Annual report 2010


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Annual report 2010

  1. 1. ANNUAL REPORT 2010
  2. 2. CONTENTS O T H A N N U A L R E P O R T 2 0 1 0 Letter from Executive Chairman & Group CEO 02 About OTH: OTH at a Glance 03 Financial Highlights 04 Organizational Structure 05 Financial Milestones 06 Financial Events 2010 07 Board of Directors 10 Corporate Governance Report 14 Corporate Responsibility Report 15 GSM Operations: OTA 18 Mobilink 20 Mobinil 22 banglalink 24 koryolink 26 Telecel Globe 28 WIND Mobile 32 2010 Financial Review: Board Report 34 Financial Statements (IFRS/US$) 42 Financial Statements (EAS/EGP) 62
  3. 3. ÒI never thought the day will come when I will be leaving my fifth child to the care of new parents; the child that I have brought to this world, nurtured and raised to become strong and grown. Funnily enough though, it was not as difficult as I thought, as I reached a stage of my life where I want to move on and continue giving in other areas. It must also be due to the fact that I am confident that the child has reached a stage of maturity and strength that I can rest assured, that it is poised to continue in health growth, success and that it is on the right track to achieve the vision I have set for it from day one. My belief in the consolidation of the telecom industry has become a reality today, where a large number of telecom suppliers have been reduced to only four or five major players. The same is also happening on the operator side. I also believe that my team, which has now been integrated into the newly merged Vimplecom Limited, will do a great job in realizing the synergies of this merger and in driving further our operations through a much more powerful vehicle, which will carry a significant benefit to OTH's shareholders. My gratitude and appreciation go to the team I have worked with over the years and all the employees of OTH who have helped in creating this success story and who made it possible to be where we are today, as well as to the departing board members for helping in navigating this wonderful journey and to OTH's shareholder for their valued trust over the years. I wish Mr. Bichara and Mr. Abou Doma a lot of success in their new mission. Naguib Sawiris, Executive Chairman Letter from Executive Chairman & Group CEO ÒThe year 2010 has proven to be a year of significant milestones aiding the growth of Orascom Telecom Holding, on an operational and strategic level. On October 4th , 2010 WIND TELECOM, OTH's parent company, and VimpelCom Ltd. announced their intention to combine their groups, thereby creating the world's sixth largest telecommunications company. Most recently, in March 2011, the VimpelCom Special General Meeting approved the transaction. Furthermore, on April 14th , over 97% of OTH's shareholders approved the proposed refinancing plan for the company, as well as a demerger into two separate entities: OTH and Orascom Telecom Media and Technology Holding S.A.E (OTMT). The refinancing plan will ensure an improvement in the company's liquidity position and capital structure, while OTMT will serve as a holding company for Mobinil, koryolink, Alfa management contract, the cable businesses and OT Ventures. Consequently, OTH will join the ranks of truly global players in the field of telecommunications supported by expertise and a strong leverage profile while benefiting from significant synergies resulting from the WIND-VimpelCom transaction. The demerged entity of OTMT will allow for better focus on strategies and lend both OTH and OTMT the independence to drive faster growth. On January 4th , 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium, through which we owned 50% of Tunisiana, for a total cash consideration of US$ 1.2 billion, equalling an enterprise value of 6.7x Tunisiana's 2009 EBITDA and generating over 40% annual return on OTH's investment in the business since 2003. OTH now counts over 101 million subscribers across its operating countries. The 16% increase in our customer base compared to last year has translated into a net income before minority interest of US$ 781 million for the year ending 31 December 2010. In addition, Net Debt/EBITDA now stands at 2.5x. Pro-forma for the receipt of proceeds from the disposal of Tunisiana, Net Debt/EBITDA is approximately 1.9x. While the majority of our operations have displayed strong and stable growth, the Algerian unit, due to the consistently hostile operating environment, has faced a decrease in revenues of 6.5% compared to the year end of 2009. Many restrictions on the operation still remain in place, such as the hindrance of promotions and local governmental restrictions, in addition to SIM card shortages resulting from a ban on imports. Despite a number of cost cutting initiatives being instigated in order to stabilize and maintain network quality, restrictions imposed by the Algerian government continue to negatively impact Djezzy's results. Pakistan has shown a 9% increase in its revenues for the year, in local currency terms, alongside efficient cost management initiatives which resulted in a YoY EBITDA margin growth of 3%. The high subscriber growth trend in Bangladesh has translated into revenue growth of over 30% in comparison to 2009 despite increasing competitive pressures in the Bangladeshi telecommunications market. WIND Mobile Canada continues to grow its customer base and has succeeded in adding nearly 100 thousand new subscribers compared to the last quarter, nearing its total subscribers to a quarter of a million. In light of the company's promise to deliver innovation and value to its shareholders moving forward into the new era of consolidation, we see the perfect opportunity to do so in the expected combination of WIND TELECOM and VimpelCom, allowing us to continue to maximize long-term shareholder value. Ò Khaled Bichara, Group CEO 02 OTHANNUALREPORT2010
  4. 4. OTHANNUALREPORT2010 OTH at a Glance Positioned for success Orascom Telecom Holding S.A.E. ("OTH") is a leading telecommunications company with mobile operators in many regions of the globe including Canada, the Middle East, Africa and Asia. It was established in 1998, by launching its first mobile operation ("Mobinil"), also the first mobile operator in Egypt. OTH's headquarter resides in the heart of Cairo where the company initially started. After Mobinil's launch, OTH continued its journey by pursuing markets characterized by large population densities and low mobile penetration rates. However this strategy changed in the last two years as it started to enter more diverse markets with its latest launch to date ("WIND Mobile") in Canada. In 1998, OTH started off with 200,000 subscribers. By the end of 2010, OTH is proud to be extending its care and services to over 101 million subscribers. It is also serving a total population under license of approximately 517 million with an average mobile telephone penetration of approximately 48%. A borderless company Having launched "Mobinil" in 1998, OTH operations to date include Algeria ("OTA"), Pakistan ("Mobilink"), Egypt ("Mobinil"), Bangladesh ("banglalink"), North Korea ("koryolink") and Canada ("WIND Mobile") through an indirect equity ownership in Globalive Wireless. At the beginning of 2009, OTH was also awarded the management contract of one of the two Lebanese mobile telecommunications operators ("Alfa") from the government of the Republic of Lebanon. Furthermore, OTH has an indirect equity ownership in Telecel Zimbabwe (Zimbabwe) and through its subsidiary Telecel Globe, operates in Burundi and the Central African Republic. Value to stakeholders OTH's target is to provide value for its investors and shareholders by expanding in high growth markets and strengthening its position in its existing operator companies through focusing on current as well as potential subscribers. Profitability and success are demonstrated through the fact that all of OTH's operator companies are either market leaders or major players in their markets. OTH employees take gratification in striving for the success of a business that provides the tools by which people can communicate and improve their lives. OTH's customers everywhere in the world are provided with the best service as operator companies constantly aim to cater and adapt to their needs by offering innovative solutions to make their lives better, easier and more rewarding. The power to communicate In a world with increasing interconnectivities and rapid technological transformations and advancements, not being able to communicate means not being able to exist. It is OTH's core belief that communication is the essence of life, the inherent right of every human being and the means by which communities advance. Being a borderless company, OTH seeks to provide communications to all peoples of the world. Communication empowers people by letting them tell their stories, enhance their lives and advance their communities. Integrating the most suitable and best technology innovations for each country enables OTH operator companies to facilitate and enrich their subscribers' lives. When the world calls, we listen. When the world talks, we feel what it wants to say. We help give it a voice. OTH's vision To harness our networks to provide millions of connected customers with solutions that empower their personal and professional lives. OTH's mission We Exist toÉ Enrich our customers' lives through accessible communication services Ensure our shareholders' returns with the highest yields Expand our employeesÕ horizons with exceptional growth opportunities Enable our communities' development and prosperity by always giving back 03 'A V OICE THAT SOUNDS IS A VOICE THAT'S HE A R D.'
  5. 5. Shareholder Information Orascom Telecom Holding S.A.E. ("OTH") maintains a high level of disclosure and keeps its shareholders informed of any significant event through press releases, quarterly earning releases, conference calls and an updated website with all relevant operational and financial information in addition to reporting its financials under Egyptian Accounting Standards (EGP) and under International Financial Reporting Standards (US$). Ownership Structure WIND TELECOM S.p.A. directly and indirectly owns approximately 51.7% of the shares of OTH and 48.3% is public free float. Rights Issue In January 2010, OTH's Board of Directors announced the launch of its Rights Issue to holders of its ordinary shares and GDRs. The proceeds were directed towards further strengthening the Company's balance sheet, enhancing OTH's liquidity including financing needs since dividends could not be repatriated from Algeria due to the prevailing tax dispute, in addition to general corporate purposes. The Rights Offering amounted to EGP 4,357 million (equivalent to approximately USD 800 million), and was offered by way of pre-emptive rights to existing shareholders / eligible GDR holders. The Company offered up to 4,356,590,515 Shares in the Rights Issue, equivalent to 871,318,103 new GDRs. 49 shares/GDRs were offered for every 10 shares/GDRs. The price for each Share was 1 EGP (par value, in line with Egyptian market practice), and represented approximately USD 800 million based on the Fx rate of 12/01/2010; with a discount to TERP of 81.6% (based on the closing price of 12/01/2010). In March 2010, OTH announced the final results of the subscription and over-subscription of its Rights Issue launched in January. Subscriptions by existing shareholders have resulted in the following: Number of ordinary shares subscribed for: 4,356,590,515; Total percentage of rights issue taken up: 100%; Total ordinary shares taken up: 100%; Total GDRs taken up: 100%; Total number of remaining unsubscribed ordinary shares: 0. Subscriptions were received in the Over-subscription Offering for approximately 448 times the amount of shares available for over- subscription. Share Ownership Program for Employees As part of its commitment to motivate and retain its key employees, OTH offers an ESOP plan, having an ownership of approximately 1% of OTH shares. Paid up Capital As at December 31st , 2010, OTH's paid up capital was EGP 5,245,690,620, divided into 5,245,690,620 shares, each with a nominal value of EGP 1. Dividends The Board of Directors of OTH agreed not to distribute any dividends to its shareholders during 2010 as a result of the circumstances surrounding the Algerian business unit, Orascom Telecom Algeria, thereby necessitating the aforementioned Rights Issue. Dividend Policy OTH's primary goal is to maintain sufficient reserves and liquidity to ensure its operational and financial needs and to maintain a strong growth profile of its business. OTH intends to operate a progressive distribution policy based on what are believed to be sustainable levels of dividend payments supplemented by variable distribution to shareholders of any excess cash resources. Consequently, dividends will vary from year to year. Share Price Performance At the beginning of 2010, the OTH stock was quoted at EGP 4.98 on EGX. The highest quotation during the year was EGP 7.76, and the lowest was EGP 4.09. At year end, the quotation price was EGP 4.32; this amounted to a 13.0% decrease in value. The market value as of December 31st , 2010 was EGP 22.6 billion. OTH GDRs listed on the London Stock Exchange at the beginning of 2010 were quoted at US$ 4.72. The highest quotation during the year was US$ 7.05 and the lowest was US$ 3.60. At year end, the quotation price was US$ 3.65; this amounted to a 22.6% decrease in value. The market value as of December 31st , 2010 was US$ 4.0 billion. Trade OTH is traded on both the Egyptian Exchange and on the London Stock Exchange under the symbols (ORTE.CA, ORAT EY) and (ORTEq.L, OTLD LI), respectively. Disclosure To ensure full disclosure and transparency, OTH reports its Holding and Consolidated financials on a quarterly basis applying both the Egyptian Accounting Standards (ÓEASÓ) and US$ consolidated financial statements in accordance with the International Financial Reporting Standards (ÓIFRSÓ). Financial Highlights (1) After excluding Tunisiana subscribers from 2009 figure (2) On July 13, 2010, the Amended and Restated Shareholders' and Settlement Agreements concluded with France Telecom entered into force. Consequently, starting Q3 2010, Mobinil is reflected through the equity method. Mobinil's financial figures for 2009 and H1 2010 are represented as a discontinued operation under IFRS. On 4 January 2011, OTH sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OTH owned 50% of Orascom Telecom Tunisia (ÒOTTÓ). As a result the proportionate consolidation of OTT during Q4 is no longer applicable under IFRS as it renders the entity an investment held for sale, and consequently a discontinued operation under IFRS rules. Figures for 2009 and 9 months 2010 have been restated to reflect the accounting treatment of OTT. (3) Based on a weighted average for the outstanding number of shares of 1,046,501,539 GDRs Main Financial Data (according to IFRS) 2009 2010 Revenues (in US$ million)(2) 3,760 3,825 EBITDA (in US$ million)(2) 1,518 1,584 EBITDA Margin 40.4% 41.4% Net Income (in US$ million) 317 743 Earnings per GDR (US$)(3) 0.36 0.73(3) CAPEX (in US$ million) 761 660 Net Debt (in US$ million) 5,113 4,009 Subscribers (1) in millions Revenues in US$ millions EBITDA in US$ millions 2009 2010 2009 2010 3,760 3,825 1,518 1,584 2010 102 97 2009 OTHANNUALREPORT2010 04
  6. 6. Organizational Structure Khaled Bichara Executive Chairman Ahmed A. Doma Group CEO Corporate Finance, Treasury, Tax Planning & Corporate Accounting, Budgeting, Planning & Control, Investors Relations Aldo Mareuse Group Chief Financial Officer Mohamed Naguib Internal Audit & Revenue Assurance Officer OTHANNUALREPORT2010 Manal Abdel Hamid PR & Corporate Communications Director Compensation & Benefits, Training & Development, Recruitment and Administration Wafaa Lotaief Group HR & Admin Officer Compliance & Secretarial Corporate Affairs, Corporate Attorney Ragy Soliman General Counsel Hany Bedair Chief Technology Officer Network Support, IT & VAS Support, Procurement, Total Quality Management, Program Management 05 TBD* Chief Commercial Officer Market Development, Sales, Customer Operations, Corporate Marketing, Fixed and Broadband, Market Planning, Products and Services Public Relations, Corporte Communications, Corporate Social Responsibility Business Planning, Corporate Strategy, Innovation and Partnerships Emad Farid Group Chief Strategy Officer The above reflects the latest composition of the Organizational Structure * Mr. Ahmed Abou Doma is currently Acting Chief Commercial Officer
  7. 7. Financial Milestones OTH launches Rights Issue for US$ 800 million. Renewal of Alfa management contract in Lebanon after exceeding the 1 million subscriber milestone mark. OTH announces results of its Rights Issue where Subscriptions were received in the Over-subscription Offering for approximately 448 times the amount of shares available for over-subscription. France Telecom and Orascom Telecom submit the main terms of their agreements on MobiNil and ECMS to the Egyptian Financial Supervisory Authority a global settlement fee of US$ 300,000,000 in consideration for OTH's undertakings and obligations under the Master Agreement, the termination of the original Shareholders Agreement as well as execution of the Amended and Restated Shareholders Agreement. OTH announces sale of LINKdotNET through a Share Sale and Purchase Agreement with MobiNil for an enterprise value of US$ 130 million. OTH announces the sale of its 50% stake in Tunisiana to Qatar Telecom for an enterprise value equal to 6.7 Tunisiana's 2009 EBITDA. The transaction was completed in January 2011. OTHANNUALREPORT2010 January 2010 February 2010 March 2010 April 2010 July 2010 November 2010 06
  8. 8. Financial Events 2010 France Telecom and Orascom Telecom submit the main terms of their agreements on MobiNil and ECMS to the Egyptian Financial Supervisory Authority In April 2010, France Telecom and Orascom Telecom submitted to the Egyptian Financial Supervisory Authority the main terms of the agreements on MobiNil and ECMS signed between them. The content of this submission can be found below. 1. Maintaining the partnership between the Parties, and subject to paragraph 4 below, neither Party shall transfer to the other Party any shares in MobiNil for Telecommunications (unlisted) or the Egyptian Company for Mobile Services (listed). The Parties further agreed that Orascom Telecom Holding shall not own or hold, directly or indirectly and/or whether acting in concert, an equity stake in the Egyptian Company for Mobile Services (listed) of more than 20% of the share capital of the latter (this refers to a standstill provision which further provides that Orascom Telecom Holding shall not seek to directly or indirectly and/or whether acting in concert increase its current equity stake in ECMS. This has been clarified in a subsequent press release); 2. Amending and restating the existing shareholders' agreement between the Parties relating to MobiNil for Telecommunications (unlisted). As a result of this amendment, OT will adopt the equity method instead of the proportionate consolidation method for the basis of accounting on the shareholders' equity. OT will consolidate its investment using the equity method in accordance with the Egyptian Accounting Standard No. 18, where OT's share in the net assets of ECMS at the date of entry into force of the settlement agreement shall be presented in a separate line item in the consolidated balance sheet, rather than on a line-by- line basis. As a result of this reclassification, there will be no impact on OT's consolidated income statement and OT's consolidated shareholders' equity, at that date. As for the OT's share in the profits or losses, the changes in the shareholders' equity of ECMS recognized after that date will be presented in a separate line item in the consolidated income statement and the consolidated statement of shareholders' equity respectively. By virtue of the International Financial Reporting Standards, France Telecom will fully consolidate its investment in MobiNil Telecommunications and ECMS as from the date of entry into force of the settlement agreement and the Amended and Restated Shareholders Agreement. The modification of the basis of the accounting treatment for France Telecom and Orascom Telecom will have no effect on ECMS and the minority shareholders of ECMS; 3. Granting Orascom Telecom Holding certain rights in the amended and restated shareholders' agreement with respect to the approval of material decisions and operational matters, the governance model under the Amended and Restated Shareholders Agreement is designed to ensure (i) the consolidation by FT of the financial results of MobiNil and its subsidiaries, and (ii) that material matters relating to the finances and operations of MobiNil, ECMS and/or their material Subsidiaries may not be taken unless such actions are authorized pursuant to the approval of all of the OT Directors and a majority of the FT Directors. The composition of the boards of MobiNil and ECMS reflects participation by OT and FT which is not materially different from the original shareholders agreement, whereby FT appoints, directly or indirectly, the majority of the members of the MobiNil and ECMS board of directors. The ECMS board of directors shall continue to include three non-executive, independent directors with relevant industry background. ECMS' management will include a CEO appointed by FT and a CFO designated from among FT candidates, whereas the Chief Technical Officer and the Chief Commercial Officer will be designated by the CEO from among OT candidates. Under the original shareholders agreement, in case the OT and the FT representatives on the board of MobiNil fail to reach consensus on a decision, a deadlock mechanism was triggered where either party buys the other's stake in MobiNil through a bidding process. Being the main reason behind the dispute subject matter of the arbitration between OT and FT, the parties agreed to simplify and amend such deadlock resolution mechanism and replace it with a right granted to OT in certain deadlock situations to put its shares in MobiNil and ECMS to FT for the Put Option Consideration, which consideration is calculated on a per share price; 4. Granting Orascom Telecom Holding in the amended and restated shareholders' agreement the option to put its shares in MobiNil for Telecommunications (unlisted) together with its shares in the Egyptian Company for Mobile Services (listed) to the France Telecom Group (i) during the period from September 15 through November 15, 2012, and (ii) during the period from September 15 through November 15, 2013, as well as (iii) at anytime until November 15, 2013 in a limited number of deadlock situations on some material decisions, and subject to certain conditions. In the event of the exercise of the put option, the price per the Egyptian Company for Mobile Services (listed) share ("ECMS P") which has been agreed between the Parties will increase over time from EGP 221.7 as of closing up to EGP 248.5 as of end 2013, to be converted in EUR at a fixed EUR/EGP exchange rate of 7.53. As for the opening put option price (221.7 as of 30/06/2010), it was calculated in reference to the weighted average market share price of ECMS for the week preceding April 14, 2010 accreted by 3% to 30/06/2010 = 220.3*(1+3%*79/360), payable in Euros at a fixed rate corresponding on the EGP:EUR rate as at the date of signing of the agreement. Each subsequent price represents a 3% annual accretion over the opening put option price. Therefore, the price of the put option does not express the parties' view of the long term valuation of ECMS. T h e p r i c e p e r M o b i N i l f o r Telecommunications (unlisted) share will be computed as ECMS P multiplied by the total number of ECMS shares held OTHANNUALREPORT2010 07
  9. 9. Financial Events 2010 OTHANNUALREPORT2010 08 by MobiNil for Telecommunications (unlisted) in the Egyptian Company for Mobile Services (listed) and divided by the total number of MobiNil for Telecommunications (unlisted) shares; 5. The continuation of the Parties in rendering technical support and management services to the Egyptian Company for Mobile Services (listed) according to the two existing management agreements with the Parties, which were ratified to the General Assembly of the Company, and whereby each Party receives a fee equal to 0.75% of the total revenues of the Company (excluding equipment sales and sales taxes). In case of exit by OT, it will assign to FT its rights to the above management fees and enter into a transition services agreement to the benefit of ECMS enabling ECMS, at its option, to continue or terminate the various services and/or technical assistance agreements entered into with OT group, all subject to applicable laws and the approval of the competent corporate bodies of ECMS. In consideration for the assignment referred to above and the entering into by ECMS of the transition agreement, FT shall pay to OT a fee of EUR 110 million; 6. Prior to the settlement agreement, a dispute between the relevant parties on the ownership of the "MobiNil" trademark existed. OT and FT agreed that MobiNil and ECMS shall regularize the ownership of the MobiNil Trademark in the best interests of ECMS and all its shareholders and with a view to enhance the visibility of the trademark; 7. The agreement in principle of the Parties on the acquisition by the Egyptian Company for Mobile Services of Link Dot Net S.A.E and Link Egypt S.A.E, a leading Egyptian ISP, for total consideration calculated on the basis of an aggregate enterprise value of USD 130,000,000, subject to obtaining the approval of the competent corporate bodies (general assemblies and/or boards of directors) and completing the necessary procedures in accordance with applicable laws and regulations; and 8. In consideration for the settlement of all disputes between the Parties, whether in Egypt or abroad, under the Master Agreement, FT also agrees to pay OT a global settlement fee of USD 300,000,000 in consideration for OT's undertakings and obligations under the Master Agreement, the termination of the original shareholders agreement as well as execution of the Amended and Restated Shareholders Agreement (which results in the loss for OT of consolidation of MobiNil financial results) and the Settlement Agreement. There is no specific contractual breakdown of the global settlement fee among the items set forth above. However, the quantum was agreed taking into account the value of the additional portion of EBITDA that will be consolidated by France Telecom in its financial statements. Such fee shall be paid by one of the FT Entities in cash on the Closing Date and is in line with the benchmark of companies suffering a discount on their holdings in non consolidated assets. The quantum and the payment of such global settlement fee do not impact ECMS and the minority shareholders of ECMS. All the more, ECMS will benefit from the global settlement between its main shareholders as it will enable ECMS to perform and pursue its development with the full support and commitment of France Telecom and Orascom Telecom. Moreover, the global settlement enables France Telecom to reinforce its long term investment in Egypt and to ensure a positive media environment for its investment. Orascom Telecom Algeria's (ÒOTAÓ) tax appeal process In November 2009 Orascom Telecom Algeria (OTA) received a notice of reassessment from the Algerian Direction des Grandes Entreprises (ÒDGEÓ) in respect of the tax years 2005, 2006 and 2007 (the ÒReassessmentÓ). In December 2009, OTA filed an administrative appeal. To appeal, OTA was required to pay 20% of alleged taxes and penalties to be owed, amounting to USD 120 million. The appeal was rejected. In March 2010, OTA paid a further 20% of the remaining balance amounting to USD 110 million (including delay penalties), to appeal to the Central Commission, which was rejected. OTA's administrative appeal in relation to the 2004 tax reassessment had also been rejected. In April, after exhausting all appeal available within internal forums at the Algerian tax authority, OTA then appealed to the Administrative Court of Algiers to request: - An injunction to immediately suspend the payment order received pursuant to the rejection of OTA's appeal to the tax administration on April 1st, 2010, and - The dismissal of the entire tax adjustment for the years 2004 through to 2007, on the merit of the case. OTA paid the remaining balance of the principal amount of the authorities' tax reassessment claim for the years 2005-2007 equivalent to USD 597* million, excluding penalties which amount to USD 74 million from which USD 49 million were paid and USD 25 million has been suspended until final ruling of the administrative court on merits in the case filed by OTA pertaining to taxes and penalties related thereto. All amounts paid will be recoverable if OTA's case against the tax authority is successful. These payments were made without prejudice to any rights OTH or OTA may have under: (1) the tax exemptions and protections granted under an Investment Agreement dated 5 August 2001 signed by Algeria with OTH and Oratel International Inc. (now a fully owned subsidiary of OTH) acting for and on behalf of OTA; (2) the 1997 Treaty for the Mutual Promotion and Protection of Investments between Algeria and Egypt; and (3) Algerian law. In September 2010, OTH announced that OTA received a preliminary tax notification from the DGE in respect of the years 2008 and 2009, in which the DGE preliminarily re- assessed taxes alleged to be owed by OTA in the amount of approximately DZD 17 billion (approximately USD230 million). In December, OTA received the Final Tax Reassessment for the aforementioned amount. In February, OTA paid the equivalent of USD 230 million to the Algerian tax authority under protest, representing the settlement in full of the 2008-2009 Tax Reassessment.
  10. 10. Financial Events 2010 OTH and OTA consider that the 2008-2009 Tax Reassessment is baseless, relying on the same arbitrary measures as the tax claims made in relation to preceding years. Accordingly, OTA is challenging the 2008- 2009 Tax Reassessment with the tax administration and the Algiers administrative court. This appeal should have entitled OTA to defer payment of 80% of the claim, subject only to the provision of financial guarantees. However the Algerian tax authorities refused to consider any of the guarantees offered by OTA (including full cash collateral) and OTA had no choice but to pay in full in order to avoid coercive enforcement action and/or risk incurring additional penalties. Without prejudice to their rights under the Investment Agreement, applicable bilateral investment treaty and applicable laws, OTH and OTA intend to take all necessary legal steps to challenge the Reassessment. * Based on an exchange rate of: USD 1 = DZD 73.6. OTH Announces the sale of LINKdotNET and Link Egypt to Mobinil In July 2010, Orascom Telecom Holding S.A.E. (ÒOTHÓ or Òthe CompanyÓ) announced that it had concluded the sale of its internet services arm LINKdotNET and Link Egypt (ÒLINKÓ) to the Egyptian Company for Mobile S e r v i c e s ( Ò M o b i n i l Ó ) . I n T o u c h Communications S.A.E, a wholly-owned subsidiary of OTH signed a share sale and purchase agreement with Mobinil for the sale of LINK. The sale excludes the non-ISP part of Link Egypt's business and affects LINKdotNET's Egyptian operations only. The other non-connectivity business, LINK Development, LINKonLINE, Connect Ads, Arab Finance Brokerage Company and Arpu+ remain owned by OTH. The deal was a cash transaction based on an enterprise value of USD 130 Million. The business represented 56% and 90% of the revenue and EBITDA of OTH Internet Services respectively. VimpelCom combines with WIND TELECOM to create new global telecom group IIn October 2010, WIND TELECOM S.p.A (WIND TELECOM), the parent company of Orascom Telecom Holding S.A.E. (ÒOTHÓ) announced that it signed an agreement with VimpelCom Ltd. (ÒVimpelComÓ) to combine the two groups creating the world's sixth largest mobile telecommunications carrier by subscribers. In March 2011, WIND TELECOM announced that the shareholders of VimpelCom Ltd. voted in their Special General Meeting in favor of the combination with WIND TELECOM. On April 15th, 2011, VimpelCom and WIND TELECOM announced the closing of the transaction that combines the two entities to create a new global telecom group. OTH sells its 50% shareholding in Tunisiana to Qatar Telecom In November 2010, Orascom Telecom Holding S.A.E. (ÒOTHÓ) announced that it has entered into a share purchase agreement with Qatar Telecom Q.S.C. (ÒQtelÓ) by which OTH would sell its entire shareholding in Orascom Tunisia Holdings (ÒOTuHÓ) and Carthage Consortium (ÒCarthageÓ), two companies through which OTH owns 50% of Orascom Telecom Tunisie (ÒTunisianaÓ). In January 2011, OTH announced that it had completed the sale of its entire shareholding in OTuH and Carthage for a total cash consideration of US$ 1.2 billion, OTHANNUALREPORT2010 09 corresponding to an enterprise value equal to 6.7 times Tunisiana's 2009 EBITDA and generating over 40% annual return on OTH's investment in the business since 2003. Proceeds will be used to strengthen OTH's liquidity position and support the development of higher-growth businesses. OTH lenders support further financial flexibility In January 2011, Orascom Telecom Holding S.A.E. (ÒOTHÓ) announced that it has successfully obtained the support of its Senior Secured Lenders for relief from representations, warranties, and covenants in the credit agreements as they relate to Orascom Telecom Algeria (ÒOTAÓ), in order to provide the Group with greater flexibility while it assesses its alternative options relating to OTA and enabling OTH to be in a position to negotiate effectively with the Algerian government to procure the most favourable outcome relating to Algeria in order to protect its interest and that of its stakeholders. Furthermore, part of the Orascom Telecom Tunisie (ÒTunisianaÓ) disposal proceeds would be applied to prepay principal maturities, eliminating debt repayment obligations until the second half of 2012. Consequently, the Group significantly strengthened its liquidity position and financial flexibility. Over 97% of the voting shares that participated in OTH's OGM/EGM approve demerger and refinancing plan On April 14th, 2011, Orascom Telecom Holding S.A.E. (ÒOTHÓ or the ÒCompanyÓ) announced that the Company's shareholders overwhelmingly approved all of the items on the agenda at today's Ordinary and Extraordinary General Assembly Meetings, paving the way to implement the Company's refinancing plan and the demerger of the Company into two separate entities, Orascom Telecom Holding S.A.E. and Orascom Telecom Media and Technology Holding S.A.E., in connection with the ÒVimpelCom- WIND TELECOMÓ transaction. Shareholders approved the following significant resolutions, among others: 1. the approval of a refinancing plan to refinance the Company's outstanding secured and high yield debt together with certain derivative transactions in an amount of approximately US$2.7BN. 2. an increase in OTH's authorized share capital to EGP 14BN (with the issued and paid-in capital remaining unchanged). 3. the approval of the planned demerger from OTH of Orascom Telecom Media and Technology Holding S.A.E. (ÒOTMTÓ), a company to be formed at the time of the demerger. OTMT will hold certain assets of OTH that are not intended to form part of the VimpelCom-WIND TELECOM group going forward, including OTH's interests in Egyptian Company for Mobile Services (ÒECMSÓ), CHEO Technology Joint Venture company (ÒkoryolinkÓ) in North Korea, Orascom Telecom Ventures S.A.E. (formerly Intouch Communication Services S.A.E.), as well as other investments in the media and technology sectors, including undersea cable assets. Shareholders representing 63.44% of the Company's voting shares participated in the Ordinary General Assembly Meeting and 63.44% at the Extraordinary General Assembly Meeting. The resolutions were approved by 99.99% of the voting shares that participated in the Ordinary General Assembly Meeting and approximately 97% at the Extraordinary Assembly Meeting.
  11. 11. Board of Directors Standing from left to right Henk van Dalen Non-Executive Board Member Emad Farid Executive Board Member Khaled Galal Bichara Executive Chairman Iskander Shalaby Non-Executive Board Member The above reflects the latest composition of the Board of Directors as per the OGM held on May 17th , 2011. OTHANNUALREPORT2010 10 Ahmed Abou Doma Chief Executive Officer Ragy Soliman Executive Board Member Aldo Mareuse Executive Board Member Mohamed Shaker Non-Executive Board Member Jeffrey D. McGhie Non-Executive Board Member
  12. 12. Board of Directors Khaled Galal Bichara Executive Chairman Mr. Bichara is Group President and Chief Operating Officer of VimpelCom Ltd. as well as Group Executive Chairman of Orascom Telecom Holding. Mr. Bichara played a pivotal role in the $6.6 billion merger of VimpelCom with WIND TELECOM S.p.A, to create the world's sixth telecommunications carrier Before joining VimpelCom, Mr. Bichara was the Group Chief Executive Officer of OTH S.A.E. He sits on the board of OTH since 2003. Mr. Bichara was appointed Chief Operating Officer of OTH in April 2009. He was previously COO of Wind Telecommunicazioni S.p.A. (Wind). He brought a wealth of experience in both telecommunication and information technology with a strong management and entrepreneurial experience. Mr. Bichara headed the fixed line and portal business unit at Wind from 2005 until he was promoted to Chief Operating Officer of the company. At Wind, he played a key and instrumental role in restructuring the company's organization, which led to the successful turnaround of Wind from a continuously loss making company to one of the best performing mobile, fixed line and broadband integrated operators in Europe within a record time span of three years. Prior to joining Wind, he was the cofounder, Chairman and CEO of LINKdotNET (ÓLDNÓ), the largest private Internet Service Provider (ÓISPÓ) in the Middle East. In 2001, following successful negotiations, Microsoft chose to partner with LDN headed by Mr. Bichara to launch MSN Arabia, the Middle East's first global portal, bringing full internet experience of MSN to users in the region. In December 2003, Business Today Egypt chose Mr. Bichara as the ÒYoung Executive of the YearÓ for executives under the age of 40. Mr. Bichara earned his Bachelor of Science degree from the American University in Cairo where he is a member of the Advisory Board for the Computer Science and Engineering Department. He is an active member of the Software Community in the Middle East, a founding member of the Egyptian Software Association and the Internet Society of Egypt. He is also a board member of WIND Italy and various telecom and IT companies. OTHANNUALREPORT2010 11 Ahmed Abou Doma Chief Executive Officer Mr. Ahmed Abou Doma has been appointed as " Executive Vice President Asia & Africa Business Unit, CEO of OTH" on May 2011. Before Joining Vimpelcom, and since Jan 2009, Mr. Abou Doma was the Managing Director and Chief Executive Officer for banglalink the, OTH mobile operator in Bangladesh. Mr. Abou Doma started his career in the field of Information Technology by joining IBM in 1993 to 1996. Between 1996 and 1998, Mr. Abou Doma led the business development team of Datum IDS launching the 3rd established ISP in Egypt at the time. In 1998, and as part for the startup team, Mr Abou Doma helped launch Mobinil. Between 1998 and 2003, Mr Abou Doma held different senior management roles in Mobinil. From 2003 untill the end of 2008, he held the position of Marketing Director of Mobinil. Born in Cairo, Egypt, Mr. Abou Doma holds a BSc in Electronics and Communication Engineering from Cairo University (1992). He has received the ÒTelecom Business Planning AwardÓ by the International Telecommunication Union (ITU) based in Switzerland. He also completed the International Executive Program (IEP) from INSEAD Business School in Singapore and France.
  13. 13. Iskander Shalaby Non-Executive Board Member On September 1, 2008 Alex Shalaby was appointed Chairman of the Egyptian Company for Mobile Services (Mobinil) by board consensus, following his appointment as its President and CEO in 2005. This step came because of Shalaby's remarkable achievements at Mobinil over the preceding three years where the company has witnessed continued market share leadership, tripled the subscriber base from six to 19 million, doubled the revenues, and increased net profits by 30%.. Alex Shalaby was Chief Officer for Regulatory Affairs at Mobinil from 1998 to 2005 and was responsible for helping with the licensing and regulations required in setting up Mobinil as the first mobile operator in Egypt. Mobinil is partly owned by OTH and France Telecom/Orange, a balancing challenge for Shalaby to maintain the trust and confidence of the two major shareholders as well as the company's thousands of public shareholders. As former Executive Vice President of Orascom Telecom Holding OTH and continuing to be one of its board members, Shalaby's regional experience proved invaluable as OTH expands its global footprint. Shalaby came to Mobinil from Washington, DC where he was AT&T Director for Public Affairs, serving as the company's link to lawmakers on Capitol Hill and lobbying the executive branch of the U.S. government. He helped in achieving more liberalization of the telecoms sector internationally for the emerging nations of the Middle East, Africa, Eastern Europe through the relevant multi-lateral agencies. It was during these years that he served on the boards of the American Chamber of Commerce becoming its president during the period (1991 - 1992) and the Bi-national Fulbright Commission and Seeds of Peace; he currently chairs the board of Injaz & SIFE in Egypt. As his AT&T responsibilities shifted from local to regional, with particular focus on North Africa and the Levant, between 1993 and 1995, Shalaby became Regional Director for International Public Affairs for AT&T, based in Cairo, Egypt, where he was the principal interface with key agencies within the governments in the region on matters impacting AT&T's operations. Alex Shalaby started with the early days of data communications at AT&T, moving between posts in California and New Jersey, where he worked with Bell Labs. Shalaby then moved to become Managing Director for AT&T in Egypt, and General Manager for the Middle East and North Africa region until 1993. He held a variety of technical and managerial positions with AT&T start-ups in the Gulf (1977-1980). In 1977 he moved to Saudi Arabia to help launch the first major AT&T microwave project before moving on to Kuwait and the UAE. Once again, during this period he established and secured a solid position for AT&T in the Gulf region. In 1966, Shalaby graduated with a Bachelors of Science degree in Electrical Engineering from the University of Alexandria and started his first job with Egypt Air as a radio and radar engineer for two years. In 1969, he immigrated to the United States, where he settled in San Jose, California and started his first job with Pacific Telephone and Telegraph Company, a subsidiary of AT&T at the time. During this time, he earned a Masters of Science degree in Electrical Engineering and Computer Science from San Jose State University. Mohamed Shaker Non-Executive Board Member Born October 16th,1933 and graduate of the Faculty of Law, Cairo University in 1955. Dr. Shaker obtained a Doctorate degree in Political Science from the Graduate Institute of International Studies, University of Geneva, in 1975. He joined the Foreign Ministry in 1956 . As ambassador he served at the United Nations at New York (1984 - 1986), Vienna (1986 - 1988) and London (1988 - 1997). During his tenure in Vienna, he was a member of the Board of Governors of the International Atomic Energy Agency (IAEA). Two years before, he was the representative of the Director General of the IAEA to the United Nations (1982 - 1983). At present, he is Chairman of the Board of a number of think tanks and academic institutions including the Egyptian Council for Foreign Affairs (a leading non governmental Think Tank), National Center for Middle East Studies and Regional Information Technology Institute. He is also a member of the Board of the Nuclear Power Plants Authority. He is Chairman of the Board of Trustees of a number of major philanthropic organizations namely; Sawiris Foundation for Social Development and Magdy Yacoub Foundation for Heart Research. He also presided over two major international conferences; the Review Conference of the Nuclear Nonproliferation Treaty (NPT) 1985 and the UN Conference on the promotion of Peaceful Uses of the Nuclear Energy in 1987. He was a member of the U.N. Secretary-General's Advisory Board on Disarmament Matters. 1993-1998 He was a member of the UN Expert Group on Disarmament and Non-Proliferation Education (2001 - 2002). Two of Dr. Shaker's major works are The Nuclear Non-Proliferation Treaty: Origin and Implementation 1959 - 1979 (3 volumes), New York: Oceana Publications, Dobbs Ferry, 1980, which was reproduced in an electronic copy issued by both the Egyptian Council for Foreign Affairs (ECFA) and James Martin Center for Nonproliferation Studies, California in May 2010, and The Evolving International Regime of Nuclear Non-Proliferation, Leiden/Boston: Martinus Nijhoff Publishers, 2007, The Hague Academy of International Law, Recueil des Cours, Vol. 321, 2006. Two decoration were bestowed upon him by the President of Egypt:-Order of the Republic, Second Grade, 1976 and Order of Merit, First Grade, 1983. Board of Directors OTHANNUALREPORT2010 12 Emad Farid Executive Board Member Emad Farid is the Group Chief Strategy Officer of OTH in charge of Corporate Strategy, Strategic Planning and Innovation & Partnerships, a position he has been assuming effective November 15th, 2009. Before this position, he held the position of Group Chief Operating Officer of OTH since 2003. He is a member and/or Chairman of the Board in many of OTH's subsidiaries including Mobilink (Pakistan), koryolink (DPRK), Telecel Globe, Ring, OT Ventures and MENA cable among others. In addition, he is member of the Board of Directors of Wind Telecomunicazioni, a mobile and fixed telecommunication operator in Italy. Mr. Farid joined the Orascom group in 1992 where he held different managerial positions. He joined OTH in 2000 and was subsequently appointed as the CEO of Syriatel (OTH's GSM subsidiary in Syria). Mr. Farid holds a Master of Science degree in Telecom Engineering from Cairo University.
  14. 14. Ragy Soliman Executive Board Member Mr. Soliman joined Orascom Telecom in 2003 in the position of Director - Legal Affairs. Effective October 2007, Mr. Soliman assumed the position of OTH's General Counsel at Orascom Telecom. In his role as general counsel to OTH, Mr. Soliman has oversight and management responsibility for all legal and corporate governance matters. He also serves on a number of Executive Management Committees. Prior to his appointment in 2003, Mr. Soliman represented a broad range of international corporate and governmental clients as a Senior Associate with Ibrachy & Dermarkar in Egypt and in other International law firms. He holds a Master's Degree in International Business Law from London University. Aldo Mareuse Executive Board Member Aldo Mareuse is Group Chief Financial Officer of OTH and WIND TELECOM S.p.A. a position he has held since 2002. He is a member of the Board of Directors of OTA (Algeria), ECMS (Egypt), Mobilink (Pakistan) and Wind Acquisition Holding Finance S.p.A (WAHF). From 1990 to 2002, he held various positions and locations in the Investment Banking Division of Credit Suisse First Boston ÒCSFBÓ. His last position within CSFB was managing director in the Investment Banking Division, telecommunications group where he was advising telecommunication operators in M&A, equity and debt financing. He holds an Engineering degree from Ecole Centrale de Lyon (France). Jeffrey D. McGhie Non-Executive Board Member Jeffrey D. McGhie is General Counsel of VimpelCom Ltd. Mr McGhie held the position of Vice President, General Counsel of OJSC VimpelCom since June 2007, he served as Chief Legal Officer since March 2006. Prior to joining VimpelCom, he held the position of associate in the Moscow office of Akin Gump Strauss Hauer & Feld LLP from September 2002 until December 2004, and counsel from January 2005 until March 2006. From December 1999 until August 2002, Mr. McGhie was an associate at Kirkland & Ellis in Chicago, Illinois. Mr. McGhie graduated with a Russian from Brigham Young University (Provo, Utah USA) in 1995 and received a J.D. magna cum laude and MBA from Indiana University (Bloomington) in 1999 (Bloomington, Indiana USA). Board of Directors OTHANNUALREPORT2010 13 Henk van Dalen Non-Executive Board Member Henk van Dalen is Chief Financial Officer of VimpelCom Ltd. Mr. Van Dalen was born on 1st November 1952 in Papendrecht, the Netherlands. He studied Economy and Sociology at the Erasmus University in Rotterdam. He started his career in 1976 at Dutch chemical company Royal DSM. After several jobs in Corporate Management Development and HR he worked in a number of General Management positions at DSM. From 2000 until 2006 Mr. Van Dalen was a member of the Board of Management and CFO of Royal DSM NV. From April 2006 until July 2010 Mr. van Dalen was Chief Financial Officer and member of the Board of Management of TNT NV. Supervisory directorships and other positions held: ¥ Member of the Supervisory Board of NIB Capital Bank ¥ Member of the Supervisory Board of Macintosh Retail Group NV ¥ Member of the Board of Advisors NEVIR (Dutch Association for Investor Relations) ¥ Member of the Board of the Nationaal Fonds 4/5 mei ¥ Member of the Board VEUO (Dutch Association of Listed Companies) Experience: Henk van Dalen's experience includes, a.o ¥ HR in all functions including CLA and restructuring ¥ Strategy and portfolio transformation ¥ General management and leadership of divisions and business area's ¥ Large international business transactions ¥ M&A and disposals ¥ 10 years of leadership in group financial function (CFO) in listed (EuroNext AEX/NYSE) companies
  15. 15. Corporate Governance Report OTH is committed to achieving and maintaining the highest standards of corporate governance. The Company considers effective corporate governance essential to enhancing shareholders' value and protecting stakeholders' interests. Accordingly, the Board attributes a high priority to identifying and implementing appropriate corporate governance practices to ensure transparency, accountability and effective internal controls. The Board continued to further its commitment to corporate governance through reviewing existing processes and, where appropriate, developing new ones. The Company substantially complies with the practices enunciated in the Egyptian Corporate Governance Code and will strive to comply with these and other appropriate standers and governance guidelines. The key corporate governance principles and practices are as follows: The General Assembly The General Assembly (ÓGAÓ) of the Company is the ultimate governing body of the Company. In summary, the (ÓGAÓ): ¥ Includes all the shareholders of the Company; ¥ Takes its decision by voting among shares represented in the meeting. The voting rule is: 1 share = 1 vote for all shares indifferently; ¥ Holds at least one ordinary meeting per year and may have an extra-ordinary meeting as needed; ¥ The responsibilities of the GA are based on the laws and Company Statues; ¥ It appoints the board, approves the financial results, appoints the external auditors, and approves dividends distribution. Board of Directors The Board has the responsibility to work to enhance the value of the Company in the interest of the Company and its shareholders. In summary, the Board: ¥ Is engaged in active and continuous strategic planning and approves corporate strategies, including the approval of transactions relating to acquisitions and divestments, and capital expenditure above delegated authority limits; ¥ Reviews and approves the corporate plan for the forthcoming year and following two years, including the capital expenditure and operating budget, and reviews performance against strategic objectives; ¥ Assesses business opportunities and risks on an ongoing basis and oversees the Company's control and accountability systems; ¥ Monitors and approves the Company's financial reporting and dividend policies; ¥ Appoints and has the authority to remove the Chief Executive Officer and approves the recommendations of the Human Resources; ¥ Ratifies the appointment and has the authority to remove the Chief Financial Officer and Group General Counsel and appoints the Company Corporate Secretary; and ¥ Oversees succession planning for the Chief Executive Officer and senior management. The Chairman and the Chief Executive Officer establish meeting agendas to ensure adequate coverage of key issues during the year. In addition workshops and strategy meetings take place. Executives and other senior people regularly attend Board meetings and are also available to be contacted by Directors between meetings. The Board met seven times in 2010. Dr. Mohamed Shaker was appointed to the Board on 12th, May 2010. Mr. Onsi Sawiris retired from the Board on the same date and H.E. Ahmed Maher retired from the Board on 7th, November 2010. Composition of the Board of Directors Executive Chairman Khaled Galal Bichara Board Members Khaled Galal Bishara (Executive Chairman) Ahmed Abou Doma (Chief Executive Officer) Emad Farid (Executive Board Member) Aldo Mareuse (Executive Board Member) Ragy Soliman (Executive Board Member) Iskander Shalaby (Non-Executive Board Member) Mohamed Shaker (Non-Executive Board Member) Henk Van Dalen (Non-Executive Board Member) Jeffrey McGhie (Non-Executive Board Member) The above Board Members classification is based on the Egyptian Corporate Governance code. The latter did not specify the criteria for independent directors that would allow the Company to benchmark against, yet in our opinion and based on internationally recognized best practices, a number of our directors would qualify as independent directors bringing to the company the highest possible standing from both a personal and professional standpoint. Secretary to the Board Ragy Soliman OTH Secretary is responsible to the Board and is available to individual Directors in respect of Board procedures. The Company Secretary was appointed in July 2003. He joined the Group in March 2003. He is Secretary to most of the Board Committees. Board Committees ¥ The Board has established a number of committees which are the most important tools for the management and the operational integration of the Company and provides sufficient resources to enable them to undertake their duties. Executive Directors are not members of the Audit Committee, although they may be invited to attend meetings. It has recently been revised to: ¥ Monitor the implementation of strategies and the development of plans and results; ¥ Ensure the overall coordination of business actions and the management of the relative cross-over business issues; ¥ Build up the necessary operating synergies between the various functions involved in the technological, business and support processes; and ¥ Support the integrated development of the innovation processes of the Company. ¥ In particular, the Committees Board include: Executive Committee The objective of the Executive Committee is to review and, where appropriate, authorize corporate action with respect to most matters concerning the Company's interests, strategy and management of its business and subsidiaries during intervals between meetings of the Board, and generally perform such duties as may be directed by the Board from time to time. Investment Committee The objective of the Investment Committee is to assist the Board in reviewing the Company's investment policies, strategies, transactions and performance, and in overseeing the Company's capital and financial resources. The Committee has resources and authority appropriate to discharge its responsibilities, including the authority to retain experts or consultants. Audit Committee The objective of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing (i) proposed financial plans; (ii) the financial information provided to shareholders and others; (iii) systems of internal controls which management and the Board have established; and (iv) the audit process, including both internal and external audits. The Audit Committee interacts directly with the independent auditor to ensure the independent auditor's ultimate accountability to the Board and the committee, as representatives of the shareholders, and is directly responsible for the appointment, compensation and oversight of the independent auditor. Remuneration Committee The objective of the Remuneration Committee is to ensure that the company has a formal process of considering management and directors' remuneration that is, executive directors should play no part in decisions on their own remuneration, there should be an alignment of the remuneration schemes and the performance objectives of the Company, and the remuneration schemes should attract and retain talented individuals. Management Committee Management Committee has the ultimate responsibility for directing the activity of the Company, ensuring it is well run and delivering the outcomes for which it has been set up. The management committee should provide leadership to the Company by: ¥ Setting the strategic direction to guide and direct the activities of the Company; ¥ Ensuring the effective management of the Company and its activities; and ¥ Monitoring the activities of the Company to ensure they are in keeping with the founding principles, objects and values. ¥ In particular, the Committee System of the Company includes: Operational Committee The Operational Committee is in charge of the day-to-day operations on the Operational and Holding level, This committee also serves as a bridge between the Management and the Executive Committee to make sure that all are working together for the benefit of the Company. OTHANNUALREPORT2010 14
  16. 16. Corporate Responsibility Report OTH pursues a socially responsible management system across its operating companies considering economic, social and environmental roles and responsibilities to provide value to all its stakeholders. Managing our Corporate Social Responsibility (CSR) program entails creating channels of stakeholder engagement and consultation, provision of guidance to all our CSR focal points in relevant areas and inclusion of EHS management. For more information, please read our annual sustainability report available on Social Investment We are committed to developing and supporting the communities we serve through our social investment program. We have focused on a number of social investment platforms that tackle the socioeconomic needs of the countries we operate in. Orascom Telecom's social investment activities focus on four major areas: Disaster relief, improving health practices and access for medical services, investing in education and learning support programs, and improving living conditions for children. Brief descriptions of some of the group's social investment projects undertaken in different countries in 2009 are listed below. Egypt - Orascom Telecom Holding S.A.E 1 Goal Education for All In February 2010, OTH joined global mobile operators' forces in the world's largest cause- related campaign in support of universal education at the FIFA World Cupª 2010. The '1Goal: Education for all' campaign was announced at the World Mobile Congress which took place in Barcelona and continued until the World Cup final in South Africa on 11th of July. The campaign, which was under the personal patronage of Her Majesty Queen Rania Al Abdullah of Jordan, is an initiative to ensure that every child in the world has the opportunity to go to school by 2015. GSM operators who serve more than 1 billion mobile users delivered an international mobile communications campaign that combines the platform of the world's biggest sporting occasion with the world's largest medium, to harness public support for 1GOAL. The mobile campaign - coordinated by the GSMA - comprised a host of mobile communications tools, including mobile advertising, applications and messaging. These tools enabled millions of people to sign up, via a host of mobile response mechanisms, demonstrating to global leaders and the UN that universal education is a universal demand. OTH along with its subsidiaries Mobinil and Djezzy, and sister company Wind Greece have joined forces along with operators from across the mobile world and global football stars, the football world and FIFA, together with educational champions, charities and campaigners to support 1GOAL - a legacy of the FIFA Football World Cup 2010ª - to give all children in the world the chance in life an education brings. Egypt- Orascom Telecom Holding Orascom Telecom sponsors the French University in Egypt to compete in SIFE World Cup Orascom Telecom Holding S.A.E proudly sponsored the SIFE Egypt team from the French University in Egypt to compete in SIFE 2010 World Cup. The French University in Egypt was named 2010 SIFE World Cup Champion for a second consecutive year. This victory is unprecedented in the more than 30 year history of this global organization, where the same university won the World Cup in two successive years. The competition took place in Anaheim, California, October 10-12th where 39 national champion university teams representing 39 countries presented their civic engagement projects. More than 400 global business leaders to evaluated the outreach projects of the national champion teams. The teams were judged on how successful they've been at using business solutions to create economic opportunity for others. SIFE (Students In Free Enterprise) an international non-profit organization that brings together the leaders of today and tomorrow to create a better, more sustainable world through the positive power of business. Founded in 1975, SIFE has active programs on more than 1,500 college and university campuses in over 40 countries. For more information contact SIFE World Headquarters at 417-831-9505 or visit Through SIFE, students around the world are discovering that Òdoing wellÓ and Òdoing goodÓ can be accomplished simultaneously throughout college and career. The French University in Egypt award-winning projects include helping women who lived in poverty due to social and cultural limitations achieve income by starting sustainable businesses weaving rugs and bags. The team also implemented natural and low cost method to purify contaminated water and built 6 purification unites in El Alatma village. They taught farmers how to build the purifying units and use them for the irrigation of crops. The Other top-four finalists included: Second Place: University of Nottingham Ningbo, China. Third Place: Belmont University, United States of America. Fourth Place: Loyola College, India. Egypt - Orascom Telecom Holding Orascom Telecom Receives ISO Certifications for Environment Protection and Occupational Health & Safety Management Systems OTH has successfully been awarded the ISO 14001 certificate, by T†V certification body of Germany, for adopting and successfully implementing an Environmental Management System (EMS) which provides high quality and safe mobile service which conforms to the safety regulations in each of the countries where OTH operates as well as the international telecommunication standards for ensuring maximum environmental protection for the local community. Similarly and continuing its strategy and commitment of ensuring safest work environment and eliminating occupational hazards for its employees, OTH attained the OHSAS 18001 certificate which is the most widely recognized Occupational Health & Safety Management System standard globally. The certificate demonstrates OTH's compliance with the structured management systems approach which enables it to identify hazards, and implement appropriate protective and preventive control measures to reduce the potential for occupational injuries, illnesses and fatalities. Egypt - Mobinil Mobinil Ramadan 2010 CSR campaign - Building safe & sanitary homes in Egypt's poorest villages In line with Mobinil's annual corporate social responsibility tradition to reach out for underprivileged Egyptians during the holy month of Ramadan, Mobinil launched an sms campaign to raise funds for three different projects to improve the housing and sanitary conditions in some of Egypt's poorest rural villages. Mobinil's OTHANNUALREPORT2010 15
  17. 17. Corporate Responsibility Report OTHANNUALREPORT2010 16 partners in this initiative were UNICEF, Habitat for Humanity and Dar El Orman. Mobinil and UNICEF collaborate to provide 2,000 households around 14,000 beneficiaries with safe water and/or sanitary facilities to help reduce child mortality rate. Mobinil and Habitat for Humanity Egypt partnered to construct/repair the houses for 150 ultra-poor families living in villages in the governorate of El Menia and Beni Sweif. The target communities were those extremely poor families living in poverty housing and below the poverty line of EGP 10/person per day. Mobinil cooperated with Dar El Orman to rehabilitate the houses of 100 poor families and provide them with basic furniture. Pakistan - Mobilink Flood Relief Efforts Mobilink led one of the largest private sector initiatives for flood relief in Pakistan and is ranked the top donor amongst the Overseas Investors Chamber of Commerce and Industries (OICCI) member companies who contributed to the relief efforts. Mobilink's total contribution to the flood relief efforts was USD 2.7 million including a donation of Rs 85 million from Orascom Telecom Holding, Mobilink employees' salary donation of Rs 6.7 million and pre-fabricated shelters equivalent to Rs 140 million. The shelters were committed to renowned international organizations and local NGOs including the World Health Organization (WHO) and Thardeep Rural Development Program (TRDP) and were used to establish Basic Health Units (BHUs) to meet the medical needs of the flood victims across Pakistan. All funds generated by Mobilink were channeled through the Mobilink Foundation and were able to reach out to more than 115,000 flood victims in severely affected locations by the floods across Pakistan. Over, 95,000 bottles of water, 3,000 bags of flour, 5,950 packs of dry food rations, 7,865 packs of ready to eat food, 6,100 hygiene kits and 3,100 non-food items were distributed among the flood affectees. Mobilink has also supported the rehabilitation phase of flood relief whereby 60 houses were constructed nationwide. Mobilink Foundation has channeled the relentless energy and fervor of the Mobilink employees, who volunteered their time, energy and expertise in relief process - from procurement to distribution on ground. In fact the key driver in Moblink's efforts was employee volunteerism. Bangladesh - banglalink ICT Support for Underprivileged Children As part of Banglalink's commitment to promote effective and quality education in Bangladesh and as part of supporting 'Digital Bangladesh', Banglalink started to set up computer labs in 270 schools. The project aims at imparting computer literacy to students who are deprived from practicing their computer science syllabus. The computer labs are equipped with PCs, laptops, internet modems, multimedia projectors, speakers and microphones. Starting in Tungipara and Kotalipara with 20 computer labs, Banglalink has widened its project with 76 labs at Monirumpur, while 154 more schools are in the pipeline. In this regard, the Government and Banglalink also organized a launching program and an orientation for over 2,000 teachers of Monirumpur on the 23rd of December, 2010 at Monirumpur Upazila Porishad office.
  18. 18. GSM Operations Orascom Telecom Holding serves a population of 515 million* with an average penetration of 47% Country Population Mobile Penetration Algeria (OTA) 35 million 75% Pakistan (Mobilink) 184 million 54% Egypt (Mobinil) 80.5 million 92% Bangladesh (banglalink) 156 million 43% North Korea (koryolink) 22.8 million 2% North Korea (koryolink) Bangladesh (banglalink) Pakistan (Mobilink) Egypt (Mobinil) Algeria (OTA) Central African Republic (Telecel Centrafrique) Burundi (LeoTM ) Zimbabwe (Telecel Zimbabwe) Canada (WIND Mobile) Note: Sovereign Ratings shown are Moody's/S&P. Population Figures from CIA Factbook (est. December 2010). Mobile Penetration is based on December 31, 2010 subscriber figures & market share *excluding Canada and Lebanon Country Population Mobile Penetration Canada (WIND Mobile) 34 million 70% Central African Republic (Telecel Centrafrique) 4.8 million 17% Burundi (LeoTM ) 9.9 million 15% Zimbabwe (Telecel Zimbabwe) 11.7 million 49% OTHANNUALREPORT2010 17
  19. 19. OTHANNUALREPORT2010 18 Financial and Operational Overview: December December Inc/ 2009 2010 (Dec) Financial Data Revenues (US$ 000) 1,867,837 1,746,566 (6.5%) Revenues (DZN bn) 135.6 129.2 (4.7%) EBITDA (US$ 000) 1,067,241 982,167 (8.0%) EBITDA (DZN bn) 78.10 72.50 (7.2%) EBITDA Margin 57.1% 56.2% (0.9%) Capex (US$ m) 261 90 (66%) Financial Data December September December Inc/(Dec) 2009 2010 2010 Dec. 2010 vs. Dec. 2009 Operational Data Subscribers 14,618,166 14,919,031 15,087,393 3.2% Market Share 59.4% 57.9% 57.6% (1.8%) ARPU (US$) (3 months) 9.9 9.6 9.7 (2.3%) ARPU (DZD) (3 months) 721 725 724 (0.4%) MOU (YTD) 248 278 280 13.0% Churn (3 months) 7.1% 7.3% 5.7% (1.4%) Operational Data OTA - ALGERIA Speak kindly or refrain from talking
  20. 20. OTHANNUALREPORT2010 19 Orascom Telecom Algeria SPA (ÒOTAÓ) operates a GSM network in Algeria and provides a range of prepaid and postpaid products encompassing voice, data and multimedia, using the corporate brand ÒOrascom Telecom AlgŽrieÓ and the dual commercial brands of ÒDjezzyÓ and "Allo". OTA was awarded the second GSM license in Algeria in 2001 and launched its operations in February 2002. OTA commenced its operations under the brand ÒDjezzyÓ and introduced a second prepaid brand ÒAlloÓ in August 2004. As of December 31st , 2010, OTA served over 15.1 million subscribers with a market share of 58% of total mobile subscribers and its network covered 96% of the total population of Algeria. Despite having launched its GSM operation approximately three years after the launch by the incumbent, Algerian Mobile Network (ÒAMNÓ conducting business under the ÒMobilisÓ name), OTA was able to rapidly grow into Algeria's leading and preferred telecommunications operator by far. OTA has rolled-out the largest network in the country through continuous investments. Finally, as demand is growing and local content is beginning to develop, OTA has started to rollout a range of value- added multimedia services based on GPRS and EDGE technologies, which are designed to increase customer usage and boost loyalty. OTA is IS0 9001 and ISO 14001 certified highlighting its continuous commitment to operational excellence and customer satisfaction. Algerian Telecommunications Market Telecommunications services in Algeria are provided principally by AlgŽrie TŽlŽcom, t h e i n c u m b e n t s t a t e - o w n e d telecommunications operator, which provides fixed-line services, and by three GSM mobile operators, OTA, AMN and Wataniya Telecom Algeria. AlgŽrie TŽlŽcom holds a monopoly position with respect to basic fixed-line services. License In July 2001 OTA was granted a license to operate a nationwide GSM telecommunications network, to provide a range of telecommunications services in Algeria, to operate its own backbone and to share or lease network infrastructure with or to its operators. The license is a 15-year dual band license expiring 2016 with automatic renewal for two subsequent five-year terms as long as OTA complies with the terms of the license. Renewal is at no additional cost. Network As of December 31st , 2010, OTA's network covered approximately 96% of Algeria's population, spreading its coverage over the 48 wilayas (provinces) in the country and providing on-road coverage along major highways. The New Generation Network (ÒNGNÓ) equipment introduced at the end of 2006 allowed OTA to further reduce the capital expenditure and operating expense per subscriber. Services and Marketing OTA provides both basic voice and value- added services to its corporate and retail subscribers. In addition to basic voice services, OTA provides its subscribers with a wide range of value-added services and data services such as : Voicemail, CLIP, CLIR, missed call alert, Voice SMS, Chatting services, Web SMS, Data services, MMS, e-voucher, Credit transfer, Ring Back Tone, EDGE, BlackBerry / BlackBerry connect, Wap Portal, Streaming, Directory Service, Automatic device management, Phonebook backup over GPRS, STK menus, USSD menus and all roaming services (Prepaid roaming, GPRS roaming...) OTA offers prepaid, postpaid and hybrid postpaid-prepaid services under its ÒDjezzyÓ and ÒAlloÓ brands and has become the market leader and trendsetter with the highest brand recognition and preference. As of December 31st , 2010, prepaid subscribers represented over 95% of OTA's total subscribers' base. OTA offers its loyalty program ÒImtiyazÓ to its prepaid and postpaid subscribers allowing them to accumulate points when using their mobile phone and convert them into free airtime, handsets or other rewards and advantages. Ownership and Governance Following the completion of an agreement to purchase an additional 1.21% stake in Oratel in November 2006, OTH directly and indirectly owns 96.81% of OTA. OTA - ALGERIA
  21. 21. OTHANNUALREPORT2010 20 Financial and Operational Overview: December December Inc/ 2009 2010 (Dec) Financial Data Revenues (US$ 000) 1,058,448 1,107,067 4.6% Revenues (PKR bn) 86.8 94.3 8.7% EBITDA (US$ 000) 386,653 438,071 13.3% EBITDA (PKR bn) 31.70 37.33 17.8% EBITDA Margin 36.5% 39.6% 3.0% Capex (US$ m) 157 143 (9%) Financial Data December September December Inc/(Dec) 2009 2010 2010 Dec. 2010 vs. Dec. 2009 Operational Data Subscribers 30,800,354 31,444,099 31,794,292 3.2% Market Share* 31.5% 32.6% 30.9% (0.6%) ARPU (US$) (3 months) 2.9 2.7 2.9 0.0% ARPU (PKR) (3 months) 242 231 245 (1.2%) MOU (YTD) 198 202 206 4.1% Churn (3 months) 5.2% 9.3% 8.2% 3.0% Operational Data * Market share, as announced by the Pakistani Regulator is based on information disclosed by the other operators which use different subscriber recognition policies. Mobilink - PAKISTAN May my homeland through me attain elegance, As the garden through flowers attains elegance
  22. 22. OTHANNUALREPORT2010 21 Mobilink - PAKISTAN Pakistan Mobile Communications Limited (ÒMobilinkÓ or ÒPMCLÓ) operates the leading GSM network in Pakistan and provides a range of prepaid and postpaid voice and data telecommunication services to both individual and corporate subscribers. Mobilink launched its operations in August 1994, after it was founded in 1990 as a joint venture between Motorola and the Saif Group. Mobilink's network is the most extensive in Pakistan, reaching over 73% of the total population and 100% of the urban population as of December 31st , 2010, delivered through 8,071 cell sites and 63 switches. Mobilink enjoys the most widespread retail channel in the country, with over 420 Franchise Centers, more than 2500 customer care center touch points and over 200 thousand retailers throughout Pakistan. Mobilink served over 31 million subscribers as of December 31st , 2010, representing a market share, as calculated by the company, of approximately 39% of the total mobile subscribers in Pakistan. According to Pakistan Telecommunication Authority (PTA) latest figures closing December 2010, Mobilink's market share is 30.93% but this market share is based on information disclosed by the operators each of which use different subscriber recognition polices. The company also intends to diversify into data market and has already setup a pilot Wimax network in one city which currently is serving 35 thousand subscribers. Pakistani Telecommunication Market Telecommunication services in Pakistan are provided by Fixed Local Loop (FLL) operators, Wireless Local Loop operators, mobile operators and Long Distance and International (LDI) operators. Pakistan Telecommunication Limited (ÒPTCLÓ), the incumbent FLL and LDI operator enjoys the highest share among FLL and LDI operators. PTCL is 62% state-owned, 26% is held by Etisalat and the remaining 12% is with the public. PTA has issued 12 licenses to provide long distance and international services. There are currently five mobile operators in Pakistan: Mobilink, CMPak Limited (ÒCMPak - formerly PaktelÓ), Pakistan Telecom Mobile Limited (ÒUfoneÓ), a subsidiary of PTCL, Telenor Pakistan and Warid Telecom providing GSM services. WLL operators did not enjoy much penetration in the Pakistani market registering only 2.85 million subscribers till Nov 2010 as per PTA reports with PTCL, Telecard and World Call being the major operators. The year 2010 brought a number of challenges for Pakistan marked by the worst flood in history, double digit inflation, war against terrorism, and gas and electricity load shedding. Increase in price of electricity coupled with load shedding put pressure on individuals and business entities. Flood devastated telecommunication services in various areas along with the infrastructure damage and displacement of people. License Mobilink was awarded a 15-year license in July 1992 to establish, maintain and operate Cellular Mobile Telephone Public service and systems in Pakistan. The license was renewed in 2007 for a further period of 15 years. On June 26, 2006 Mobilink was granted another Azad Jammu & Kashmir (AJ&K) and Northern Areas (NAs) license also for a period of 15 years. The company also has a Long Distance and International (LDI) license which was awarded to one of its subsidiaries in 2004 and has a 20 years validity. Mobilink also acquired WLL licenses along with spectrum in 3.5 MHz band in 12 of the countryÕs 14 telecom regions, which enables Mobilink To provide WiMAX broadband services. These licenses are valid till 2024. Network As of December 31st , 2010, Mobilink's GSM network covers more than 10,000 cities, towns and villages and provides on-road coverage along all of the nation's major highways. In addition to voice, Mobilink also has the largest data network in the country. Services and Marketing For the telecom industry, 2010 proved to be a year full of competition among the mobile operators with aggressive offers, segmentation, retention and acquisition being the key focus areas. This year the mobile market achieved the 100 million subscriber landmark as reported by PTA. However it should be noted that the dual SIM ownership has become a major phenomenon with consumer sharing their wallet depending upon various offers. The price war going on between cellular operators greatly benefited consumers who were being offered attractive new packages and value added services. Industry offers majorly focused on Ghanta (hourly) offers, Friends and Family offers and projection of lower rates based coupled with smaller pulse. Youth segment enjoyed major attention by all operators with roll out of new packages for this specific segment. Preserving subscriber base was emphasized and was witnessed through reactivation promotions run by all operators. Mobile Number Portability saw major aggression this year with operators striving hard to increase their customer base through it. Mobilink markets its prepaid services under the brand name 'Jazz' which offers different packages to suit the need of diverse customer segments. Mobilink markets its postpaid services using the brand name 'indigo', which offers different packages and value added services for corporate and individual customers. 'indigo' brand commands a premium image in the market and is being used by several leading corporations of the country. Mobilink's broadband services are offered under the brand name of 'infinity' with WiMAX services in Karachi and DSL services across the country. Mobilink set its goal to conserve its market share, growth in revenue and decrease its operational costs. With these objectives in mind, various offers and initiatives were undertaken so that Mobilink countered competition effectively as well as passed on value to its customers. Acquisition and reactivation offers were run to increase the subscriber base. Aggressive offers were run to increase customer engagement and to counter competition. Mobilink VAS rolled out a number of industry first and innovative offers and kept the revenue on the increase. Ownership and Governance Orascom Telecom indirectly owns 100% of the share capital of Mobilink through direct stakes held by wholly owned subsidiaries of OTH.
  23. 23. OTHANNUALREPORT2010 22 Financial and Operational Overview: Mobinil - EGYPT December September December Inc/(Dec) 2009 2010 2010 Dec. 2010 vs. Dec. 2009 Operational Data Subscribers 25,354,209 28,401,312 30,224,888 19.2% Market Share 42.0% 39.0% 39.9% (2.1%) ARPU (US$) (3 months) 6.5 5.4 4.9 (24.6%) ARPU (EGP)* (3 months) 36 31 28 (20.9%) Avg MOU (YTD)* 173 171 167 (3.2%) Churn (3 months)* 10.8% 7.2% 7.3% (3.5%) Operational Data * ARPU, MOU & Churn expressed under OTHÕs definition may differ from MobinilÕs disclosed figures. He who Likes his voice let it sound
  24. 24. OTHANNUALREPORT2010 23 The Egyptian Company for Mobile Services ÒECMSÓ, launched in May 1998, provides a range of prepaid and postpaid voice and data telecommunications services. ECMS operates under the brand name ÒMobinilÓ. Its network covers approximately 100% of the Egyptian population. Mobinil's subscriber base, at December 31, 2010, reached 30.225 million mobile customers and is well positioned for future profitable growth. Ownership and Governance Mobinil is owned by OTH, France Telecom Group and public market equity investors. Orascom Telecom and France Telecom Group have respectively 34.66% and 36.34% economic interest in ECMS. The remaining 29% shares of ECMS are publicly traded on the Egyptian Exchange. Egyptian Telecommunications Market Fixed-line services are provided exclusively by Telecom Egypt, the incumbent 80% government-owned operator, with nearly 11 million customers. Three GSM mobile operators - Mobinil, Vodafone Egypt and Etisalat - compete to serve more than 76 million mobile users, providing a variety of voice and data services. Egypt also has the largest number of internet users in the region, using both dial-up, and increasingly broadband services. After Telecom Egypt's monopoly expired at the end of 2005, there were several attempts to introduce a second fixed-line license; however, these attempts were derailed. On the other hand, each of the three mobile operators acquired an ISP arm to compete in the broadband arena. The Egyptian telecommunications market in 2010 was marked by aggressive competition mainly induced by pricing pressures. License Mobinil was granted a license in 1998 to operate a GSM mobile telecommunications network and to provide a range of telecommunications services in Egypt. The license, amended in January 2005 by the National Telecommunication Regulatory Authority (NTRA), is a 15-year dual-band license with automatic renewal for successive five-year periods, providing that Mobinil fully complies with the license requirements. Mobinil signed a 3G license agreement in October 2007, and both 2G and 3G licenses were extended till 2022. Network Mobinil constantly aims to providing its customers with top quality services by enhancing its network capacity and coverage, as well as ensuring that its network provides the most up-to-date technology. By the end of 2010, Mobinil had 10,412 sites providing 2G and 3G services. The Internet link capacity was more than doubled in light of meeting its customers' increasing demand for 3G and data usage. In addition, it ended off 2010 with 2,120 sites with HSDPA technology. Services and Marketing Mobinil embraced the highly competitive 2010 Egyptian market by providing its consumers and the enterprise market with a variety of offers and plans. Its commercial activities primarily revolved around offering its customers the best value for money, depending on their varying communication needs and budgetary constraints. 2010 was a very active year for Mobinil on the consumer market front with the creation and revamping of numerous plans for both prepaid and postpaid customers. Targeting its prepaid customers, Mobinil launched a series of tariff plans with highly attractive per minute rates in the market, such as, El Masry, Ahsan Nas, ALO Kalam Aktar and Bedoon Shoroot. Certain promotions gave prepaid customers the chance to win valuable prizes with every recharge through Mobinil scratch cards or e-recharge. Prepaid customers that run out of credit could make calls and send SMS by borrowing extra credit from Mobinil through the Salefny service. Postpaid customers were able to reap the benefits of revamped Star tariff plans with a combination of unlimited free minutes, SMS, BlackBerry service or mobile Internet, mobile broadband, and a free USB modem and data line (Star Max). Mobinil also enhanced the Star Awards program to foster loyalty and retain the high-end customer base. Another significant achievement for Mobinil in 2010 was the enhancement of Mobile Broadband activities. Data solution bundles that combined affordable and high-end laptops with Mobinil 3G USB modems and free data lines made the Internet accessible to a wider range of the Egyptian market. Data bundles and promotions were also available for iPads and Samsung Galaxy P1000 Tabs. Mobinil enhanced data packages for both prepaid & postpaid customers and introduced time based mobile broadband for the first time in Egypt. The new and revamped tariff plans gave customers more payment plan options and therefore increased the purchase of broadband products. Mobinil was also first to introduce the Unlimited Mobile Internet package. To reach mobile and broadband users, Mobinil launched MyShop, a value added service under MyMobinil, the online service portal. The new online shop offers visitors the opportunity to browse and buy any Mobinil products that are delivered to their doorsteps. Also under MyMobinil, MyServices was enhanced to allow postpaid, prepaid and corporate prepaid customers to subscribe to /unsubscribe from their available data buckets. Several value added services were introduced such as Voice SMS and ME services. ME services is an application used with medium end handsets that allows customers to browse the internet, chat, download the latest music, videos, games and latest news. On the enterprise market front, the company focused on both voice and Internet services. In collaboration with RIM, Mobinil launched the BlackBerry Enterprise Service Express (BES Express), which is a free secured software designed to access e-mail and data with a BlackBerry Smartphone. Free Video Calling service, for both local and international calls was also introduced. Moreover, Mobinil implemented reduced tariffs on roaming and international calls for all its customers. This included the EGP 1.99/minute international call offer (prepaid & postpaid customers), EGP 1 roaming receiving rate (postpaid customers) and in- flight roaming with EgyptAir as well as with its OnAir Switzerland partners namely British Airways, Qatar Airways, Saudi Arabian Airlines, Royal Jordanian Airlines, Wataniya Airways Kuwait and Air Portugal (postpaid customers). Mobinil - EGYPT
  25. 25. OTHANNUALREPORT2010 24 Financial and Operational Overview: banglalink - BANGLADESH * Market share, as announced by the Regulator in Bangladesh is based on information disclosed by the other operators which use different subscriber recognition policies. December December Inc/ 2009 2010 (Dec) Financial Data Revenues (US$ 000) 350,844 456,984 30.2% EBITDA (US$ 000) 118,560 127,686 7.7% EBITDA Margin 33.8% 27.9% (5.8%) Capex (US$ m) 122 235 93% Financial Data December September December Inc/(Dec) 2009 2010 2010 Dec. 2010 vs. Dec. 2009 Operational Data Subscribers 13,886,913 18,107,163 19,327,005 39.2% Market Share* 26.8% 27.8% 28.5% 1.7% ARPU (US$) (3 months) 2.3 2.3 2.1 (10.0%) ARPU (EGP) (3 months) 163 160 149 (8.7%) Avg MOU (YTD) 253 232 230 (9.3%) Churn (3 months) (0.6%) 5.2% 4.6% 5.2% Operational Data Gray hairs are signs of wisdom if you hold your tongue, speak and they are but hairs, as in the young. Rabindranath Tagore
  26. 26. OTHANNUALREPORT2010 25 banglalink - BANGLADESH Orascom Telecom Bangladesh Limited (ÒbanglalinkÓ or ÒOTBÓ) is a GSM telecommunications operator in Bangladesh and provides a range of prepaid and postpaid voice and data telecommunications services, using the brand name ÒbanglalinkTMÓ, and is operating in a highly competitive market having six mobile operators. Banglalink, the fourth entrant in the market, commenced its operation in February 2005. banglalink overtook Robi (then AKTel) and became the second largest mobile operator in Bangladesh within less than 3 years of operation. As of December 31st , 2010, banglalink's network covered over 97% of the total population of Bangladesh with over 19.33 million subscribers and a market share of over 28.16%. This phenomenal growth was possible mainly because of overwhelming response of subscribers to banglalink's products and services, a strong brand image, an extensive distribution network, and continuous improvement in service quality. Bangladeshi Telecommunications Market Telecommunications services in Bangladesh are provided by 5 GSM and 1 CDMA mobile operators, and 13 fixed- line operators. The oldest mobile operator, Pacific Bangladesh Telecom Ltd. (ÒCitycellÓ), is still the only CDMA operator, in which SingTel acquired a minority interest. The five GSM operators are, in order of launch date, GrameenPhone (GP), the market leader, of which 55.8% owned by Telenor Mobile Communications AS, 34.2% is owned by Grameen Telecom and 10% stake is publicly held. GP is a publicly listed company listed in both the stock exchanges of Bangladesh. Axiata Bangladesh Ltd (Robi) former TM International Bangladesh Ltd (ÒAKTELÓ), the third largest player is a joint venture company in which Axiata holds 70% and NTT DoCoMo holds 30% stake; banglalink, Teletalk Bangladesh Ltd. (ÒTeletalkÓ), the state owned mobile operator, and Airtel Bangladesh, a joint venture company in which Airtel holds 70% and Warid Telecom holds 30% stake. The Bangladesh Telecommunications Company Limited (ÒBTCLÓ) is the incumbent state-owned fixed-line operator that has been present from the beginning. The remaining private fixed line operators were issued licenses a few years ago. License banglalink holds a nationwide 15-year GSM license which was issued in November 1996 that is valid until 10 November 2011. Network With the help of an aggressive network roll-out since launch, banglalink's network extends all across the country and covers over 97% of the population. The primary focus in recent years has been on ensuring continuous improvement in the quality of the network while also enhancing coverage in rural areas. Services and Marketing banglalink's marketing strategy focused on targeting different consumer segments with specially designed products and services that are tailored to the needs of these segments. banglalink's prepaid brand, Òbanglalink deshÓ, is perceived as the best prepaid package in the country with innovative tariff and value for money features and a very strong brand image. Òbanglalink businessÓ, Òbanglalink SMEÓ and ÒBanglalink PCOÓ caters to the needs of the business segment including the thriving SME sector where banglalink has been the pioneer in the country. In 2010, banglalink has launched a premium telecom brand ÒICONÓ specifically targeting the high-end lifestyle segment of the country. banglalink provides its subscribers with a wide range of innovative value-added services including caller ring-back tone, music station, song dedication, voice portal, voice chat, voice-SMS etc to name a few. In recent years, banglalink also launched Facebook Text to update Facebook status, Timer SMS, Phone Back-up, Call Block, Friend Finder, Field Force Locator, Vehicle Tracking and call-center based information services 'Banglalink Krishi Jigyasha 7676' and 'banglalink Babsha Jigyasha 7677', which provide advisory service regarding agriculture and SME business queries respectively. 'banglalink jigyasha' services won the Asia Mobile Awards 2009 under the category Best Mobile Enterprise Application Product or Service. banglalink has already established a nationwide EDGE/GPRS network serving both postpaid and prepaid subscribers. banglalink's international roaming network comprises of 250 operators across 95 countries and EDGE/GPRS connectivity is available to roaming customers as well. banglalink is pioneer in launching mobile financial services in Bangladesh, being the first operation in the whole of South Asia to launch international remittance over mobile. Banglalink has won award from International Association of Money Transfer Networks (IAMTN) for this first-ever service in Bangladesh. It also launched a range of other mobile financial services, such as Railway ticketing, utility bill pay, concert ticketing and domestic remittance services with Bangladesh Post Office. banglalink's customer care services are regarded as the best in the mobile industry of Bangladesh. A state-of-the art call center with highly trained agents provides round the clock service to customers. banglalink is also the pioneer in taking customer service closer to its subscribers by introducing Òbanglalink service pointsÓ in over 1,150 locations across the country, being the widest customer care network by far within telecom industry. A dedicated team of relationship managers provide exclusive services to business segment customers. Ownership and Governance OTH owns 99.9998% of the shares of banglalink. Orascom Telecom Bangladesh Limited (banglalink) was incorporated in Bangladesh under the Companies Act 1994 which is obliged to comply with the laws of land.
  27. 27. OTHANNUALREPORT2010 26 Financial and Operational Overview: koryolink - NORTH KOREA * Based on the official exchange rate between the US$ and the North Korean Won (KPW) of KPW 135 as sourced by Bloomberg. December December Inc/ 2009 2010 (Dec) Financial Data Revenues (US$ 000) * 25,951 66,402 155.9% EBITDA (US$ 000)* 17,153 57,764 n.m. EBITDA Margin 66.1% 87.0% 20.9% Capex (US$ m)* 27 47 74% Financial Data December September December Inc/(Dec) 2009 2010 2010 Dec. 2010 vs. Dec. 2009 Operational Data Subscribers 91,704 301,199 431,919 n.m. Market Share 100.0% 100.0% 100.0% 0% ARPU (US$) (3 months)* 24.5 15.2 14.6 (40.4%) MOU (YTD) 239 320 316 32.4% Operational Data Even though words have no wings,Ê they can still fly a thousand miles.
  28. 28. OTHANNUALREPORT2010 27 CHEO Technology Joint Venture Co. (Koryolink) operates the first and only 3G mobile operator in the Democratic People's Republic of Korea (DPRK). Koryolink provides a range of prepaid voice and multimedia services. Koryolink launched its operations in December 2008. As of December 31st , 2010, koryolink's subscriber base reached 432 thousand and its network covered 91% of the DPRK population. By the end of 2010, Koryolink - in its second year of operation - has managed to grow it is subscribers base by over 370% over end of year 2009. This phenomenal growth is a result of the overwhelming response to Koryolink services. Contrary to initial assumptions that the mobile service will be only available to the government officials and elite, the fact is that currently mobiles are used by different segments and levels of the society. Moreover; users are increasingly dependent on the mobile service; a fact illustrated by the hype in traffic in special events and occasions. DPRK Telecommunications Market Fixed line services are provided exclusively by the Korean Post and Telecom. Corp. (KPTC). Internet services provided through KPTC also are only available for the foreigners resident in DPRK. A government owned and operated 2G mobile operator which was operational since 2002 closed down during Q4 2010. License Koryolink is issued a nationwide WCDMA license in January 2008 to provide a range of 3G telecommunications services. The license is valid for 25 years from launch date and granting exclusivity to Koryolink for the first 4 years. Network Following the success of operations in 2009, an aggressive network expansion plan was carried to extend coverage and services to various parts of DPRK in addition to the capital Pyongyang. Koryolink's network - at end of year 2010 - consists of 333 on air base stations covering the capital Pyongyang as well as 14 main cities and 72 small cities. The network coverage extends also over 22 highways. The network covers 14.8% of the territory and 91% of DPRK population. Services and Marketing During its second year of operation; Koryolink has focused on boosting subscriber growth through targeting various segments with innovative offerings, while continuously expanding sales outlets throughout all main cities in DPRK. In Q2, and in an aim to make the mobile service more affordable; Koryolink introduced a new rate plan targeting lower- end customers resulting acquiring more subscribers from areas outside Pyongyang. As a startup to its VAS launch plan, Koryolink has successfully launched the Video Call service in Q3 2010 to witness a high demand from different segments. In its efforts to maximize its reach to customers, Koryolink - in 2010 - continued to aggressively expand its sales presence across DPRK. Koryolink sales network currently consists of five sales shops in various areas Pyongyang. An indirect sales channel has also been established with Koryolink's local partner (KPTC) consisting of 13 outlets in Pyongyang and 8 sales outlets covering major cities outside the capital. Koryolink 3G network supports a variety of services - in addition to voice - such as video call, SMS, MMS, voice mail, WAP and HSPA. MMS and HSPA services will be launched in early 2011. Ownership and Governance Orascom Telecom Holding owns 75% of CHEO Technology Joint Venture Co. while the Koran Post and Telecom. Corp. (KPTC) owns the remaining 25%. koryolink - KOREA
  29. 29. OTHANNUALREPORT2010 28 Company Brief: Telecel Globe, a wholly owned subsidiary of Orascom Telecom, launched its operations in February 2008. It is an international telecommunications company that manages GSM operators in small and medium sized countries in Sub-Saharan Africa with high growth potential. It currently manages four GSM networks in the Central African Republic, Burundi and Zimbabwe and plans to continue expanding its footprint by acquiring or developing other operators. Telecel Globe positions its networks as market leaders and strives to improve the quality of life of the people in the markets which it operates by increasing network coverage, improving network quality and introducing new value added services such as data services, prepaid roaming and air time credit transfer. The portfolio of VAS on offer by its operators is being aggressively expanded as the new state-of-the- art networks allow more innovative services and promotions to be implemented, increasing customer satisfaction and ARPUs. Telecel Globe has also established the Telecel Globe Foundation to serve the local communities in the countries which it operates. The Foundation regulates all the Group's CSR activities to ensure that all operators are responsible corporate citizens that give back to their communities.