#1te Investor Presentation FY 2014 March 2015#2ECONOMIC OVERVIEW EGYPT TELECOM MARKET OVERVIEW TELECOM EGYPT ROAD MAP COMPANY BACKGROUND PERFORMANCE UNDER REVIEW FULLY INTEGRATED OPERATIONS & OTHER INVESTMENTS CLOSING REMARKS APPENDIX Content te 4 7 11 13 17 32 52 36 38#33 Disclaimer This document has been prepared by Telecom Egypt (the "Company") solely for the use at the analyst/investor presentation, held in connection with the Company. The information contained in this document has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. The information set out herein is subject to updating, completion, revision, verification and amendment and such information may change materially. The Company is under no obligation to update or keep current the information contained in this material or in the presentation to which it relates and any opinions expressed in them is subject to change without notice. None of the Company or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this document or its contents, or otherwise arising in connection with this document. This document does not constitute an offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares of the Company and neither it nor any part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever. This presentation has been made to you solely for your information and background and is subject to amendment. This presentation (or any part of it) may not be reproduced or redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (excluding the relevant person's professional advisors) or published in whole or in part for any purpose without the prior written consent of the Company. This presentation includes forward-looking statements. These forward-looking statements include all matters that are not historical facts, statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the company operates may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if the Company's results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The Company does not undertake any obligation to review or confirm analysts expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation. te#4Economic Overview te#55 Egypt's Opportunities • History Egypt had one of the first centralized governments in the world. Parliament was introduced to Egypt in 1824; and the Constitution in 1882. There is a lively feeling of unity and compelling solidarity among Egyptians despite witnessing several political challenges and revolutions. Egypt with time went through a number of wars, invasions and revolutions, but had never been through and always had been immune to any civil wars through its history. History Geography Egypt Opportunities Demographics Demographics • Geography Egypt is located at the heart of the world. It is the point of convergence of the three old continents Africa, Asia and Europe. Egypt's distinctive geographic location positioned it to be globally ranked second in the submarine cable business, with 18 maritime cable systems crossing through its territory, seizing 16% of the global cable business. Its unique geographical location strengthens its prospects to become a global hub for Internet services and to attract foreign investments. Gross Domestic Product (GDP) at PPP Egypt has a population of 87 million, with a growth rate of 3% • Egypt has a young population; around 1/3 of Egyptians are under the age of 15 and around 2/3 of Egyptians are under the age of 25. Gross National Income (GNI) Per Capita at PPP (In USD) * 11,000 10,800 $10,790 10,600 . There are 1 million school graduates and 300k university graduates every year. $10,610 10,400 10,200 $10,360 $10,200 2013 A nation with just above 19 million households and approximately half a million new households are built and occupied every year. 10,000 9,800 2010 2011 2012 2013 (In USD Billions) 3,400 3,200 $3,315 $3,256 3,000 2,800 $2,973 $2,804 2,600 2,400 2010 2011 2012 Source: Central Bank of Egypt (CBE), CAPMAS, world Bank * Data are in current international dollars based on the 2011 ICP round.. te#66 Egypt's Opportunities Total External Debt* * External Debt (In $ Billions) Domestic debt (In EGP Billions) 34 1,045 889 35 34 2010 2011 2012 Foreign Reserves (In $ Billions) Foreign Reserves 40.000 35.000 35.200 30.000 25.000 20.000 15.000 10.000 5.000 0.000 2010 26.600 2011 Source: Central Bank of Egypt **Central Agency for Public Mobilization and statistics 1,238 43 896,477 777,806 724,878 1,527 Banks'Deposits (In EGP Billions) Local Currency Foreign Currencies 686,052 LI 206,440 2013 2010 Unemplogment Rate ** Unemplogment rate 290,508 232,159 245,711 2011 2012 2013 14.0% 12.0% 13.4% 12.9% 12.4% 10.0% 8.0% 8.9% 6.0% 15.500 14.900 4.0% 2.0% 0.0% 2012 2013 2010 2011 2012 2013 te#77 Egypt's Challenges Education High illiteracy rates. Poor primary education quality. Insufficient number of schools. Insufficient schools' facilities. ✓ te donated to the Egyptian Foundation for Technological Education Development (EFTED) to construct and furnish the Nile University Buildings and complete the second phase of the University's IT Network. te funds literacy classes all over the country through its national project "Anwaar". Education Employment Egypt Challenges Health • . Employment High unemployment rate reached over 13 percent in June 2013. Many of University graduates settle for Low-Skilled Jobs. ✓te launched "With You" initiative, aiming to employ people suffering from hearing and speech impairment preparing them to work with sign language. ✓ te launched "Injaz" an educational volunteer based program, linking the private sector with universities, designed to enhance youth skills to ensure they are well equipped and prepared to enter the job market. te funds "Eshrak" social project to train the youth in artisanal, technical and professional fields that is fundamental for economic development. Health Highest rates of new hepatitis C virus (HCV) infection in the world -15% of population infected with HCV. The standard of public healthcare is low. Low healthcare expenditure. te launched "Egypt without HCV" initiative in collaboration with Misr El Kheir Foundation to curb the spread of HCV. te launched blood donation campaigns and succeeded in raising dozens of blood bags to support the National Center for Blood Transfusion. Source: Central Agency for Public Mobilization and Statistics, World Health Organization (WHO). Egypt's Political Environment Update:- 3td December 2013:- Final draft of Constitution. 14th 15th January 2014:- Referendum on the Constitution. Between 27 and 28 May 2014:- presidential election in Egypt. 4th June 2014:- Egypt declares el-Sisi winner of presidential election. 17th July 2014:- The legislative polls, the final stage of a "roadmap". te#8Egypt Telecom Market Overview te#99 Telecom Market - Growing Market (Retail Revenue) Telecom Companies Retail Revenues (n EGP Billions) (i.e.: te & MNOS) 32.74 Mobile Broadband Services (In EGP Billions) 4.24 2012 Mobile Voice Services CAGR (2012-2014) 29.88% (In EGP Billions) 5.68 34.15 35.07 +4% +3% 2013 CAGR (2012-2014)--1.35% 2014 24.09 24.47 23.45 1.61 etisalat D 6.85 7.03 etisalat D 6.65 3.37 1.14 0.97 2.50 vodafone vodafone 9.29 9.38 8.82 1.88 1.44 1.57 mobinil 7.95 8.06 7.97 mobinil 1.22 0.96 2012 2013 2014 2012 2013 2014 Fixed Broadband Services (In EGP Billions) CAGR (2012-2014)19.96% 2.95 0.00 2.48 Others etisalat D 0.18 2.05 0.00 vodafone 0.55 0.16 0.00 mobinil 0.50 0.24 0.15 0.47 0.24 0.23 1.98 te 1.58 1.20 2012 2013 Source: All Information according to te's Market Intelligence Reports. 2014 Fixed Voice Services (In EGP Billions) CAGR (2012-2014)-3.63% By offering Total telecom Services, will Sustain the attrition in Fixed Voice 3.22 2.99 2.95 2012 2013 2014 te te#1010 Telecom Market Subscriber Bases te's Subscribers Base (In 000's Subscribers) 9,282 7,934 7,323 6,781 6,336 te's Subscribers Breakdown as at 31th Dec.2014 (In 000s Subscribers) 1,052, 17% Total Subs 6.3 Million Population Penetration 7.2% 5,283, 83% Household Penetration 33.9% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Home Enterprise Mobile Market Subscribers Base (In 000's Subscribers) Mobile Subscribers Distribution as at 31th Dec. 2014 (In 000s's Subscribers) 23,047 23,270 22,050 etisalat D etisalat vodafone 13,849 22,050, 23% 8,648 36,802 40,233 41,912 39,549 vodafone 39,549, 42% Total Subs 95.3 Million 31,768 30,225 32,914 33,773 34,747 33,717 mobinil Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 33,717, 35% mobinil Population Penetration 108.6% te#1111 Internet Market Internet Users In Egypt (In Millions) ADSL Subscribers Base (In 000's Subscribers) 38.8 32.6 29.0 22.8 2,500 48.3 te o-Others 2,000 1,978 1,667 +19% 1,500 1,362 +22% 1,111 Internet Penetration (% of Population) +23% 55.4% 883 1,000 +26% Household broadband Penetration 16.2% +10% +9% 500 +28% 879 964 1,051 +32% 687 519 FY 2010 FY 2011 FY 2012 0 FY 2013 FY 2014 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Market Growth (In 000's Subscribers) སྐྱི༢ ཙྪི༢ 2014 1,978 1,051 +19% 1,667 2013 FY 2012 1,362 +22% 879 964 2,631 2,241 Source: CAPMAS. ** Internet Penetration are an approximation, extracted from MCIT website till 30/11/2014. 3,029 15% ADSL Market Share Breakdown (In Percent %) te Others te 65% MCIT website as at 31/12/2014. Others 35% te#12Telecom Egypt Road Map te#13Road To Success 13 Telecom Egypt Road Map Status Quo Telecom Egypt offers fixed voice & broadband services. However, voice services are a dying business and there are no future for a telecommunication company without a mobile arm. Total Telecom License 2G & 3G Technology te's customers have been asking for total telecom services, offering value for money. Now more than ever they desire a single supplier for all of their telecom and data needs, with a single invoice. That's why te has been lobbying hard to acquire the Total Telecom License to meet customers demands. To build the total telecom model, we plan to start with it lightly. We are not willing to invest in 2G and 3G technologies at the moment as they are outdated technologies. We'll be waiting for the 4G technology where the tech is worth investing in, which we believe will generate revenues for the company and more generation of value for our customers. So, by then we'll be hybrid, roaming on 2G/3G to offer traditional mobile voice service and operating 4G with heavy reliance on fixed access asset to offer real broadband services and experience. Commercial Agreements After the issuance of the Total Telecom License, te will negotiate, finalize and sign the appropriate commercial agreements with the local operators to use and roam on their networks. 4G Technology When the government announces the issuance of 4G spectrum in the short to medium term, te management would be interested in applying for that spectrum, where te will optimally leverage on its fixed access asset to capitalize on the available synergies supporting CAPEX and OPEX Saving where around 70% of the mobile traffic is generated from the Home/Enterprise Zones, allowing te to have an edge over mobile operators. Vodafone Egypt Asset With 4G technology deployment, investments and CAPEX needs are required, te shareholders will have to decide how it will evolve with Vodafone Egypt's assets, be it a seller or buyer, until then te understands that there are no obligations to divest such assets. And, the disposal of such assets is a General Assembly decision, where the shareholders will come to decide whether there is any duplication in assets, which might hurt their interests. te#14Company Background te#1515 Key Performance Indicators (KPIs) te's Subscribers Base (In 000's Subscribers) 7,323 ADSL Subscribers Base (In 000's Subscribers) 2,500 te O-Others 2,000 1,978 1,667 +19% 1,500 1,362 +22% 6,781 1,000 6,336 +9% +10% 1,051 964 879 500 0 FY 2012 FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 Fixed Voice ARPU* (In EGP/Month) 33.93 -2.84% 3.79% 32.97 FY 2012 FY 2013 31.72 FY 2014 Fixed Data ARPU (In EGP/Month) 61.62 3.21% 63.60 11.26% 70.76 FY 2012 FY 2013 FY 2014 * Fixed Voice ARPU includes Home & Enterprise revenues (Subscription+ VAS+ Voice Calls), and revenue from Incoming International to Fixed Calls. te#1616 Telecom Egypt's Line of Business te's business has now been organized into customer facing units in order to focus on growth Lines of Business Retail Wholesale Business Unit (BU) BU Characteristics Home Services Traditional voice services and high speed Internet (ADSL) through home landlines. Growth based on demographics and ability to spend more on telecoms. 18 million homes and 500 thousand new potential households created per year. 60% of home revenue is access and data based. Enterprise Solutions High Speed Internet Services (ADSL) and Enterprise Integrated applications solutions for both Private Companies and Govern- mental Organizations and Institutions. Enterprise is repositioning from being a connectivity provider, to a total solution provider. This is expected to level up in the next five years. Domestic Wholesale Versatile wholesale services including infrastructure leasing, as well as data transfer for mobile companies and internet providers. te's MNOS and ISPS Use extensive and unique fiber based network for transmission services. The uptake in mobile Particular demand for total subscribers and mobile telecom. technology has seen an increase in bandwidth and transmission demand. International Carriers Affairs International voice operations, thanks to te's bilateral relations with international carriers and companies, as well as a focus on diversity of inbound traffic sources. Develop and grow international and regional Hub business, as well as developing adjacent voice services (HCD-ITFS). Implementing "Least Cost Routing" module. International Customers & Networks Egypt's unique geography, connecting the Red and Med Seas, make te's network a unique global resource connecting Euro- Asia and Euro-E-Africa infrastructure. The world depends on te heritage for international communications. Latency and diversity support te's offering. te#1717 A Solid Track Record Revenue Mix (In EGP Millions) 14,000 +9.16% +11.02% 12,158 12,000 11,138 10,032 +29% 1,250 10,000 +45% 971 -2% International Customers & Networks 671 +26% 3,067 3,142 8,000 2,495 International Carriers Affairs +19% +7% 6,000 2,681 Domestic Wholesale 2,111 2,258 +3% 4,000 +14% 1,735 2,031 1,782 Enterprise Solutions -1% +5% 2,000 3,019 2,984 Home Services 3,129 FY 2012 FY 2013 FY 2014 EBITDA Growth (In EGP Millions, In Percent %) NPAT Growth (In EGP Millions) 3,850 100% 3,100 80% 3,841 90% 2,900 70% 2,958 3,800 80% 2,700 60% 70% 2,500 2,620 50% 3,750 - 60% 2,300 -50% 40% 3,736 2,100 3,700 37% 3,687 33% - 40% 30% 1,900 . 2,031 - 30% 32% 1,700 26% 20% 27% 3,650 20% 10% 1,500 17% 10% 3,600 FY 2012 0% 1,300 0% FY 2013 FY 2014 FY 2012 FY 2013 FY 2014 Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. te#18Performance Under Review - FY 2014 (Financial & Operational) te#1919 Income Statement Summary Income Statement Summary 12 Months Period Ending Dec YOY In EGP Millions FY 2014 FY 2013 % Change Revenue 12,158 11,138 9.15% Home Services 3,129 2,984 4.8% Enterprise Solutions 2,031 Domestic Wholesale 1,782 14.0% 2,681 2,258 18.7% International Carriers Affairs 3,067 3,142 -2.4% International Customers & Networks 1,250 971 28.7% EBITDA Margin EBIT Margin 3,841 3,687 4.17% 31.59% 33.10% 2,707 22.26% 3,080 27.65% -12.12% Profit Before Tax & Minority Interest 3,084 Margin 25.37% 3,753 33.69% -17.82% Net Profit Margin EPS 2,031 16.70% 2,958 26.56% -31.36% 0.89 1.43 Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. -37.72% NPAT EBIT EBITDA Revenue FY 2014 Results FY 2014 Revenues witnessed growth of 9%, The growth was across most of the business units operations, in particular the core retail line of business, redressing the balance between the wholesale and retail revenues. The growing demand for broadband services reflected an increase of 19% in ADSL subscriber base on 2013, and growth in data revenues by 25.1%, offsetting the decline in voice revenues. The Increase in total revenues and high profitability, led to a healthy margin of 31.6%. The decrease is attributable to the drop in Income From Direct Investments; mainly the decrease in VFE's earnings by EGP 138 Million. The decline was mainly attributable to a number of one-offs. The additional EGP 149 million for provisions formed to hedge for future sales taxes, on FY 2013, another EGP 113 million deducted during the year for tax reviews with the local tax authorities for delayed settlements. Additionally, the additional 5% increase in corporate taxes by law with a noticeable EGP 70 million impact, and the hike in Deferred Taxes for contingent liabilities associated with taxes on dividends amounting for an additional EGP 308 million. te#2020 Income Statement Summary Income Statement Summary Quarter Only QoQ YOY % % In EGP Millions Revenue Q4 2014 Q3 2014 Q4 2013 Change Change 3,009 2,717 2,782 10.75% 8.13% Home Services 793 792 756 0.1% 4.8% Enterprise Solutions 523 495 442 5.5% 18.2% Domestic Wholesale 863 590 627 46.2% 37.7% International Carriers Affairs 764 751 723 1.8% 5.7% International Customers & Networks 66 88 234 -25.3% -72.0% EBITDA Margin EBIT Margin 660 21.93% 646 23.78% 767 2.14% -13.95% 27.56% 489 16.25% 409 15.06% 591 21.25% 19.56% -17.29% Profit Before Tax & Minority Interest 548 455 729 20.40% -24.75% Margin 18.22% 16.76% 26.18% Net Profit Margin 236 7.85% 251 9.24% 555 19.95% -5.85% -57.42% EPS 0.06 0.15 0.25 -57.20% -74.63% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. NPAT EBIT EBITDA Revenue Q4 2014 Results QoQ 2014 Revenues witnessed growth of 10.75%, the growth was across most of the business units operations, in particular the core retail line of business, redressing the balance between the wholesale and retail revenues. the growing demand for broadband services reflected an increase of 19% in ADSL subscriber base on 2013, and growth in data revenues by 27.3% YoY & 4.6% QoQ, offsetting the decline in voice revenues. The Increase in total revenues and high profitability, led to a margin of 21.9%. • The decrease is attributable to the drop in Income From Direct Investments; mainly the decrease in VFE's earnings by EGP 35 Million YoY. The decline was mainly attributable to a number of one-offs, such as the Deferred Taxes for contingent liabilities amounting for EGP 154 million YoY. te#2121 Revenue Breakdown YOY Consolidated Revenue In EGP Millions 12 Months Period Ending Dec FY 2014 FY 2013 % Change Retail Services: Home Services Margin/Retail Services 3,129 60.64% 2,984 62.61% 4.84% Enterprise Solutions Margin/Retail Services 2,031 39.36% 1,782 37.39% 13.97% Total Retail Revenue 5,160 4,766 8.25% Margin/Total Revenue 42.44% 42.79% Wholesale Services: Domestic Wholesale Margin/Wholesale Services 2,681 38.32% 2,258 35.44% 18.74% International Carriers Affairs 3,067 3,142 -2.41% Margin/Wholesale Services 43.82% 49.32% International Customers & Networks Margin/Wholesale Services 1,250 17.86% 971 15.24% 28.71% Total wholesale Revenue 6,998 6,372 9.83% Margin/Total Revenue 57.56% 57.21% Total Revenues 12,158 11,138 9.15% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. HS BU IC&NBU ICA BU DW BU ES BU FY 2014 Results HS BU revenues increased primarily to the growing demand for broadband services reflecting an increase of 20% in ADSL subscriber base on 2013, and growth in data revenues by 29.4%, offsetting the decline in voice revenues. The rise in ES BU was mainly due to the expansion in New Urban Development Communities (i.e.: NUCA) generating an additional EGP 275 Million. The increase was attributable to the additional EGP 256 million, on FY 2013, from the introduction of new products to drive capacity sales on the new IRU model • The decrease was on-top of the unforeseen changes in retail activities in the Saudi market that had an aggressive impact in Q1 2014, having a net year-on- year downside of EGP 157 million. The increase was mainly due to the two major Cable Project transaction recognized in Q2 2014, providing crossing services to SMW-5 and AAE-1 cable systems, amounting for an additional EGP 543 Million on 2013. te#2222 Revenue Breakdown Consolidated Revenue In EGP Millions Quarter Only QoQ YOY % % Q4 2014 Q3 2014 Q4 2013 Change Change Retail Services: Home Services Margin/Retail Services 793 60.27% 792 61.52% 756 0.12% 4.84% 63.11% Enterprise Solutions 523 Margin/Retail Services 39.73% 495 38.48% 442 36.89% 5.52% 18.22% Total Retail Revenue Margin/Total Revenue 1,316 43.73% 1,288 47.39% 1,199 43.08% 2.20% 9.78% Wholesale Services: Domestic Wholesale Margin/Wholesale Services 863 50.98% 590 41.31% 627 39.57% 46.20% 37.70% International Carriers Affairs 764 Margin/Wholesale Services 45.14% 751 52.55% 723 45.66% 1.76% 5.68% International Customers & Networks 66 Margin/Wholesale Services 3.88% 88 6.15% 234 14.77% -25.32% -71.95% Total wholesale Revenue 1,693 1,429 Margin/Total Revenue 56.27% 52.61% 1,584 56.92% 18.45% 6.89% Total Revenues 3,009 2,717 2,782 10.75% 8.13% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. HS BU IC&N BU ICA BU DW BU ES BU Q4 2014 Results The increase was primarily attributable to the growing demand for broadband services reflecting an increase of 0.12% QoQ & 4.84% YoY. The increase was mainly due to the expansion in New Urban Development Communities (i.e.: NUCA) generating an additional EGP 79 Million YoY. The increase was attributable to the additional EGP 198 million YoY, from the introduction of new products to drive capacity sales on the new IRU model The ICA BU showed a healthy growth of 6% YoY, positively impacted by a slight climbing pattern in the revenues of international, inbound and transit activities volumes and related revenues The decrease in ICA BU was due to a decrease in Ancillary Services by 66.9% YoY & a decrease in Capacity Sales by 76.9% YoY. te#2323 Cost Breakdown YOY Operating Cost Breakdown 12 Months Period Ending Dec % In EGP Millions FY 2014 FY 2013 Change Interconnection Cost 2,350 2,259 4.03% Margin/Operating Cost 34.61% 34.92% Depreciation & Amortization 1,528 1,636 -6.64% Margin/Operating Cost 22.50% 25.30% Other Operating Cost Margin/Operating Cost 2,911 42.89% 2,572 39.78% 13.18% Total Operating Cost Expenses 6,789 Margin/Total Revenue 55.84% 6,467 58.07% 4.97% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. Interconnection Cost Other Operating Cost Depreciation & Amortization FY 2014 Results The increase of interconnection cost by 4.03% is driven by the commercial agreements signed with local MNOS for the provisions of International and Infrastructure Services. The decrease is a direct result of the increase in the cost of fully depreciated assets during the period. The increase of other operating cost by 13.18% is mainly due to the increase in license fees and frequencies by 77.49% & Employee cost by 10.72% on 2013. te#2424 Cost Breakdown Operating Cost Breakdown QoQ YOY Quarter Only % % In EGP Millions Q4 2014 Q3 2014 Q4 2013 Change Change Interconnection Cost 585 Margin/Operating Cost 31.76% 571 32.94% 534 32.63% 2.48% 9.41% Depreciation & Amortization 380 Margin/Operating Cost 20.64% 388 22.38% 385 23.52% -2.00% -1.35% Other Operating Cost 876 Margin/Operating Cost 47.60% 774 44.68% 718 43.86% 13.23% 22.00% Total Operating Cost Expenses Margin/Total Revenue 1,841 1,732 1,638 6.28% 12.40% 61.19% 63.76% 58.86% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. Interconnection Cost Other Operating Cost Depreciation & Amortization Q4 2014 Results The increase in interconnection cost is mainly due to the commercial agreements signed with local MNOS for provision of international & infrastructure services. The decrease is a direct result of the increase in the cost of fully depreciated assets during the period. The increase of other operating cost is mainly due to the increase in license fees and frequencies by 77.31% & Employee cost by 18.05% YoY. te#2525 Cost Breakdown SG&A Analysis In EGP Millions General & Administrative Expenses: YOY 12 Months Period Ending Dec FY 2014 % FY 2013 Change Salaries & Wages Margin/G&A Expenses 1,094 60.73% 972 64.66% 12.58% Depreciation Margin/G&A Expenses Others Margin/G&A Expenses 55 3.08% 49 3.29% 12.03% 652 36.20% 482 32.05% 35.40% Total G&A Expenses Margin/Total Revenue 1,802 14.82% 1,503 13.50% 19.88% Selling & Distribution Expenses: Salaries & Wages Margin/S&D Expenses 777 58.71% 749 63.53% 3.79% Depreciation Margin/S&D Expenses 9 2.92% 0.69% 0.75% Others Margin/S&D Expenses 537 40.60% 421 35.72% 27.64% Total S&D Expenses Margin/Total Revenue 1,324 10.89% 1,179 10.58% 12.30% Total SG&A Margin/Total Revenue 3,126 25.71% 2,682 24.08% 16.55% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. Others Depreciation Salaries & Wages FY 2014 Results The increase in salaries and wages is attributable to the 10% annual salary increase and the newly structured incentive rewards program, both of which came into effect as of the first quarter 2014, amounting for a difference of more than 150 million Egyptian Pounds on 2013. Impacted by the increase in the cost of the fully depreciated assets during the periods. G&A Expenses The Increase is mainly due to the increase in Taxes & Custom Duties by EGP 113 Million on 2013. S&D Expenses The increase is mainly due to the increase in discount allowed to mobile operators by EGP 102 Million on 2013. te#2626 Cost Breakdown SG&A Analysis In EGP Millions General & Administrative Expenses: QoQ YOY Quarter Only % % Q4 2014 Q3 2014 Q4 2013 Change Change Salaries & Wages Margin/G&A Expenses Depreciation Margin/G&A Expenses 336 62.94% 268 67.18% 227 60.99% 25.70% 48.30% 15 2.74% 14 3.56% 12 3.30% 3.14% 19.29% Others Margin/G&A Expenses 183 117 34.32% 29.27% 133 35.71% 57.34% 38.12% Total G&A Expenses Margin/Total Revenue 535 17.77% 398 14.67% 372 13.37% 34.15% 43.71% Selling & Distribution Expenses: Depreciation Salaries & Wages Q4 2014 Results The increase in salaries and wages is attributable to the 10% annual salary increase and the newly structured incentive rewards program, both of which came into effect as of the first quarter 2014, amounting for a difference of more than EGP 121 million YoY & EGP 114 million QoQ. Impacted by the cost of the fully depreciated assets during the period. Salaries & Wages Margin/S&D Expenses 212 166 56.55% 48.44% 199 48.90% 27.12% 6.06% Depreciation Margin/S&D Expenses 2 0.60% 2 -1.15% -0.13% 0.66% 0.55% G&A Expenses Others Margin/S&D Expenses 160 42.86% 175 206 50.90% 50.55% -8.31% -22.23% Others Total S&D Expenses Margin/Total Revenue 374 344 12.43% 12.64% 408 14.66% 8.90% -8.27% Total SG&A Margin/Total Revenue 909 30.20% 742 27.31% 780 28.02% 22.46% 16.52% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. The Increase is mainly due to the increase in Taxes & Custom Duties by EGP 20 Million YoY. S&D Expenses The decrease is mainly due to the decrease in discount allowed to mobile operators by 25% YoY and Advertisement.by 38% YoY. te#2727 EBITDA Analysis te's EBITDA Bridge (In EGP Billions - %of Sales) FY 2014 12.16 ( 3.38 ) Margin 31.6% ( 2.35 ) 27.8% ( 2.59 ) 19.3% 3.84 21.3% Sales Revenue Personnel Cost Interconnection Cost Other Opex* EBITDA Salaries and Wages. Fixed to Mobile Interconnection Cost. General & Admin Expenses. Company Share of Social Insurance. • ISP's and Audio Text. • Selling & Distribution Expenses. . Employee Holidays. International Interconnection Cost. • Other Direct Costs. Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. * Other Opex excludes Depreciation and Amortizations. te#2828 Balance Sheet Summary Balance Sheet Summary YOY % Change In EGP Millions FY 2014 FY 2013 Current Assets 9,493 11,067 -14.22% Net Fixed Assets 11,070 11,151 -0.73% Long-Term Investments 9,474 8,693 8.99% Other Long-Term Assets 2,318 1,765 31.33% Total Assets 32,355 32,675 -0.98% Curent Liabilities (Exc. STD) 4,498 3,764 19.5% Bank Short-Term Borrowings 0 0 CPLTD 84 107 -22.04% Long-Term Debt 383 475 -19.51% Other Non-Current Liabilities 3 12 -75.81% Total Liabilities 4,967 4,359 13.95% Total Equity & Minority Interest 27,388 28,316 -3.28% Total Liabilities & Equity 32,355 32,675 -0.98% Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. Current Liabilities Long Term Investment Net Fixed Assets Current Assets FY 2014 Results Decreased, due to the increase in cash and cash equivalent; mainly the Interim dividends by EGP 736million., and some other fees amounted to EGP 302 million paid to NATR. The decrease in net carrying value of fixed assets is due to the depreciated assets in the FY'14 period. The FY 2014 period increased by 9% than FY 2013 figures, mainly due to the increase in investments in associates ( i.e.: Vodafone Egypt). Its worth mentioning, that there was no corresponding dividends distributed during the period. The FY 2014 period increased by 19.5%, mainly attributed to the increase of creditors and other credit balance due to the projects of IP Core and MSAN. te#2929 Telecom Egypt's Return Metrics & Cash Flow Summary Per Share Data In EGP DPS % Change EPS % Change Payout Ratio Cash Flow Summary In EGP Millions Return Metrics - YoY Analysis FY 2012 FY 2013 FY 2014 (In EGP Millions) 1.30 1.00 0.56 -7% -23% -44% 1.25 1.43 0.89 -18% 14% -38% 2,620 104% 70% 63% 2,219 YOY FY 2014 FY 2013 % Change Dividends Net Profit Net Cash From Operating Activities 1,796 2,083 -13.80% FY 2012 Cash Flows From Investing Activities -2,100 -418 402.95% Capital Expenditure (CAPEX) Cash Flows From Financing Activities -2,439 -2,353 3.68% (In EGP Millions) Net Change In Cash & Cash Equivalent Translation Diff. of Foreign entities Cash & Cash Equivalents at the BOP -2,744 -687 299.52% (4) 6 -168.96% Capex -Capex/Sales 5,644 6,325 -10.77% Cash and Cash Equivalents at the EOP 2,897 5,644 -48.67% • TE has a high free cash flow* generation ability. Free cash flow for FY 2014 reached EGP 1,076mn. *[Free cash flow defined as (EBITDA net of tax +(Depreciation & Amortization) tax shield - CAPEX- Net Borrowing)] Management believes that te has sufficient financial resources to finance growth areas within the group and potentially return cash back to its shareholders. Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. 1,707 2,958 956 2,031 FY 2013 FY 2014 te Started rolling out fiber optic cables in newly developed areas and other replacement of existing copper based cables. Our aim is to build around 4 million home and enterprise connections by the year end 2015 at a Capital Expenditure of around EGP 2.0 billion. 2,523 Δ 21% WC+ 1,086 689 756 516 11% 7% 7% 5% FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 te#3030 Ratio Analysis Ratios FY 2010 FY 2011 FY 2012 FY2013 FY 2014 Liquidity Current Ratio 2.02 2.49 2.83 2.89 2.07 Efficiency Account Receivable Turnover 4.14 4.37 4.33 3.92 Average Collection Period 88.26 83.59 84.32 93.15 3.38 108.07 Debt Leverage Ratio 3.14% 2.66% 2.27% 2.06% 1.70% Profitability Return on Invested Capital 9.83% 9.04% 7.76% 8.86% 6.8% *[Return on Invested Capital (ROIC) calculated as (NPAT/(Average Total Equity + Net Debt), bt)] Note: All financial figures reported are based on Consolidated financials under Egyptian Accounting Standards. Profitability Efficiency Liquidity FY 2014 Results Decreased by 28.2% compared to 2013. The decrease in cash equivalent is due to the payment of interim dividends for the six month ended june 30, 2014. In addition, the investment in treasury bills during year. Efficiency witnessed a decline in account receivable turnover, while there was an increase in the average of collection period. • Return on Invested Capital (ROIC) in FY 2014 decreased by 6.8%. Net Profit After Tax for the year recorded EGP 2,031 versus EGP 2,958 million in FY 2013. The decline was mainly attributable to some one-offs: a EGP 149 million for provisions formed to hedge for future sales taxes, on FY 2013, another EGP 113 million deducted during the year for tax reviews with the local tax authorities for delayed settlements. The additional 5% increase in corporate taxes by law with a noticeable EGP 70 million impact, and the hike in Deferred Taxes for contingent liabilities associated with taxes on dividends amounting for an additional EGP 308 million. te#3131 Key Performance Indicators (KPIs) (Quarter Cumulative) Fixed Voice ARPU * (In EGP/Month) 3.8% 32.97 31.72 Fixed Data ARPU (In EGP/Month) 63.60 11.3% 70.76 FY 2013 FY 2014 FY 2013 FY 2014 te's ADSL Market Share (In percent %) 63.37% FY 2013 65.30% FY 2014 te's ADSL Net Adds (In 000's Subscribers) 305 FY 2013 1.6% 310 FY 2014 * Fixed Voice ARPU includes Home & Enterprise revenues (Subscription + VAS+ Voice Calls), and revenue from Incoming International to Fixed Calls. te's Net Adds Market Share (In Percent %) 78.29% ARPU ADSL 78.02% FY 2013 FY 2014 te#3232 Key Performance Indicators (KPIs) (Quarter Only) Fixed Voice ARPU * (In EGP/Month) 31.21 5.0% 7.6% 32.11 29.65 Q3 2014 Q4 2014 Q4 2013 te's ADSL Market Share (In percent %) te's ADSL Net Adds (In 000's Subscribers) 65.30% 64.75% 63.37% 98 Q3 2014 Q4 2014 Q4 2013 Fixed Data ARPU (In EGP/Month) 51.3% 61.8% 125 48 2.1% 7.3% 71.62 70.15 66.77 Q3 2014 Q4 2014 Q4 2013 te's Net Adds Market Share (In Percent %) 89.83% 99.02% ARPU ADSL 89.92% Q3 2014 Q4 2014 Q4 2013 Q3 2014 Q4 2014 Q4 2013 * Fixed Voice ARPU includes Home & Enterprise revenues (Subscription+ VAS+ Voice Calls), and revenue from Incoming International to Fixed Calls. te#33Fully Integrated Operations & Other Investments te#3434 Fully Integrated Operations & Other Investments Fully Integrated Operations Affiliates I Information Technology Telecommunication MERC 49.00% TE France SAS 100.00% Technology Development Fund 46.15% Vodafone Egypt 44.95% TE Data TE Data Holding T TE Investment Holding 99.95% Associates 99.99% Egypt Trust 35.71% ✗ ceed TE Information Technology Ideavelopers 18.75% 97.66% Nokia Siemens Networks 10.00% Technologies centra Centra Technologies CITC 58.76% 10.00% - Arab Co PC Manufacturing 10.00% Note: te has 2% indirect ownership in MERC through TE Data, Making total ownership in MERC51%. te#3535 Telecom Egypt's holding in Vodafone Egypt te's Shareholding in Vodafone Egypt Buy Sell 8.6% EGP30/Share EGP 619.2 mn Dec-03 23.47% 0.13% EGP 86/Share EGP 100/Share EGP 27.44 mn EGP 1.035 bn - 4.31% EGP 5.63 bn EGP 100/Share 16.9% EGP 17.73/Share EGP 719.1 mn 0.16% EGP 96.28/Share EGP 35.65 mn 44.95% With a blended acquisition price EGP 55.60 Per share Jan-05 Oct-06 Dec-06 Mar-07 Sep-08 Total te#3636 Vodafone Egypt Highlights VFE's Subscribers Base / Voice Minutes (In Million Subs/In Billion Minutes) VFE's Financial Highlights (In EGP Millions) VFE Subscribers Voice Minutes Revenue NPAT 45 40 40.2 35 36.8 30 31.8 25 20 15 43.2 10 5 0 0 ON WO 100 90 41.9 39.5 80 13,152 13,449 12,572 70 12,064 12,093 71.3 68.4 68.2 50 57.5 40 20 2,908 2,002 L L L L L 1,948 1,990 1,849 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 VFE's Capital Expenditure (In EGP Millions / In Percent %) VFE's Contribution to te's Net Profit (In EGP Millions / In Percent %) CAPEX O-Capex/Sales IVFE Contribution -0% of te's NPAT 3,500 70% 1,600 90.0% 3,000 60% 1,400 80.0% 3,160 1,200 1,345 70.0% 2,500 50% 60.0% 2,000 2,394 2,302 2,385 1,000 40% 831 50.0% 2,086 800 969 900 1,500 876 30% 40.0% 600 42.8% 40.9% 30.0% 1,000 20% 23.5% 400 33.4% 32.7% 30.1% 20.0% 19.8% 500 19.0% 18.1% 16.6% 10% 200 10.0% 0 0% 0 0.0% Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 te#37Closing Remarks te#3838 Closing Remarks Solid Growth in Wholesale Revenue Ownership of Strong Performing Mobile Asset Robust Cash Position and Solid Balance Sheet Retail Presence in Around 40% of Households Strong Platform of Cash flow Generation Upside Potential from Under Penetrated Broadband Market Ability to Capitalize on Unique Geographic Position te#39Appendix te#4040 New Business Units Modeling Structure HS-BU Retail Business Units Revenue Structure Wholesale ES-BU Installation Subscription Value added Services Voice local Calls Voice Fixed to Mobile Voice International Calls Voice Internet Calls Voice National Calls Mobile-To-Fixed (M2F) Internet & Data Other Domestic Customers Installation Subscription Value added Services PRI (DID & DOD)/leased line Voice Local Calls Voice Fixed to Mobile Voice International Calls Voice Internet Calls Voice National Calls Mobile-To-Fixed (M2F) Internet & Data Others Subsidiaries Assays Other Domestic Customers DW-BU National Transmission Services International Transmission Services Collocation International Call Conveyance Access Services ICA-BU International Settlement Business Unit (BU) IC&N-BU Cable Projects Ancillary Services (O&M) Capacity Sales HS-BU: Home Services ES-BU: Enterprise Solutions DW-BU: Domestic Wholesale ICA-BU: International Carriers Affairs IC&N-BU: International Customers & Networks te#4141 te's Submarine Cable Opportunity International Customers BU Growth Pillars Position te as a regional Asia And East Africa gateway to Europe for traffic originating from Asian, Middle-Eastern and African countries 1 Diversify te International Service Portfolio Extend te's international service portfolio by developing new value added services Leverage partnerships with global operators to enhance international brand image 2 Expand te International Reach • • Expand te international footprint by deploying PoPs and expanding customer base Identify opportunities for new business development (e.g. te-North expansion or deployment of new cable system) Seek partnerships with international carriers to enter new markets 3 Enhance Sales Capabilities • Develop sales capabilities and enhance international account management As part of te's focus on customer centricity, the sales & business development division has been restructured to three key geographic Regions (Arica, Asia and Europe & Rest of world) Project Contractual Progress (In USD Millions) Cable Projects 251.7; 60% 221.7; 43% Ancillary Services and Capacity Sales In 2014, te will continue to recognize IRU Revenues from the different submarine cable projects which is considered services of high margins, and revenues from associated ancillary services and capacity sales. Traffic Transiting Through Egypt Leverage te's national backbone and international infrastructure to support te's international business In Addition to Traffic Originated in Africa Source: Central Bank of Egypt U$D 1=EGP 7.1531/12/2014) te#4242 te's International Business Growth Potential te International Connectivity UK O Portugal Morocco Algeria France Germany Belgium Greece. Tunisia Egypt Aqaba Gulf aba Aqaba Turkey Cyprus Syria Jordan Lebanon rdan Iraq iran Libya Egypt Pakistan Qatar U.A.E Saudi Arabia O Oman Eritrea Yernen North Sudan Djibout Ethiopia South Sudan Somalia TE North SEAMEWE-3 SEAMEWE-4 IMEWE EIG ALETAR/BRYTAR FLAG FALCON-HAWK SEACOM TATA DRC Uganda Kenya Rwanda Burundi Tanzania Mozambique Madagascar GBI SMW3 HAWK FLAG SMW4 IMEWE Aletar 10 G Technology ALETAR/BRYTAR FLAG SEAMEWE-4 SEAMEWE-3 TATA India Bangladesh Sri Lanka Maldives SEACOM FALCON-HAWK GBI EIG IMEWE TE North | 10 Tbps 5 Tbps Kore Japan China Taiwan Myanmar Vietnam Philippine Thailand Malaysia Brunei D ° Singapore D EIG TERBI Indonesia Abu Talat Alex. Suez Aqaba Taba Flag Zafranna FALCON FLAG SMW3 SMW4 IMEWE EIG Seacom/TATA Australia GBI Owned/Consortium member Private Cables te#4343 Telecom Egypt's Shareholding Structure As at Dec. 31 2014 te's shareholding structure per Continent (In Millions) 80% Government North America 71.9 21.1% North America 20% Free Float Telecom Egypt is 80% owned by the government and 20% Free Float. The 20% Free Flow is owned by both individual and institutional Shareholders. By law, Egyptian government should hold not less than 51% stake in Telecom Egypt Europe 68.8 20.2% Asia Europe Africa South America Australia te's shareholding structure Per Region MENA 56.7% Mediterranean 41.7% Asia 58.9 North 17.2% Africa 40.8% Middle East 56.7% Gulf Australia 15.2% South America 0.0 0.0% * Africa' 139.8 40.9% Excluding Egypt Government which represents 80% of Total te shares 1.9 0.6% te#44Mohamed Kamal Group Director for Media & Investor Relations Tel: +202 31315219 Fax: +202 31316115 [email protected] iir.telecomegypt.com Thank you! Investor Relations Contacts te