7,546 9,148 10,628 12,078 13,422 14,576North Korea 2 92 138 173 209 246 284 328

Canada 21,500 23,000 24,930 27,021 29,289 31,746 34,409 37,296

Lebanon 1,436 2,381 2,904 3,394 3,882 4,340 4,632 4,944

Total Subscribers 228,060 268,109 295,928 324,427 354,561 383,921 409,727 432,005

Change 20% 18% 10% 10% 9% 8% 7% 5%

Penetration Rates 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Algeria 63% 71% 77% 82% 86% 89% 92% 94%

Pakistan 54% 56% 57% 60% 64% 69% 72% 74%

Egypt 50% 63% 71% 77% 83% 87% 90% 91%

Tunsia 81% 94% 99% 102% 106% 108% 109% 110%

Bangladesh 28% 32% 36% 39% 42% 44% 46% 47%

Telecel Globe Countries n/a 22% 28% 33% 38% 43% 47% 51%

North Korea 0% 0% 1% 1% 1% 1% 1% 1%

Canada 65% 70% 75% 81% 88% 95% 102% 111%Lebanon 34% 55% 66% 76% 86% 95% 99% 104%

Average 42% 48% 52% 56% 60% 64% 67% 69%

Change 18% 15% 8% 7% 7% 6% 5% 3%

OT Subsidiaries Subscribers (000) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 14,109 14,618 15,527 16,301 17,015 17,650 18,187 18,610

Mobilink 28,480 30,800 32,397 34,636 37,653 40,992 43,971 46,427

Mobinil 19,190 24,137 27,554 0 0 0 0 0

Tunisiana 4,257 5,211 5,327 5,479 5,607 5,705 5,771 5,838

Banglalink 10,337 13,887 16,003 17,870 19,538 20,919 22,160 23,228

Telecel Globe 702 1,823 2,530 3,250 3,916 4,569 5,174 5,693

Korylink 2 92 138 173 209 237 256 278

Conslidated Subscribers 77,076 90,568 99,475 77,711 83,938 90,071 95,517 100,074

Mobinil - - - 30,678 33,529 35,960 37,833 39,417

Wind Canada - - 386 846 1,345 1,886 2,471 3,107Alfa 600 1,068 1,329 1,574 1,818 2,047 2,193 2,349

Total Subscribers 77,676 91,636 101,190 110,809 120,630 129,964 138,015 144,947

Change 12% 18% 10% 10% 9% 8% 6% 5%

OT Subsidiaries Market Share 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 64.7% 59.4% 57.8% 56.6% 55.6% 54.8% 54.2% 53.8%

Mobilink 31.7% 31.5% 31.1% 30.6% 30.1% 29.6% 29.2% 29.0%

Mobinil 47.2% 42.0% 45.8% 45.9% 46.0% 46.1% 46.3% 46.4%

Tunisiana 51.1% 53.4% 51.5% 50.5% 49.7% 49.2% 48.8% 48.5%

Banglalink 23.2% 26.8% 27.2% 27.5% 27.7% 27.8% 27.9% 28.0%

Telecel Globe n/a 30.5% 33.5% 35.5% 36.8% 37.8% 38.5% 39.1%

Korylink 100.0% 100.0% 100.0% 100.0% 100.0% 96.2% 90.0% 84.7%

Wind Canada 0.0% 0.0% 1.5% 3.1% 4.6% 5.9% 7.2% 8.3%

Alfa Lebanon 41.8% 44.8% 45.8% 46.4% 46.8% 47.2% 47.4% 47.5%

Grand Market Share 34.1% 34.2% 34.2% 34.2% 34.0% 33.9% 33.7% 33.6%Change -7% 0% 0% 0% 0% -1% 0% 0%

OT Subsidiaries ARPU (US$) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 12.4 10.8 9.5 9.1 8.6 8.4 8.4 8.3

Mobilink 3.4 3.0 2.7 2.5 2.4 2.3 2.3 2.3

Mobinil 9.4 7.7 6.3 0.0 0.0 0.0 0.0 0.0

Tunisiana 13.7 12.6 10.7 8.5 8.1 8.0 7.8 7.6

Banglalink 2.8 2.4 2.2 2.1 2.0 2.0 2.0 2.0

Telecel Globe 4.5 5.4 5.1 5.0 5.0 4.9 4.9 4.9

Korylink 0.0 46.3 44.0 43.1 42.7 42.3 41.8 41.8

Conslidated GSMs' ARPU 7.0 6.1 5.2 4.4 4.2 4.1 4.0 3.9

Mobinil 0.0 0.0 0.0 5.8 5.6 5.8 5.9 6.1

Wind Canada 0.0 0.0 41.3 40.3 39.3 38.5 38.1 37.7

Alfa 47.2 40.0 36.0 34.2 33.5 32.8 32.8 33.5

Global ARPU 7.3 6.4 5.7 5.4 5.3 5.4 5.5 5.6Change -1% -12% -10% -6% -1% 2% 2% 2%


15/18

15




Revenues (US$ mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 2,041 1,868 1,725 1,730 1,720 1,754 1,795 1,825Mobilink 1,208 1,058 1,016 1,002 1,037 1,106 1,171 1,221Mobinil 891 944 458 0 0 0 0 0Tunisiana 326 357 337 277 270 270 268 266Banglalink 288 351 390 420 445 476 507 534

Telecel Globe 25 81 133 173 213 250 284 316Korylink - 26 61 81 98 113 124 134GSMs' Revenue 4,779 4,685 4,120 3,682 3,783 3,969 4,149 4,296Telecom Services 472 291 349 383 412 433 456 479Internet Services 76 89 91 18 19 20 21 22Consolidated Revenues 5,327 5,065 4,560 4,084 4,214 4,422 4,626 4,797Change 13% -5% -10% -10% 3% 5% 5% 4%Proforma Consolidated Revenues (Excluding Mobinil) 4,436 4,121 4,102 4,084 4,214 4,422 4,626 4,797Change 10% -7% 0% 0% 3% 5% 5% 4%

% of Consolidated Revenues 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 38% 37% 38% 42% 41% 40% 39% 38%Mobilink 23% 21% 22% 25% 25% 25% 25% 25%Mobinil 17% 19% 10% 0% 0% 0% 0% 0%Tunisiana 6% 7% 7% 7% 6% 6% 6% 6%Banglalink 5% 7% 9% 10% 11% 11% 11% 11%

Telecel Globe 0% 2% 3% 4% 5% 6% 6% 7%Korylink 0% 1% 1% 2% 2% 3% 3% 3%GSMs' Revenue 90% 93% 90% 90% 90% 90% 90% 90%Telecom Services 9% 6% 8% 9% 10% 10% 10% 10%Internet Services 2% 2% 0% 0% 0% 0% 0% 0%

EBITDA (US$ mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 1,290 1,067 966 934 910 910 913 909Mobilink 492 385 391 391 399 420 433 452Mobinil 430 460 185 0 0 0 0 0Tunisiana 189 192 152 118 113 111 108 107Banglalink 14 117 133 136 145 155 165 174Telecel Globe 0 0 25 34 44 53 63 73Korylink 17 39 51 60 66 68 70GSMs' EBITDA 2,414 2,239 1,891 1,665 1,671 1,715 1,750 1,785Telecom Services 33 -10 45 41 45 49 53 57

Internet Services 0 10 16 3 3 4 4 4OT Holding & Others -63 -67 -60 -48 -43 -40 -37 -34Consolidated EBITDA 2,384 2,172 1,891 1,661 1,676 1,727 1,770 1,812Change 17% -9% -13% -12% 1% 3% 2% 2%Proforma Consolidated EBITDA (Excluding Mobinil) 1,954 1,711 1,706 1,661 1,676 1,727 1,770 1,812Change 13% -12% 0% -3% 1% 3% 2% 2%

EBITDA Margin 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 63% 57% 56% 54% 53% 52% 51% 50%Mobilink 41% 36% 39% 39% 39% 38% 37% 37%Mobinil 48% 49% 40% 39% 39% 42% 44% 47%Tunisiana 58% 54% 45% 43% 42% 41% 40% 40%Banglalink 5% 33% 34% 33% 33% 33% 33% 33%Telecel Globe 2% 0% 19% 20% 21% 21% 22% 23%Korylink 0% 66% 65% 63% 61% 58% 55% 52%GSMs' EBITDA 51% 48% 46% 45% 44% 43% 42% 42%

Telecom Services 7% -4% 9% 7% 7% 7% 8% 8%Internet Services 0% 12% 17% 17% 18% 18% 19% 19%Consolidated EBITDA 45% 43% 41% 41% 40% 39% 38% 38%Change 3% -4% -3% -2% -2% -2% -2% -1%Proforma Consolidated EBITDA (Excluding Mobinil) 44% 42% 42% 41% 40% 39% 38% 38%Change 2% -6% 0% -2% -2% -2% -2% -1%

% of Total EBITDA 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 54% 49% 51% 56% 54% 53% 52% 50%Mobilink 21% 18% 21% 24% 24% 24% 24% 25%Mobinil 18% 21% 10% 0% 0% 0% 0% 0%Tunisiana 8% 9% 8% 7% 7% 6% 6% 6%Banglalink 1% 5% 7% 8% 9% 9% 9% 10%Telecel Globe 0% 0% 1% 2% 3% 3% 4% 4%Korylink 1% 2% 3% 4% 4% 4% 4%GSMs' EBITDA 101% 103% 100% 100% 100% 99% 99% 98%Telecom Services 1% 0% 2% 2% 3% 3% 3% 3%Internet Services 0% 0% 1% 0% 0% 0% 0% 0%OT Holding & Others -3% -3% -3% -3% -3% -2% -2% -2%

OT KPIs & JC Assumptions (continued)


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Capex (US$ mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Djezzy 167 261 313 298 283 269 260 258

Mobilink 537 157 126 132 136 137 137 133

Mobinil 524 472 519 519 519 519 519 519

Tunisiana 99 91 118 148 137 127 120 114Banglalink 407 122 183 156 140 133 126 120

Wind Canada 400 300 200 150 150 150

Others 160 221 141 146 150 155 159 164

Total Capex. 1,894 1,324 1,801 1,698 1,565 1,489 1,473 1,458

Consolidated Capex. 1,576 1,037 1,006 805 777 757 743 732

Change -1% -34% -3% -20% -3% -3% -2% -2%

Investment Income (EGP mn) 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Wind Canada (433) (481) (399) (201) 21 350

Mobinil 232 540 627 870 1,155 1,521

Others (16) (10) (5) (1) 10 25

Total Investment Income (16) (263) (217) 49 223 667 1,185 1,896

OT KPIs & JC Assumptions (continued)



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Source: OT financials & Jazira Capital estimates and forecasts


ORASCOM TELECOMEquity ResearchFigures are in EGP mn Income Statement 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Revenues 29,379 28,435 25,685 23,348 24,454 26,047 27,655 29,112

Growth 8.5% -3.2% -9.7% -9.1% 4.7% 6.5% 6.2% 5.3%

EBITDA 13,123 12,256 10,651 9,499 9,727 10,174 10,583 10,99

Growth 10.6% -6.6% -13.1% -10.8% 2.4% 4.6% 4.0% 3.9%

EBITDA Margin 44.7% 43.1% 41.5% 40.7% 39.8% 39.1% 38.3% 37.8%

Depreciation & Amortization (4,981) (5,477) (4,929) (4,482) (4,611) (4,705) (4,771) (4,785)

Reported EBIT 8,143 6,779 5,722 5,017 5,116 5,470 5,812 6,215

Non-Operating Items 133 (263) (217) 49 223 667 1,185 1,896

Net Interest (2,271) (2,319) (1,865) (1,595) (1,605) (1,581) (1,361) (1,268)

Net Profit Before Tax 6,005 4,197 3,641 3,471 3,734 4,556 5,636 6,843

Income Tax (2,208) (2,013) (1,941) (1,880) (1,967) (2,142) (2,242) (2,297)

Net Profit After Tax 3,797 2,184 1,700 1,591 1,768 2,414 3,394 4,546

Extraordinary Items (954) 12 1,490 0 0 0 0 0

Minority Interest (378) (351) (135) (73) (71) (71) (71) (71)

Net Income 2,465 1,845 3,055 1,518 1,696 2,343 3,323 4,475

Non-Appropriation Items (48) 0 (60) (30) (33) (46) (65) (88)

Net Attributable Income 2,416 1,845 2,995 1,488 1,663 2,297 3,258 4,387

EPS (EGP) 0.46 0.35 0.57 0.28 0.32 0.44 0.62 0.84

Growth -79.0% -23.6% 62.3% -50.3% 11.8% 38.1% 41.8% 34.7%

Balance Sheet 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

Cash & Marketable Securities 4,053 4,790 4,742 4,060 4,425 4,644 4,126 3,929

Trade Receivables-Net 1,813 1,828 1,684 1,531 1,603 1,708 1,813 1,909

Inventory 584 304 275 250 261 278 296 311

Other Current Assets 3,328 3,266 2,950 2,682 2,809 2,992 3,176 3,344

Total Current Assets 9,778 10,188 9,651 8,522 9,098 9,622 9,412 9,493

Net Fixed Assets 27,908 27,526 24,832 25,679 26,309 26,792 27,190 27,52

Other LT Assets 17,023 17,573 19,363 18,239 17,225 16,458 15,950 15,91

Non-Current Assets 44,931 45,099 44,195 43,918 43,534 43,249 43,140 43,442

Total Assets 54,709 55,287 53,846 52,440 52,632 52,872 52,551 52,935

Short Term Bank Debt & CPLTD 2,930 5,483 4,462 6,948 12,277 7,294 7,560 6,359

Dividends Payable 925 0 1,892 788 966 1,451 2,224 3,220

Other Current Liabilities 13,327 13,083 12,104 10,971 11,312 11,852 12,357 12,64

Total Current Liabilities 17,182 18,566 18,459 18,707 24,555 20,598 22,141 22,22

Long-Term Debt & Bonds 28,794 26,747 19,682 17,191 10,750 14,009 11,000 10,00

Other LT Liabilities 3,866 3,168 3,380 3,489 3,543 3,590 3,637 3,686

Non-Current Liabilities 32,660 29,915 23,063 20,679 14,293 17,599 14,637 13,686

Paid in Capital 899 889 5,246 5,246 5,246 5,246 5,246 5,246

Total Shareholders' Equity 4,867 6,806 12,325 13,054 13,784 14,675 15,773 17,027

Net Debt (adjusted with Div. Payable & Cash) 28,596 27,440 21,295 20,868 19,569 18,110 16,658 15,650

Working Capital (7,404) (8,378) (8,808) (10,185) (15,457) (10,975) (12,730) (12,728)

Free Cash Flow 2008a 2009a 2010e 2011f 2012f 2013f 2014f 2015f

NOPLAT 5,102 4,065 4,106 2,752 2,854 3,186 3,684 4,175

Depreciation 4,212 4,596 4,129 3,725 3,852 3,946 4,019 4,078

Gross Cash Flow 9,314 8,661 8,234 6,477 6,706 7,133 7,702 8,253

Gross Investments (2,731) (4,086) (1,667) (5,154) (4,401) (4,265) (4,292) (4,474)

Operating Free Cash Flow Excluding Intangibles 6,583 4,574 6,567 1,323 2,305 2,868 3,410 3,779

Investment in Goodwill & Intangibles (1,578) (147) (147) (147) (147) (147) (147) (147)

Operating Free Cash Flow Including Intangibles 5,005 4,427 6,420 1,176 2,158 2,721 3,263 3,632

Non -Operating Cash Flow 8,180 (2,594) (1,642) 1,682 738 1,066 2,017 1,847

Free Cash Flow 13,185 1,833 4,778 2,858 2,896 3,787 5,280 5,480

Historical & forecasted financials


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