Telecom Egypt - Re-initiation of Coverage - March 2016

PRIME INVESTMENT RESEARCH
AUTOMOTIVE |EGYPT
GB AUTO – INITIATION OF COVERAGE
JANUARY, 14TH
2016
TELECOM|EGYPT
TELECOM EGYPT – RE-INITIATION OF COVERAGE
MARCH 24TH
, 2016
WE RE-INITIATE COVERAGE FOR … ETEL …
ASSIGNING A “BUY” RATING
WE SEE ONE OF THREE SCENARIOS TAKING PLACE OVER THE
MEDIUM-TERM …
1) IF CURRENT OPERATIONS CONTINUE AS IT IS, WE
WOULD THEN BELIEVE IN TE`S FAIR VALUE OF EGP
11.56/SHARE.
OR IF,
2) TE HUNT FOR MOBILE OPERATIONS, TAKES PLACE
SUCCESSFULLY BY 2017; WE WOULD SEE 1 OF 2
SCENARIOS THEN,
- SCENARIO 1: A VALUE OF EGP 8.13/SHARE,
IN CASE FIBER OPTICS ROLLOUT PROCEED
PARALLEL TO INCURRING MOBILE CAPEX.
- SCENARIO 2: A VALUE OF EGP 10.1/SHARE,
IN CASE MOBILE OPERATIONS` REQUIRED
CAPEX TO SOLELY BE INCURRED.
WE RE-INITIATE COVERAGE FOR TELECOM EGYPT AT A FAIR VALUE
OF EGP 11.56/SHARE IMPLYING 54% UPSIDE POTENTIAL.
WE ASSIGN ETEL A “BUY” RATING.

2
MARCH, 2016
We Re-initiate coverage on Telecom Egypt with a “BUY” rating; due to an upside
potential of 54% driven from a Fair Value of EGP 11.56/share as our base case. We
valued TE using DCF valuation methodology. We valued ETEL utilizing an average WACC
over our forecasted horizon of 17.36%, a risk free rate of 10.87%, and a risk premium of
8%. We assigned ETEL its statistically adjusted beta of 0.86. We also applied a perpetual
growth rate of 2%, relative to the company`s economic stage.
TE ROIC is by far below the company`s average WACC; being in maturity stage justifies
the historical dividend play. However, in our base case through which we assume
current operations continuation up to 2020, we see a squeeze in dividends driven by
high fiber optics CAPEX.
Assuming current operations` continuation means no mobile operations for TE. Hence,
we anticipate cash payments from VFE to resume after years of freezing. However, we
set VFE retention at 40%, added to TE`s investment BV.
Broadband, TE`s upcoming success story; anticipated to grow in revenues over the
horizon by a CAGR of 15.9%, increasing in contribution to total revenues from 21.6% in
2015 to 39.3% by 2020. To alleviate a massive expected compounded decline of 15.3%
in wholesale business units revenues; being under adverse effect from tourism arrivals`
declines and Over-The-Top applications` cannibalization.
Concerning the lack of visibility we have for the outcome of current disputes going on
between TE and other operators and concerning the sector`s regulatory reforms
application. We will be revising our numbers once new indications show up. We would
also like to note that news/rumors about former CEO Mohamed El-Nawawy getting back
the executive chair at TE, is out there.
Looking at Scenario 1, we followed 2014`s regulatory reforms, driving CAPEX higher on
the back of obtaining the MVNO license and 4G spectrum License at an estimated EGP
5bn by 2017. Necessitating TE`s 44.95% VFE stake sale, estimated at EGP 13.99bn at an
EV/EBITDA of 5.41x by 2017. Out of which EGP 2.54bn represents TE`s after-tax capital
gain.
Through Scenario 1, we assume the continuation of the fiber optics rollout, but
extending the project up to 2021 versus TE`s indication of 2019. We chose to slow down
fiber optics` CAPEX in years of mobile licenses acquisition. We also see TE`s capturing a
market share of 20% by 2020, as we believe in a predatory pricing coming at discounts
to all other market players. In Scenario 1 we applied same discounting parameters, and
our assumptions yielded a fair value of EGP 8.13/share; 8% above market price.
Liberalizing International Gateway, is also assumed to take place by 2017. Leading to
losing revenues of EGP 14.6bn from our base case projected Domestic wholesale and
International Carriers Affairs revenues; captured by VFE and Orange. However, a net
gain in revenues of EGP 1.94bn would take place thanks to mobile operations,
generating EGP 16.5bn over same time duration; neglecting time value of money.
We also tested for another case, scenario 2, in which we slowed down CAPEX other
than mobile operations related, to 5% of sales starting from 2017, assuming completely
halting fiber optics roll out or at least postponing the project beyond 2016`s already
under-deployment CAPEX. Scenario 2 yielded a value per share of EGP 10.1, providing a
34% upside.
TELECOM EGYPT … TAKING ONE OF 3 ROADS AHEAD
WHETHER IT BECOMES FULLY FLEDGED OR NOT … ALL SCENARIOS SAY IT’S A BUY
Stock Data
Outstanding Shares [in mn] 1,707.0
Mkt. Cap [in mn] 12,837.2
Bloomberg – Reuters ETEL EY / ETEL.CA
52-WEEKS EGP 5.5 – EGP 11.4
Ownership
Government 80%
Free Float 20%
Financial Highlights
EGP mn 2015 2016E 2017E 2018E
Revenues 12,184.2 12,503.9 12,862.4 13,310.1
GPM (%) 54.7% 53.7% 52.4% 51.5%
EBITDA 3,112.9 3,140.0 3,014.9 2,954.9
N.Income 2,997.4 2,117.9 1,883.9 1,773.2
EPS 1.76 1.24 1.10 1.04
P/E 4.28x 6.06x 6.81x 7.24x
DPS 0.75 0.37 0.33 0.31
BV/S 16.97 17.21 17.75 18.30
FCF/S 1.02 0.91 0.29 0.20
GCF/S 2.54 2.31 1.77 1.76
EV/EBITDA 3.5x 3.65x 3.9x 4.1x
ROA 8.96% 6.06% 5.24% 4.77%
ROE 10.75% 7.26% 6.31% 5.75%
ROIC 9.4% 8.07% 6.83% 5.97%
Source: Telecom Egypt, Prime Estimates
All prices are as of 23 March 2016
Source: Bloomberg
0
2
4
6
8
10
12
14
ETEL EGX 30 - rebased
“BUY”
MARKET PRICE EGP 7.52
FAIR VALUE EGP 11.56
POTENTIAL 54% UPSIDE
INVESTMENT GRADE
“VALUE”
Report Content
Valuation & Risks 3
Financial Statements 4
Telecom Egypt Synopsis 5
Regulations 6
Operational Overview 7
1- Base Case 7
2- Scenario 1 20
3- Scenario 2 25
Disclaimer 27

3
MARCH, 2016
N.B
We would like to note that, we assumed the continuation of current operations to
reflect our base case, as we feel that a lack of visibility lies within the horizon concerning
the sector`s recent developments and regulations. In any case, we will remain cautious
for updates and instantly revise our numbers for pop-ups.
Valuation
In EGP mn 2016F 2017F 2018F 2019F 2020F
FCF 1,556.7 500.9 346.9 298.7 551.8
PV - FCF 1,390 381.4 224.9 164.8 259.1
Terminal Value 5,940
Average WACC 17.36%
Perpetual G 2.00%
Add: 50% of Cash 1,206
Add: LT. Invs 10,561
Entity Value 20,128
Deductions (Debt & MI) 396.3
Equity Value 19,731.99
DCF/s 11.56

4
MARCH, 2016
SOURCE: TE, PRIME
 Financial Statements … Historical & Forecast
Income Statement Brief Hist. Forecast
In EGP Mn 2015 2016F 2017F 2018F 2019F
Revenues 12,184.2 12,503.9 12,862.4 13,310.1 13,769.1
Change 0.2% 2.6% 2.9% 3.5% 3.4%
COGS 5,519.3 5,793.9 6,122.9 6,453.4 6,797.3
Change 4.9% 5.0% 5.7% 5.4% 5.3%
Depreciation & Amortization (1,589.1) (1,621.5) (1,708.4) (1,793.7) (1,883.4)
Gross Profit 6,664.9 6,710.0 6,739.5 6,856.7 6,971.8
GPM 54.7% 53.7% 52.4% 51.5% 50.6%
EBITDA 3,112.9 3,140.0 3,014.9 2,954.9 2,884.1
EBITDA Margin 25.5% 25.1% 23.4% 22.2% 20.9%
Net Income After MI 2,997.4 2,117.9 1,883.9 1,773.2 1,663.0
NPM 24.6% 16.9% 14.6% 13.3% 12.1%
Balance Sheet Brief Hist. Forecast
In EGP Mn 2015 2016F 2017F 2018F 2019F
Assets
Cash 2,413.5 1,760.0 1,483.8 1,135.6 813.6
Net Receivables 4,611.6 4,732.6 4,868.3 5,037.7 5,211.4
Net Inventory 556.9 544.9 570.7 601.6 633.6
Other Current Assets 1,585.4 1,611.7 1,653.2 1,705.1 1,758.4
Total Current Assets 9,167.3 8,649.2 8,576.0 8,480.1 8,417.0
Net PPE 11,839.3 12,408.7 13,319.6 14,218.0 15,118.7
Net Intangibles 933.0 877.5 833.6 792.1 683.9
Other LT-Assets 12,638.1 13,403.6 13,830.2 14,281.2 14,745.8
Total Long Term Assets 25,410.5 26,689.8 27,983.4 29,291.3 30,548.4
Total Assets 34,577.8 35,339.0 36,559.5 37,771.3 38,965.4
Liabilities
STD - incl CPLTD 62.5 65.3 69.2 28.5 24.5
Accounts Payable 330.0 346.4 366.1 385.9 406.4
Other Current Liabilities 3,859.3 4,092.5 4,290.0 4,495.1 4,712.7
Total Current Liabilities 4251.8 4504.2 4725.2 4909.5 5143.6
LTD 326.9 327.7 306.5 301.6 279.6
Other Long Term liabilities 1,024.7 1,122.3 1,222.6 1,326.4 1,433.9
Total Long Term Liabilities 1,351.6 1,450.0 1,529.1 1,628.1 1,713.5
Total Liabilities 5,603.4 5,954.2 6,254.3 6,537.5 6,857.1
Equity
Paid-in-Capital 17,070.7 17,070.7 17,070.7 17,070.7 17,070.7
Reserves 6,380.1 6,337.8 6,356.6 6,427.5 6,494.1
RE 5,508.9 5,832.0 6,667.3 7,453.3 8,183.3
Minority interest 10.3 11.8 13.1 14.3 15.4
Total Equity 28,974.4 29,384.8 30,305.1 31,233.8 32,108.3
Cash Flow Brief Hist. Forecast
In EGP Mn 2015 2016F 2017F 2018F 2019F
CF Sources & Uses
Sources of Funds 2,284.5 761.2 1,220.5 1,211.8 1,194.1
Uses of Funds 2,587.3 1,414.7 1,496.6 1,560.0 1,516.2
Change in Cash (302.8) (653.5) (276.2) (348.1) (322.1)

5
MARCH, 2016
SOURCE: TE, PRIME
SOURCE: TE SOURCE: TE
TE`S BOD & SHAREHOLDERS STRUCTURE
Telecom Egypt Synopsis
Telecom Egypt, Egypt’s incumbent telecommunications operator, started its operations in 1854 with the first
telegraph line in Egypt. Then it was corporatized in 1998 to replace the former Arab Republic of Egypt National
Telecommunication Organization (ARENTO). TE is Egypt`s largest and main infrastructure provider. The Company is
the largest provider of fixed-line services in the Middle East and Africa with c. 6.6mn subscribers as at 31 December
2015. TE provides retail telecommunication services including access, local, long distance and international voice,
Internet and data, and other services. The company also provides wholesale services including bandwidth capacity
leasing to Internet Service Providers (ISPs), and national and international interconnection services. TE`s services also
include the provision of narrowband and broadband internet access through its subsidiary TE Data. TE Data has active
operations in Egypt and Jordan. TE currently participates in the mobile segment in Egypt by providing mobile
interconnectivity through its current stake of 44.95% in Vodafone Egypt, the largest of three existing mobile operators
in Egypt. TE`s shares and GDRs (ETEL.CA, TEEG.LN) are traded on The Egyptian Exchange and the London Stock
Exchange. On a consolidated level, TE has around 50k employees.
Telecom Egypt Lines of Business … The Company has two main divisions under which its business
operations are aligned.
Board Members
Waleed Hassan Gad Chairman/ Non-Executive
Ossama Yassin CEO/ Executive
Tarek Mohi El-din Non-Executive
Khaled Mahmoud Sayed Sherif Non-Executive
Ashraf Mohamed Saeed Non-Executive
Al-Sayed Mohamed Al-Sayed Non-Executive
Alexander Adel Alexander Non-Executive
Mohamed Abd El-Lateef Ataeya Non-Executive
Ahmed Mohamed Gamal Non-Executive
Taha Mahmoud Khaled Non-Executive
- Value Added Services
- Voice – Local Calls
- Voice – Fixed to Mobile
- Voice – international Calls
- Voice – National Calls
- Mobile – to – Fixed calls (M2F)
- Internet & Data
- Other Domestic Customers
- Value Added Services
- PRI (DID & DOD)/ leased lines
- Voice – Local Calls
- Voice – Fixed to Mobile
- Voice – international Calls
- Voice – National Calls
- Mobile – to – Fixed calls (M2F)
- Internet & Data
- Assays
- National Transmission
Services
- International Transmission
Services
- Collocation
- International Call Conveyance
- Access Services
- International Settlement - Cable Projects
- Ancillary Services (O&M)
- Capacity Sales
HS - Business ES - Business DW - Business ICA – Business IC&N - Business
Revenue Drivers
Providing traditional voice
services & high speed internet
(ADSL) through home fixed-
landlines
High speed internet services
(ADSL) & enterprise integrated
applications solutions for both
private & governmental entities.
Versatile wholesale services
including infrastructure leasing,
as well as data transfer for mobile
companies and internet
providers.
International voice operations,
thanks to TE`s bilateral relations
with international carriers and
companies, as well as a focus on
diversity of inbound traffic
sources.
Egypt's unique geography,
connecting the Red and Med Seas,
make TE`s network a unique
global resource connecting Euro-
Asia and Euro-E-Africa
infrastructure.
Home Services Enterprise Solutions Domestic Wholesale Int. Carrier Affairs Int. Customers & Networks
Retail Wholesale
Revenue Contribution - 2015
Retail – 44.9%
DW – 24% ICA – 24.4% IC&N – 6.6%Voice – 22.6% Other – 0.7%Data – 21.6%
Wholesale – 55.1%
80%
20%
Government
Entities
Free Float

6
MARCH, 2016
Egypt`s telecom sector is characterized by 1 player setting monopoly over the fixed-voice segment (Telecom Egypt),
and 3 players (Vodafone, Orange and Etisalat Egypt) competing over the mobile business operations. The 4 players
compete all together over the broadband business with TE levying dominance in the fixed-lines based data service
(ADSL services), leaving a market share of less than 30% for the other 3 mobile virtual operators (MVOs) to compete
on. However, currently the 3 MVOs capture the mobile-data competition for themselves with Vodafone acquiring the
largest share.
Recent Regulations … Taking the Industry by Storm
Contemplating the telecom scene recent past, leads to an ambiguous outlook, driven by 2014`s regulatory reforms.
The regulations amendments were assumed to be implemented for enhancing competition and industry dynamics.
The reforms were scheduled to come in action phase by phase with the 1
st
taking place in 2014, which did not till
date. The delay can be interpreted into many signals.
In December 2013, the National Telecommunication Regulatory Authority`s (NTRA) Board of Directors’ decided to
launch regulatory procedures to issue a unified license for the 4 telecom operating companies in the Egyptian market.
In April 2014, the framework was announced by the MCIT and NTRA, through which the 4 telecom operators were to
be offered the right to provide the full spectrum of telecom services. The rationale behind the unified license was to
enhance competition, as well as creating a national entity that permits investment and developing basic
infrastructure, being the core for developing telecommunication services. The unified license was composed of 3
phases to be applied consecutively.
Phase I: Integrating telecommunication services and creating a unified new entity for the sole purpose of
developing basic infrastructure – Implementation was planned by end of 2014-2015
The 1
st
phase was meant to provide TE with the right to become the 4
th
mobile operator through a license worth EGP
2.5bn. While granting the other 3 mobile operators (Vodafone, Orange, and Eitsalat Egypt) licenses to provide fixed-
line services through TE`s infrastructure, for EGP 100mn per operator. The regulations allowed TE to launch its mobile
operations through the 3 operators' networks until the issuance of 4
th
operating license for ETEL.
Phase 1 also included a plan for creating a national entity for establishing and leasing the basic infrastructure for
telecommunication networks, with granting rights to the 4 companies to share in this entity along with the State
overseeing the financial management. The purpose of the unified entity was to allow the creation of basic
infrastructure on the basis of cost-sharing and fast implementation in building and developing a nationwide
infrastructure that covers all areas, thereby improving quality of service and delivering it in higher speeds and lower
costs.
Phase II: Addressing the International Gateway Services (IGW) – planned implementation by June 2016
The 2
nd
phase stated that Vodafone and Mobinil (currently Orange) should pay EGP 1.8bn and EGP 1.5bn respectively,
to have access to TE`s legacy copper network in order to offer IGW services, with annual revenue share payment of
6% from both operators up from the current 2.4% to regulatory authorities. Etisalat Egypt, was to be exempted from
the lump sum payment as it is the only operator with IGW license beside TE; however, its license is only limited to its
customers and should then be paying EGP 8/subscriber for voice services to fixed and mobile phones. The 4G
spectrum license was announced to be provided for the 4 operators by June 2016.
Phase III: The last phase of the proposed regulatory agenda was for NTRA to unify all regulatory and financial
commitments for the 4 companies.

7
MARCH, 2016
Following the regulations … A storm of disputes rose … And TE`s witnessed a Managerial and Board
shake-up
In May 2014, TE`s BoD approved indulging in the Mobile-business and delegated former CEO Mohamed EL-Nawawy
to finalize terms and negotiations with concerned parties. The cabinet approved the regulatory reforms in September
2014, and mandated TE to divest its 44.95% stake held in Vodafone Egypt (VFE) before the end of December 2015.
The government has setup a committee comprised of representatives from the ministries of Telecommunication,
Finance and Commerce to suggest best ways for TE`s exit.
The 1
st
dispute came from the 3 operators, when VFE threatened seeking international arbitration if the Egyptian
government approved the rule giving TE access to the country`s mobile networks to launch its mobile service through.
The 3 mobile carriers have complained that the unified license only gives them limited access to TE`s older copper
network, rather than its higher-speed fiber optics currently under deployment which offers faster broadband speeds.
And the option for the fiber optics network usage was whether to rent/lease usage of fiber cables from TE or to
establish their own through the unified proposed infrastructure company.
The 2
nd
dispute rose on the back of TE`s stake in Vodafone, when VFE expressed interest in buying TE`s stake in the
company following the regulations; while, TE`s management stated earlier that the company is not obliged to exit its
JV with VFE and it may even bid to buy a controlling stake in the company when the 4
th
license is issued. A matter
indicated from TE`s Article 3 amendment in February 2014.
Due to such disputes between TE and the 3 mobile operators; putting TE in the risk of arbitrations. The
implementation of the regulations did not meet any deadline for application. Neither did TE exit its stake in VFE as
mandated by the government, nor did TE obtain its MVNO license, and up to this moment the mobile operators did
not file for obtaining the license for using TE`s copper infrastructure. Such disputes add skepticism to the scene, and
disrupt beliefs in TE becoming a full telecom services provider in the near term, unless all disputes are resolved.
TE`s former CEO El-Nawawy was known for his strong bias towards obtaining the mobile license. As a consequence
VFE halted dividends` payouts since 2013 till current time, as a mean for stressing TE to sell its stake or being able to
negotiate better terms. Following the escalation of VFE and TE`s dispute, a major managerial and BoD change in May
2015 took place for TE, relieving El-Nawawy from his duties and appointing current CEO Ossama Yassin.
The change in TE`s management leads to beliefs in a strategy change. Whether concerning TE`s stake in VFE, TE`s
joining the mobile operations, or liberalizing IGW services through the new unified. So in order to be in proximity
from reality, we assume 3 scenarios, from which one is to take place or even a transition from one to another over
the medium term.

8
MARCH, 2016
SOURCE: TE, PRIME SOURCE: TE, PRIME
SOURCE: TE, PRIME
HISTORICAL FIXED VOICE OPERATIONS … DEPENDENCY ON HH REMAINS THE MAIN THEME … 2015
Operational Outlook
Over the coming partitions, we discuss 3 different operational scenarios, but we assume the first scenario as our base
case.
Base Case … No structural changes in operations over medium term …
(Fair Value - EGP 11.56/share)
We choose our base case scenario to represent the continuation of the company`s business operations as it is, with
no business segments additions "Mobile operations or restructuring to take place "IGW liberalization".
1- Retail Business … a play on Data-returns to offset fixed voice cannibalization
This business division contributed to TE`s 2015 revenues by around 45% in 2015, included revenues from home
services provided beside those provided to enterprises.
a) Fixed Voice Services
TE is Egypt`s fixed voice services monopolistic operator, providing services through its nationwide
infrastructure. The fixed voice business outlook is not shiny being under heavy cannibalization over the
past years from mobile operations. Such substitution by mobiles is due to their mobility and
technologically advanced features.
Fixed lines subscriptions have been falling from year to year, however, the downward trend was
reversed in 2015 as a result of TE`s efforts and campaigns in introducing its new fiber optics
infrastructure connection replacing the legacy copper cables. The replacement enhances connectivity
and quality of calls. An aspect that may have assisted in a net fixed lines additions of 215k in 2015,
divided between 3.7% increase in house-holds fixed lines demand and 1.9% increase from enterprises.
The cumulative increase in 2015 softened the past 5-periods negative compounded decline from 2010-
to-2015 to stand at -7.4%.
Over the past years the average revenue per home-line subscriber kept on falling; impacted by
mandatory price cuts from TE, in efforts to minimize or slowdown the mobiles-cannibalization effect
on home lines. However, TE had more pricing ability over Enterprise users that find difficulty in
replacing their land-lines due to the urgency of conducting internal and outbound conference calls.
Fixed Voice Revenues 2011 2012 2013 2014 2015 CAGR
HH EGP ARPU/month 27 27 26 25 24 -3.3%
Change -4.9% 0.3% -4.7% -2.1% -6.6%
ES EGP ARPU/month 81 83 85 104 97 4.4%
Change -12.3% 1.7% 2.6% 22.3% -7.1%
HH Revenues – EGP mn 2,436 2,136 1,861 1,676 1,530 -11.0%
Change -17.0% -12.3% -12.9% -10.0% -8.7%
ES Revenues – EGP mn 1098.0 1082.3 1093.0 1316.0 1229.0 2.9%
Change -19.7% -1.4% 1.0% 20.4% -6.6%
HH Contribution 68.9% 66.4% 63.0% 56.0% 55.5%
ES Contribution 31.1% 33.6% 37.0% 44.0% 44.5%
8,130
6,840 6,240 5,720 5,280 5,475
1,152
1,094
1,083
1,060
1,050 1,070
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
-
2,000
4,000
6,000
8,000
10,000
2010 2011 2012 2013 2014 2015
Household Users - `000 Enterprise Users - `000
HH Change Enterprise Change
83.7%
16.3%
HH Contribution
Enterprises Contribution

9
MARCH, 2016
A DOWNTREND IN HH AND A SLIGHT UPWARD FOR EU … SLIGHTLY MODIFYING CONTRIBUTION BY 2020
SOURCE: TE, PRIME
TE`s fiber optics project implementation with the purpose of reaching 6mn homes by 2016 will have a
slight positive impact on slowing down the cannibalization of home lines. We believe home fixed lines
would just come above the 5k mark by 2020 to record a compounded decline of 1.6% from 2015. To
maintain the 5k-range the company would have to annually cut prices, in order to grab the appetite of
new clients partially offsetting existing clients’ exits. As the ARPU earned by TE from home lines was
slightly higher than that of the mobile market average in 2015. We do not account for new marriages
and housing demand in our forecast for home lines as apparently that was not the equation reflected
in historical performance. Instead, we anticipate efforts to maintain existing client base along with
offering the projected lower priced lines along with the company`s other products.
As for enterprise fixed-lines, we see a low growth rate over the period; driven by additions from newly
established companies. Mainly SMEs that might fully depend on land lines as their communication
mean due to the unavailability of more expensive software enjoyed by larger corporations. However,
we expect TE to cut its pricing for enterprises as well, to motivate additions over short term to hover
around an average of EGP 83.3/month by the end of our horizon.
The fixed lines business is already in its declining stage, as new means of communication show up
every morning, through devices powered by the internet. So the price cuts we see whether for homes
or enterprises are believed to be followed by the company to extend the declining stage of such
business over a longer as possible time period. However, if prices are to be maintained at current
levels, loss in lines would be moving on an accelerating basis exceeding our expectations. And that
would then signal the company`s strategy in trying to recognize early revenues on the expense of
securing the segment`s future.
Fixed Voice Revenues 2015 2016F 2017F 2018F 2019F 2020F CAGR
HH ARPU/month 23.71 22.29 21.17 20.33 19.72 19.12 -4.2%
Change -6.6% -6.0% -5.0% -4.0% -3.0% -3.0%
ES ARPU/month 96.62 90.82 86.28 84.56 83.29 83.29 -2.9%
Change -7.1% -6.0% -5.0% -2.0% -1.5% 0.0%
HH Revenues – mn 1,530.00 1,445.97 1,342.72 1,266.42 1,213.05 1,164.89 -5.3%
Change -8.7% -5.5% -7.1% -5.7% -4.2% -4.0%
ES Revenues – mn 1,229.00 1,169.07 1,116.17 1,102.06 1,096.39 1,107.35 -2.1%
Change -6.6% -4.9% -4.5% -1.3% -0.5% 1.0%
Total Fixed Revenues 2,759.00 2,615.05 2,458.90 2,368.48 2,309.44 2,272.24 -3.8%
Change -7.8% -5.2% -6.0% -3.7% -2.5% -1.6%
HH Contribution 55.5% 55.3% 54.6% 53.5% 52.5% 51.3%
ES Contribution 44.5% 44.7% 45.4% 46.5% 47.5% 48.7%
5,338 5,231 5,153 5,101 5,050
1,075 1,081 1,092 1,102 1,113
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2016F 2017F 2018F 2019F 2020F
81.9%
18.1%
HH Contribution
Enterprises
Contribution

10
MARCH, 2016
SOURCE: MCIT, TE, PRIME SOURCE: MCIT, TE, PRIME
MOBILE INTERNET & ADSL WERE …(CHANGE-RHS) THE MAIN DRIVERS BEHIND INTERNET USERS INCREASE
b) Broadband … TE`s success story
The broadband business in Egypt has yet much to offer, as the country is under-penetrated in terms of
internet usage. In November 2015, the number of mobile, ADSL and USB modem internet users
reached 32.9mn, equivalent to around 36.8% of Egypt`s population a figure we assume to have
increased to reach 33.2mn by the year end.
The low users-to-population ratio was mainly due the low computerization and personal computers
(PCs) penetration in Egypt, and higher prices for PCs. Individuals using computers reached 40.9% of
population as of September 2015, while the percentage of households using computers was 56.4% as
of 2014. Such ratios were mainly accounted for due to the fall in prices of PCs due to the introduction
of more advanced devices with higher mobility like smart phones and tablets. We are currently
witnessing the fastest pace of technological advancement with the leading companies competing over
new technologies being provided at more competitive prices to preserve their market shares. The
competition over new technologies and lower-priced devices will be in the benefit of growing and
developing nations like Egypt.
Internet users are the cumulative outcome of mobile internet, USB modem connection, leased lines
and ADSL broadband numbers. Mobile internet users have been increasing on the back of new
packages and offers from the 3 current operators, backing up the option of mobility and conducting
business while freely changing places. While USB modem is seen as declining use of internet being
replaced by the mobility of mobile internet, added to current consumer preferences for ADSL
broadband connectivity within residential premises due to higher speeds.
21.8 23.3 24.1 25.0 25.6
4.1 4.2 4.1 4.0 3.9
3.0 3.3 3.5 3.6 3.8
-10.0%
-5.0%
0.0%
5.0%
10.0%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
4Q2014 1Q2015 2Q2015 3Q2015 4Q2015E
Mobile Internet Users - mn USB Modem Users - mn
ADSL - mn Mob Change
USB Change ADSL Change
28.8
30.8 31.7 32.7 33.2
75.5% 75.7% 76.0% 76.6% 77.0%
14.0% 13.7% 13.0% 12.2% 11.6%
10.5% 10.6% 11.1% 11.1% 11.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
4Q2014 1Q2015 2Q2015 3Q2015 4Q2015E
Internet Users Mobile % USB % ADSL %

11
MARCH, 2016
SOURCE: CAPMAS, PRIME SOURCE: MCIT, PRIME
A GROWING POPULATION & HH NUMBERS HAND IN HAND … WILL BE ADSL UPWARD DRIVER …
SOURCE: MCIT, PRIME
Telecom Egypt … ADSL broadband market Leader
As of 2014 end, Egypt`s population reached 87.96mn, we expect population to reach 101.96mn by
2020 growing at a CAGR of 2.49%. The number of households stood at 20.9mn families in 2014 and is
seen growing to 24.3mn by 2020 in line with population growth. Such large base of households
provides broadband services a wide room to grow. BB penetration is still far below the number of
households, as up to this moment certain families still depend on dial-up connections, while others do
not enjoy the luxury of internet access.
Over our forecast horizon, we believe mobile, ADSL BB, and USB modem internet users to grow at a
CAGR of 12.96% from 2014-to-2020 reaching around 60mn internet users, equivalent to an internet
penetration ratio of 58.8% up from 32.8% in 2014 and around 37% estimated in 2015. The growth in
internet users' will be driven by the mobility of mobile internet and higher connectivity speed and
quality of ADSL BB. In 2014, 10.5% of internet users had access through ADSL; we believe that the
percentage of users dependent on ADSL will be increasing year on year, reaching 13% on conservative
basis by 2020, equivalent to 7.8mn ADSL. ADSL forecasted CAGR of 17.05% over 2014-2020, is seen
reasonable given the current under-penetration, represented by only 3.73mn users in November 2015,
which grew by 23.14% over 2014`s 3.03mn users.
TE is believed to have acquired a market share of around 74.2% in 2015E from the ADSL market. The
company was able to record over 8 percentage points` increase in market share in only 1-year. The
jump was of no surprise and is believed to proceed on an upward trend but at lower magnitudes; due
to the company`s fiber optics project that introduced new speed limits and larger
downloading/uploading capacities that was not available for Egypt`s internet users` before. We believe
the upcoming increase in ADSL broadband contribution to total internet users will be driven from USB
substitution besides the increase in internet users.
We followed a top-down approach in estimating the number of ADSL BB connections up to 2020,
from which we were able to identify the possible market share to be acquired by TE due to its huge
fiber optics` project that puts the company at an advantage over all other players. Although, we were
conservative in anticipating the increases in TE`s market share, to account for other players responding
through a pricing war to maintain their clientele. Still, we see TE enjoying the upper hand in enhancing
its market dominance as ongoing operational costs for such business line is considered relatively low
after the project`s CAPEX is fulfilled; while other players will still face the burden of interconnection
fees paid to TE for transmitting their data capacities using the company`s infrastructure networks.
ADSL BB - `000 2014 2015E 2016F 2017F 2018F 2019F 2020F CAGR
TE 1,977.0 2,809.0 3,490.2 4,135.8 4,888.2 5,664.2 6,117.4 20.7%
Others 1,053.0 976.0 1,132.6 1,270.5 1,419.2 1,551.4 1,675.5 8.0%
Total 3,030.0 3,785.0 4,622.8 5,406.3 6,307.3 7,215.6 7,792.8 17.1%
TE`s Market share 65.2% 74.2% 75.5% 76.5% 77.5% 78.5% 78.5%
Others Market Share 34.8% 25.8% 24.5% 23.5% 22.5% 21.5% 21.5%
ADSL BB Users - % of Population 3.4% 4.2% 5.0% 5.7% 6.5% 7.3% 7.6%
ADSL BB Users - % of Households 14.5% 17.6% 21.0% 24.0% 27.3% 30.5% 32.1%
3.0 3.8 4.6 5.4 6.3 7.2 7.8
28.8
33.2
39.2
45.1
50.5
55.5
59.9
10.5%
11.4%
11.8% 12.0%
12.5%
13.0% 13.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2014 2015E 2016F 2017F 2018F 2019F 2020F
ADSL BB - `000 Internet Users - 000
% of Internet Users
88.0 90.1 92.4 94.7 97.0 99.5 102.0
20.9 21.5 22.0 22.5 23.1 23.7 24.3
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2014 2015E 2016F 2017F 2018F 2019F 2020F
Egypt`s Population No. of HH - families

12
MARCH, 2016
SOURCE: TE, PRIME
TE`S BB; AN IMPRESSIVE GROWTH … (CHANGE-RHS) WITH EU CONTRIBUTION SLIGHTLY INCHING UP …
TE ADSL subscribers base is divided between households and enterprises, with the households
historically representing the vast majority of clientele. In 2015, TE reported a massive growth of 41.5%
in from household clients; although BB price cuts took place in 2015. However, the price cuts were so
beneficial to the BB business revenue stream for TE. As according to news, a proposal was made by the
MCIT responding to clients` complaints about the relatively high BB prices in Egypt in comparison with
MENA peers. The proposal came to set the 1Mbps capacity BB as the minimum available BB capacity,
and for its price to be slowed down to EGP 50/month; nearly a 50% cut, while the 2Mbps capacity to
be set around EGP 100/EGP. The pricing differed accordingly at a permitted range between all 4 BB
operators. A matter taking the market by another dispute over TE`s charged connection fees for
operators.
Although the prices were slashed, an effect of only 1% cut was apparent on the company`s
ARPU/month. As we believe the majority of customers upgraded their subscriptions to higher
capacities of 2Mbps+ that became more affordable or nearly equivalent to what they used to pay for at
lower speeds. On the revenue stream effect, price easing were beneficial as it grabbed a bulk of new
net additions; incentivized by the appealing prices along with the better connection qualities provided
by the fiber optics connectivity.
Over the horizon we anticipate the company`s households clients to grow at a CAGR of 16.7% from
2015-to-2020 reaching 5,719.7k users, while enterprise users to grow at a CAGR of 19.2% reaching
397.6k users. We believe competition is stiffer over HH BB new additions as other operators are
currently marketing wireless BB connections which would grab clients' attention. However, as TE plans
to connect more homes and enterprises with its fiber optics` project by 2019; we believe our
projections might even be more conservative concerning the net new additions acquired by TE over
the medium term, after considering 2015`s impressive Jump.
From 2016 and ongoing, we anticipate low price reductions for HH BB replicating to an extent 2015`s
story, while we see more aggressive cuts for ES BB that to maintain the company`s dominance for such
segment. Contribution to revenues from both HH and ES BB are almost constant according to our
numbers, driven by simultaneous growth for both segments; taking the broadband weighted CAGR to
15.9% by 2020.
ADSL BB Revenues 2015 2016F 2017F 2018F 2019F 2020F CAGR
HH ARPU/month 64.2 63.6 63.0 62.3 62.3 62.3 -0.6%
Change -0.9% -1.0% -1.0% -1.0% 0.0% 0.0%
ES ARPU/month 297.0 273.21 265.02 259.72 257.12 254.55 -3.0%
Change -20.2% -8.0% -3.0% -2.0% -1.0% -1.0%
HH Revenues – mn 2,038.0 2,503.5 2,921.4 3,418.3 3,961.0 4,277.8 16.0%
Change 40.3% 22.8% 16.7% 17.0% 15.9% 8.0%
ES Revenues – mn 588.0 686.6 854.9 990.2 1,136.0 1,214.6 15.6%
Change 20.7% 16.8% 24.5% 15.8% 14.7% 6.9%
Total BB Revenues 2,626.0 3,190.1 3,776.3 4,408.5 5,096.9 5,492.4 15.9%
Change 35.4% 21.5% 18.4% 16.7% 15.6% 7.8%
HH Contribution 77.6% 78.5% 77.4% 77.5% 77.7% 77.9%
ES Contribution 22.4% 21.5% 22.6% 22.5% 22.3% 22.1%
1,868.0
2,644.0
3,280.8
3,867.0
4,570.5
5,296.1
5,719.7
109.0 165.0 209.4 268.8 317.7 368.2 397.6
-5%
5%
15%
25%
35%
45%
55%
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
2014 2015 2016F 2017F 2018F 2019F 2020F
94.5% 94.1% 94.0% 93.5% 93.5% 93.5% 93.5%
5.5% 5.9% 6.0% 6.5% 6.5% 6.5% 6.5%
2.2%
3.1% 3.8% 4.4% 5.0%
5.7% 6.0%
8.9%
12.3%
14.9%
17.2%
19.8%
22.4%
23.6%
0%
5%
10%
15%
20%
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014 2015 2016F 2017F 2018F 2019F 2020F
HH -% of TE`s Users - LHS ES -% of TE`s Users - LHS
TE`s Users - to - population TE`s HH Users - to - HH

13
MARCH, 2016
SOURCE: TE, PRIME
c) Retail Division Aggregation
The main theme for TE`s retail division revenue stream in the upcoming period is apparent in the
below table, where we see total revenues growing at 7.6% over our forecast period. We see the
increase in total revenues to be mainly supported by the broadband segment anticipated performance,
offsetting further deteriorations in fixed voice revenue stream. As we see data contribution to
revenues increase from 48.8% in 2015 to reach 70.7% by 2020; due to a CAGR of 15.9% offsetting in
time the fixed voice segment is projected to record a compounded decline in revenues of 3.8%.
Total Retail Revenues - Voice & BB 2015 2016F 2017F 2018F 2019F 2020F CAGR
Total Revenues - EGP mn 5,385.0 5805.2 6235.2 6777.0 7406.4 7764.7 7.6%
Change 9.2% 7.8% 7.4% 8.7% 9.3% 4.8%
HH - Fixed Rev - EGP mn 1,530.0 1,446.0 1,342.7 1,266.4 1,213.1 1,164.9 -5.3%
Change -8.7% -5.5% -7.1% -5.7% -4.2% -4.0%
% of Total Revenues 28.4% 24.9% 21.5% 18.7% 16.4% 15.0%
ES - Fixed Rev - EGP mn 1,229.0 1,169.1 1,116.2 1,102.1 1,096.4 1,107.3 -2.1%
Change -6.6% -4.9% -4.5% -1.3% -0.5% 1.0%
Total Fixed Voice Revenues 2,759.0 2,615.0 2,458.9 2,368.5 2,309.4 2,272.2 -3.8%
Change -7.8% -5.2% -6.0% -3.7% -2.5% -1.6%
HH - BB Rev - EGP mn 2,038.0 2,503.5 2,921.4 3,418.3 3,961.0 4,277.8 16.0%
Change 40.3% 22.8% 16.7% 17.0% 15.9% 8.0%
ES - BB Rev - EGP mn 588.0 686.6 854.9 990.2 1,136.0 1,214.6 15.6%
Change 20.7% 16.8% 24.5% 15.8% 14.7% 6.9%
Change 35.4% 21.5% 18.4% 16.7% 15.6% 7.8%
Voice Contribution 51.2% 45.0% 39.4% 34.9% 31.2% 29.3%
Data Contribution 48.8% 55.0% 60.6% 65.1% 68.8% 70.7%

14
MARCH, 2016
SOURCE: TE, PRIME
2- Wholesale Division … The old school play
Historically, Wholesale was the major division in revenue contribution for TE, benefiting from domestic
transmission services for MNOs, strong growth in international traffic, and high IC&N revenue driven
by commissioning new sub-marine cable projects.
a) Domestic Wholesale Business Unit (DW BU)
The DW BU incorporates revenues from infrastructure leasing, as well as internet data transfer for
mobile companies and internet service providers (ISPs). Mobile network operators currently use TE`s
extensive fiber based network for transmission services. The full penetration for mobile market and
technology has led to an increase in bandwidth (the speed used for an amount of data transmitted
over a network connection between devices) and transmission demand. TE owns an extensive
infrastructure network extending over thousands of Kilometers all over Egypt, a network that the
company has consistently been after enlarging and raising its capacity.
Revenues from the DW BU comes from several activities; mainly domestic and international
transmission. Through domestic transmission, TE carries MNOs and ISPs backhaul traffic (links between
core or backbone networks and sub-networks). TE enjoys monopoly over backhaul capacities. Such
segment is anticipated to move along growth in mobile voice and data beside fixed BB services
provided by other operators as well. International Transmission (Outbound) services takes place
specifically for International Long Distance (ILD) services mainly from VFE and Orange capitalizing on
TE`s IGW License. Etisalat enjoys its own IGW through which it operates outbound; however, it is
exclusive to its clientele.
TE renewed its agreement with VFE and Orange in January 2015, as the old one expired by the end of
2014. The new signed long term agreements were to provide the 2 MNOs with both domestic and
international voice and data transmissions for a total value of about EGP 15bn. Out of the EGP 15bn,
EGP 3bn are for infrastructure transmission services, valid for 3 years for VFE and 5 years for Orange.
Beside EGP 12bn for international communication services, valid for 4 years for both operator; and
includes a right-to-terminate for both operators in case they receive own IGW licenses. The different
parties agreed that TE would provide discounts through this agreement based on the transmitted
capacities.
However, due to such agreement we see more pressures on profit margins, as TE did not conduct an
equivalent deal for discounting interconnection fees incurred by the company. In addition to that,
ARPUs for transmitting voice and data services domestically and internationally were already on a
downtrend. Added to a very crucial aspect rapidly developing, the widespread use of applications for
conducting voice and video calls through established internet connections. This enables a onetime
pilling for end users through their ordinary data subscription, missing on the voice calls conducted
through such applications; conducted almost for free or on a pro-rate basis of data subscription charge
may worth much lower than through voice transmission channels.
For such reasons, we do not deeply believe in new dynamics for such business unit accounting for
impressive growth over the horizon. Instead, we see domestic inbound slowing down to grow modestly
thereafter. We think international outbound will continue its downtrend on the back of technological
innovation and economic status for individuals; beside tourists` arrivals decline.
Domestic Wholesale Revenues 2015 2016F 2017F 2018F 2019F 2020F CAGR
Domestic Transmission - EGP mn 2,142.0 2,249.1 2,294.1 2,340.0 2,386.8 2,434.5 2.6%
Change 17.7% 5.0% 2.0% 2.0% 2.0% 2.0%
International Outbound - EGP mn 784.0 705.6 649.2 616.7 585.9 556.6 -6.6%
Change -11.2% -10.0% -8.0% -5.0% -5.0% -5.0%
Total DW BU - EGP mn 2,926.0 2,954.7 2,943.2 2,956.7 2,972.6 2,991.1 0.4%
Change 8.3% 1.0% -0.4% 0.5% 0.5% 0.6%
D-Transmission Contribution 73.2% 76.1% 77.9% 79.1% 80.3% 81.4%
Inter-Outbound Contribution 26.8% 23.9% 22.1% 20.9% 19.7% 18.6%
.

15
MARCH, 2016
SOURCE: PRIME SOURCE: PRIME
SOURCE: TE, PRIME
EGP VS. USD TREND … (CHANGE-RHS) ALONG WITH TOURISM ADVERSE SITUATION; INJURES ICA …
b) International Carriers Affairs (ICA) … An Era of growth ended by 2013
This segment is the main international voice operations supporter for TE; through which TE leverage its
IGW license, carrying VFE and Orange inbounding transmission of voice. Thanks to TE`s bilateral
relations with international carriers and companies. TE develops and grows international and regional
hub business, through developing adjacent voice services (Home Country Direct (HCD) – International
Free-phone Service (ITFS)). Through which the company can directly connect callers from different
countries together accessing TE`s network, or resident callers with other carriers or companies.
In 2015, ICA revenues dropped by 2.9% y-o-y to stand at EGP 2,977mn; such drop was mainly caused
by a 15.7% y-o-y drop in tourism arrivals causing a drop in international traffic demand. However, the
effect from EGP devaluation of c. 6% seemed to have had a positive flattening impact on revenues`
declines. The devaluation positive impact on ICA revenues was apparent through preventing the 14.8%
drop in incoming minutes in 2015, widening from a drop of 10.3% in 2014 to be passed to revenues in
full magnitude.
Going forward we believe the ICA revenues downward trend will not be reversed over our horizon. In
2016, we anticipate the most aggressive drop ever in tourism arrivals with a magnitude of 45%,
irreversible by the recent EGP 14.3% devaluation but slightly smoothed down. We believe tourism
arrivals to start showing y-o-y enhancements from 2017 and onwards. However, this segment is
currently susceptible to the declining international traffic driven by callers’ current preference in
shifting to broadband powered applications for international calls, that is currently available for free or
at very low cost. We see all ICA operators suffering from the cannibalization from Over-The-Top (OTT)
applications worldwide. We believe 2019 and 2020, will witness the most aggressive declines although
tourists` arrivals are projected to reach 10.15mn and 12.7mn respectively per our numbers. But OTT
cannibalization impact on ICA traffic will be strengthened by our projections for 2 consecutive
appreciations of 2% in EGP during 2019 and 2020. What strengthens our view for substitution coming
from OTT applications is that the already occurring declines are to an extent a replication for an earlier
story when an influx of Saudi Arabia SIM cards privileged through Saudi telecom operators by free
international roaming services took place in late 2013; hurting TE. And regulators had to intervene to
request the service halt.
ICA Wholesale BU Revenues 2015 2016F 2017F 2018F 2019F 2020F CAGR
ICA Inbound - EGP mn 2,977.4 2,828.5 2,743.7 2,606.5 2,398.0 2,206.1 -5.8%
Change -2.9% -5.0% -3.0% -5.0% -8.0% -8.0%
7.30
7.74
8.72
8.95 8.95 8.77
8.60
-2.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
0.0
2.0
4.0
6.0
8.0
10.0
2014 2015 2016F 2017F 2018F 2019F 2020F
EGP/USD Change
8,330
4,580
6,496
8,120
10,150
12,688
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2015 2016F 2017F 2018F 2019F 2020F
Tourists` Arrivals Change

16
MARCH, 2016
SOURCE: TE, PRIME
c) International Customers & Network (IC&N)
This segment benefits from Egypt`s geographic location, being at the center linking Africa, Asia and
Europe; through connecting the Red and Mediterranean seas. TE commissions new cables` projects in
cooperation with global partners, and then offers support and maintenance through its ancillary
services provided, mainly operating and maintenance (O&M). TE also sells and lease capacity passage
over cables in which the company has ownership, carrying transmission from and to other operators;
currently through TE`s 2 cable routes and back-up lines.
In 2015, IC&N revenues dropped significantly by 41.5% reaching EGP 807.2mn. The decline came due
to an exceptional performance in 2014, when TE conducted 2 non recurring deals for cables`
installation worth EGP 881mn; namely, SEA-ME-WE-5 and Asia-Africa-Europe (AAE)-1 that was one of
the largest cables systems ever launched employing 100Gbps with a design capacity of 40 terabits and
extending over 25k Km. Normalizing the impact of such deals, we would have seen revenues growing
by 52.3%, on the back of an extraordinary performance from the capacity sales segment increasing by
more than 2-folds. While ancillary and International customer services` revenues cumulative change
was flat.
Over the upcoming horizon, we chose not to project revenues coming from new cables installation by
TE, however, we used 2015`s revenues as a base to grow on which at perpetual growth anticipating a
replication of minor cables` annual additions or extensions. We almost followed the same
methodology for other IC&N segments, but considering slight upward adjustments over perpetual
growth rate, driven from mobile and broadband global transmitting capacities. However, as we know
that Egypt`s mobile market penetration rate is relatively lower than MENA and European peers;
meaning that most countries transmitting capacities are already characterized by over-penetrations. So
the growing trend we see is primarily backed by broadband usage growth. And here comes an upward
shift in Ancillary services, growing due to maintenance required for exhausting existing cables; beside
global expansions in bandwidth on back of new generation-technologies introduced, as talks about 5G
being presented in the near term from USA is already taking place.
IC&N Revenues - EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Cable Projects 47.0 47.9 48.9 49.9 50.9 51.9 2.0%
Change -94.7% 2.0% 2.0% 2.0% 2.0% 2.0%
% of Revenues 5.8% 5.8% 5.8% 5.7% 5.7% 5.7%
Ancillary Services (O&M) 165.0 170.0 175.0 182.1 188.4 192.2 3.1%
Change 2.5% 3.0% 3.0% 4.0% 3.5% 2.0%
% of Revenues 20.4% 20.6% 20.6% 20.8% 21.0% 21.0%
Capacity Sales 467.0 476.3 490.6 507.8 518.0 528.3 2.5%
Change 125.6% 2.0% 3.0% 3.5% 2.0% 2.0%
% of Revenues 57.9% 57.8% 57.9% 58.0% 57.8% 57.8%
International Customer Support 128.0 130.6 133.2 135.8 138.6 141.3 2.0%
Change -1.5% 2.0% 2.0% 2.0% 2.0% 2.0%
% of Revenues 15.9% 15.8% 15.7% 15.5% 15.5% 15.5%
Total IC& N Revenues - EGP mn 807.0 824.8 847.7 875.6 895.8 913.7 2.5%
Change -41.5% 2.2% 2.8% 3.3% 2.3% 2.0%

17
MARCH, 2016
SOURCE: TE, PRIME
3- TE Aggregate Revenues … Contribution shift to Retail … Thanks to BB
Over the horizon, the wholesale performance visualized, says that we are about to witness a
transitional stage for the business, shifting from maturity to the declining stage in its economic cycle.
As we believe the developed world has already reached its full penetration for mobile uses. While the
story remaining to tell, is all about broadband and cables installation. We chose not to set assumptions
for further whole-cables` projects implementation as we lack visibility for such area. However, we
believe good news might show up in TE`s press releases, in line with mega-replenishment projects that
take place every now and then especially due to the fast growing population in Africa and Asia. The
broadband story, is impressive; as all the technologies showing up every day ends up adding to this line
in TE`s revenues. Although, our figures says that we are not very optimistic about wholesale medium-
term outlook; we believe that such downtrend in wholesale will largely become captured by the BB
business segment.
Total Revenues – EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Retail Revenues
Change -7.8% -5.2% -6.0% -3.7% -2.5% -1.6%
Change 35.4% 21.5% 18.4% 16.7% 15.6% 7.8%
Other Revenues - EU BU 89.0 90.8 92.6 94.4 96.3 98.3 2.0%
Change 17.1% 2.0% 2.0% 2.0% 2.0% 2.0%
Total Retail Revenues - EGP mn 5,474.0 5,895.9 6,327.8 6,871.5 7,502.7 7,862.9 7.5%
Change 9.3% 7.7% 7.3% 8.6% 9.2% 4.8%
Contribution to Total Revenues 44.9% 47.2% 49.2% 51.6% 54.5% 56.3%
Wholesale Revenues
Domestic BU revenues 2,926.0 2,954.7 2,943.2 2,956.7 2,972.6 2,991.1 0.4%
Change 8.3% 1.0% -0.4% 0.5% 0.5% 0.6%
ICA Revenues 2,977.4 2,828.5 2,743.7 2,606.5 2,398.0 2,206.1 -5.8%
Change -2.9% -5.0% -3.0% -5.0% -8.0% -8.0%
IC&N Revenues 807.0 824.8 847.7 875.6 895.8 913.7 2.5%
Change -41.5% 2.2% 2.8% 3.3% 2.3% 2.0%
Total Retail Revenues - EGP mn 6,710.4 6,608.0 6,534.6 6,438.7 6,266.4 6,110.9 -1.9%
Change -6.1% -1.5% -1.1% -1.5% -2.7% -2.5%
Total Revenues 12,184.4 12,503.9 12,862.4 13,310.1 13,769.1 13,973.8 2.8%
Change 0.2% 2.6% 2.9% 3.5% 3.4% 1.5%
Contribution to Revenues
Voice 22.6% 20.9% 19.1% 17.8% 16.8% 16.3%
BB 21.6% 25.5% 29.4% 33.1% 37.0% 39.3%
Other Revenues - EU BU 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
Domestic BU 24.0% 23.6% 22.9% 22.2% 21.6% 21.4%
ICA BU 24.4% 22.6% 21.3% 19.6% 17.4% 15.8%
IC&N BU 6.6% 6.6% 6.6% 6.6% 6.5% 6.5%

18
MARCH, 2016
SOURCE: TE, PRIME
SOURCE: TE, PRIME
SOURCE: TE, PRIME
Operational Costs … GPM under pressure as overheads continues upward
movement
On a CAGR basis we see operating costs growing by 4.1% through 2015/2020 duration. As
interconnection costs are seen growing driven by VFE and Orange EGP 15bn renewal deal. Added to
TE`s other commercial agreements. We also see fuel costs over the horizon increasing by 2.3% driven
by hike in prices, indicated by the government expected austerity measures to be announced by
FY2016/17. Other costs are seen moving upward in line with revenues; required for maintaining the
company infrastructure and different businesses.
Operating Cash Costs – EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Interconnection Costs 2404.5 2,500.8 2,636.8 2,795.1 2,960.4 3,004.4 4.60%
Change 2.30% 4.00% 5.40% 6.00% 5.90% 1.50%
Fuel 270.4 295.2 324.3 319.4 310.8 303.0 2.30%
Change 55.40% 9.20% 9.90% -1.50% -2.70% -2.50%
Spare Parts 82.8 85.0 87.4 90.5 93.6 95 2.80%
Change 6.30% 2.60% 2.90% 3.50% 3.40% 1.50%
Maintenance 310.5 318.6 327.7 339.1 350.8 356 2.80%
Change 8.40% 2.60% 2.90% 3.50% 3.40% 1.50%
Leased Circuits & Satellite Subscriptions 137.8 141.4 145.4 150.5 155.7 158 2.80%
Change 33.90% 2.60% 2.90% 3.50% 3.40% 1.50%
Total Operating Cash Costs 3,205.99 3,340.96 3,521.67 3,694.67 3,871.24 3,916.36 4.10%
Change 7.20% 4.20% 5.40% 4.90% 4.80% 1.20%
Other Operating Cash Costs represented 43% and 42% from total COGS in 2014 and 2015 respectively,
and are anticipated to proceed upward in contribution, to reach 44% by 2020. Mainly due to the huge
contribution from salaries and wages that grew by a range over 8% in 2013 and 2014. As TE has a
growing force currently estimated at 50k employees, engineers and technicians. Other costs are
related to TE`s licensing fees and increasing frequencies bandwidth, and the increasing social insurance
account.
Other Operating Cash Costs - EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Salaries & Wages 1,198.3 1,282.2 1,371.9 1,468.0 1,570.7 1,680.7 7.00%
Change -1.12% 7.00% 7.00% 7.00% 7.00% 7.00%
Other Operating Costs 1,115.1 1,170.8 1,229.3 1,290.8 1,355.4 1,423.1 5.00%
Change 5.53% 5.00% 5.00% 5.00% 5.00% 5.00%
Total Other Op. Costs 2,313.34 2,452.97 2,601.26 2,758.77 2,926.06 3,103.78 6.05%
Change 1.98% 6.04% 6.05% 6.05% 6.06% 6.07%
In 2015, TE was able to capture a GPM of 54.7% excluding depreciation, declining from approximately
56.7% a year earlier. Signaling one of the maturity signs, as the company currently has several revenue
generating segments in maturity or declining, while licensing and interconnectivity costs, out of which
some agreements are fixed over certain time durations burden margins. By 2020, we see COGS to Sales
surpassing GPM for the first time, due to the high overhead costs historically growing faster than
revenue streams.
Aggregate Operational Costs - EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
COGS 5,519.3 5,793.9 6,122.9 6,453.4 6,797.3 7,020.1 4.93%
Change 4.95% 4.98% 5.68% 5.40% 5.33% 3.28%
Gross Profit 6,665.8 6,710.0 6,739.5 6,856.7 6,971.8 6,953.7 0.85%
Change -3.4% 0.7% 0.4% 1.7% 1.7% -0.3%
COGS/Sales 45.3% 46.3% 47.6% 48.5% 49.4% 50.2%
GPM 54.7% 53.7% 52.4% 51.5% 50.6% 49.8%

19
MARCH, 2016
CAPEX – TO – SALES – EGP MN …EXTENDED OVER 1-MORE PERIOD NOT TO EXHAUST CASH
SOURCE: TE, PRIME
SOURCE: TE, PRIME
CAPEX … Fiber Optics
TE has launched a massive project, years ago for upgrading its infrastructure network from the legacy
copper wires to fiber optics; characterized by superiority in bandwidth and speeds for transmitting
data. TE currently has a plan of reaching 6mn homes by 2016`s end. A matter that assist in maintaining
the company`s broadband accelerating penetration and prevent slashes in fixed voice users.
During TE`s 2015 results` conference call, management indicated the project`s fulfillment would take
place by 2019. TE`s management pointed out to a CAPEX to sales of 22-25%, which we believe that it
would be cash exhausting and would put TE away from its legacy being a cash rich operator. So we
assume the extension of the rollout for one more year to end up by 2020 instead of 2019 and trim
down the indicated CAPEX to Sales to 20% over 2016/2019 duration. We anticipate a 20% increase in
CAPEX in 2016, a matter of connecting 2.5mn homes and other institutions. Reaching 6mn users by
2016 would set households penetration at around 27%. The project has been a key in attracting new
subscribers along with the company`s pricing cuts applied in 2015, setting altogether superiority in the
market rally over BB.
SG&A … to continue pressuring EBITDA margin
We believe TE`s massive SG&A to continue pressures on margins on the back of high salaries and
wages required for BB marketing and penetration, beside the company`s structured incentive rewards
program and social insurance contribution and discounts allowed to MNOs.
SG&A - EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Salaries & Wages 1,992.2 2,100.8 2,213.3 2,337.9 2,469.9 2,591.9 5.40%
Change 5.33% 5.45% 5.35% 5.63% 5.65% 4.94%
Other SG&A 1,236.9 1,269.1 1,305.5 1,350.9 1,397.5 1,418.3 2.77%
Change 5.59% 2.60% 2.87% 3.48% 3.45% 1.49%
Total SG&A 3,229.14 3,369.94 3,518.76 3,688.80 3,867.36 4,010.17 4.43%
Change 5.43% 4.36% 4.42% 4.83% 4.84% 3.69%
% of Revenues 26.50% 26.95% 27.36% 27.71% 28.09% 28.70%
Leading to and EBITDA margin moving on the downtrend; due to a slower moving gross profit in
comparison with such amounts that we do not see slowing down but instead surpassing top line
inclines; a matter that would require re-structure.
EBITDA – EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
EBITDA 3,112.9 3,140.0 3,014.9 2,954.9 2,884.1 2,720.0 -2.66%
EBITDA margin 25.5% 25.1% 23.4% 22.2% 20.9% 19.5%
2,077.5 2,500.8 2,572.5 2,662.0 2,753.8 2,375.6
-
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
16,000.0
2015 2016F 2017F 2018F 2019F 2020F
CAPEX to Sales Sales
17.1%
20.0% 20.0% 20.0% 20.0%
17.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
2015 2016F 2017F 2018F 2019F 2020F
CAPEX Change CAPEX/Sales

20
MARCH, 2016
Scenario 1 … Unified License Application … VFE stake sale + MVNO + Fiber Rollout
In our 1
st
scenario, we assume the full implementation of the unified license, leading TE to divest its
44.95% stake in Vodafone Egypt, and acquiring the virtual mobile license for transmission to take place
over the current 3 operators’ networks. We also maintain the fiber rollout project, but extend its
implementation to 2021; 1-year further than our base case scenario.
We followed the guidelines early announced after the government approved the regulatory reforms in
September 2014. Through which, all existing telecom operators have been offered the opportunity to
move to the unified license regime, allowing them to offer integrated telecom services. The regulations
indicated the establishment of a new unified entity to carry out infrastructure projects, but we actually
do not see TE ready to forgo its infrastructure. In May 2015, a new legislative amendment submitted
from the Ministry of Defense came in to the picture, entitling the MoD a 60% stake in the new entity
that will be responsible for developing an alternative infrastructure and telecom network, the
government would hold 20%, and existing telecom operators to hold 20%. However, as we are not
100% sure about the implementation of such legislative amendment, we simply account in this
scenario for the liberalization of IGW Licenses being the only exit for TE not to become under multiple
arbitration cases; and anticipate TE`s mobile entry to take place through operators` networks, while
providing them the right to lease Fiber optics or copper cables.
Vodafone and Orange should then pay EGP 1.8bn and EGP 1.5bn respectively, to have access to TE`s
legacy copper network in order to offer IGW services, with annual revenue share payment of 6% from
both operators up from the current 2.4% to regulatory authorities. Etisalat Egypt, is to be exempted
from the lump sum payment as it is the only mobile operator with IGW license beside TE; however, its
license is only limited to its customers and should then be paying EGP 8/subscriber for voice services to
fixed and mobile phones.
TE … a fully Integrated Telecom Operator
Before getting into TE, a quick review over the current mobile operations in Egypt shows in our beliefs
market saturation. As NTRA has already been cancelling and suspending SIM cards for 1) being un-
utilized or 2) due to unpaid pills.
Over the upcoming horizon we believe, as a matter of enhancing business climate, gradual
enhancements in disposable income, along with the population increases anticipated, mobile
subscriptions would regain growth.
Vodafone Egypt, the historical market leader is anticipated to maintain heading the market, but we
expect such share to tremble over 2 main aspects.
1) Mobinil rebranding as Orange, after the mother company took over, means generous offers and
high selling, distribution and marketing spending by Orange, to secure a better medium term after
finally turning into profitability zone.
2) Telecom Egypt joining the market, with predatory pricing; setting discounts to ARPUs driven by no
infrastructure annual leasing/transmission fees payments, but only accounting for access costs to
operators` networks.
As per the unified license TE should pay EGP 2.5bn for acquiring the Mobile Virtual Network Operator
License (MVNO) added to our estimation for around EGP 2.5bn for acquiring the 4G spectrum license.
We believe the 4G spectrum issuance would come by 2H2016 during 1Q-FY2016/17 – 2Q-FY2016/17
which would generate around EGP 10bn from the 4 current mobile operators. However, we should
note that the MCIT minister Yasser El-kady recently indicated permitting other international players
getting into the 4G auction. Such aspect would push real cost higher than our estimated EGP 2.5bn as a
matter of bidding, if it was realized. However, we are skeptical about new entrants appetite, given the
market`s almost saturation; as we do not see Egypt`s mobile penetration approaching the 120%+ as in
some other developed markets at least within our forecast duration.
If TE is to acquire the 2 licenses, then VFE stake sale is a must. We assume the sale closure to take
place by early 2017, providing the required internal funding for the licenses acquisition; assumed to
operate by 2017 as well. We also assume liberalization to take place for the IGW same year.

21
MARCH, 2016
ANTICIPATED MARKET PLAYERS SHARES … INDICATES TE PREDATORY ENTRANCE … MN USERS
SOURCE: PRIME
TE`S MOBILE MARKET ENTRANCE … TO CAPTURE MOBILE INTERNET GROWTH – MN USERS
1- TE Mobile Operations … Penetrating at the V-shape midpoint
Mobile operators ARPUs have been inclining on the back of the regulator`s security measures for
issuing new SIM cards, that became strictly linked to identification. The increasing competition on such
a shrinking customer base became tougher, leading last resort to cutting down prices through
generous offers. Over the upcoming period, Orange rebranding will further push pricing down, added
to TE 2017`s entry. we believe TE will be the sector`s predator capturing a massive market share in a
little span of time. TE will not be subject to transmission leasing fees for carrying its voice and mobile
internet capacities, capitalizing on its infrastructure. As all international outbound and inbound
contracts already in place being the historical carrier for other operators.
We expect the number of mobile users to start rebounding by 2017, driven by TE`s join and Orange
marketing activities, to reach a total of 112mn subscribers by 2020; recording a CAGR of 3.7%
exceeding that of population growth and hence driving penetration back upward after dropping for
over 3 years in a row now. We believe in a 5% per annum market share gain for TE starting from 2017
to 2020, driven by an assumed 5% discount to VFE`s estimated ARPU by 2017. To capture a market
share of 20% by 2020 equivalent to around 22.4mn subscribers, and replace Etisalat, being the 3
rd
.
Mobile Operations 2015E 2016F 2017F 2018F 2019F 2020F CAGR
Users - mn 93.7 94.2 98.5 101.9 107.4 112.2 3.7%
Change -1.7% 0.6% 4.5% 3.5% 5.4% 4.4%
Population – mn 90.1 92.4 94.7 97.0 99.5 102.0 2.5%
Change 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Mobile Penetration 104.0% 102% 104% 105% 108% 110%
In time of capturing mobile subscriptions market share, TE will also rapidly capture mobile internet
users, with estimations to reach 18.7% of total mobile internet users by 2020, which would
represent around 50% of TE mobile subscriptions.
37.7
36.3 35.5 35.1
34.0 34.0 34.1 33.7
21.8 21.4 21.8 20.9
4.9
10.2
16.1
22.4
0.0
10.0
20.0
30.0
40.0
2017F 2018F 2019F 2020F
Vodafone Orange Etisalat Egypt TE
25.6
30.6
36.0
41.4
46.1 50.4
17.4%
19.5%
17.9%
14.8%
11.3%
9.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2015E 2016F 2017F 2018F 2019F 2020F
Internet Users - mn Mobile Internet Users
Mob - Change
1.7
4.1
7.3
11.2
35%
40%
45%
50%
3.8%
8.1%
13.1%
18.7%
0%
20%
40%
60%
-
5.0
10.0
15.0
2017F 2018F 2019F 2020F
TE Mob-Internet Users
TE Mob-internet users % of Mob subscribers
TE Market Share
41.3%
31.3%
35.5%
30.0%
23.2%
18.6%
0.0%
20.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2015E 2016F 2017F 2018F 2019F 2020F
Vodafone Orange Etisalat Egypt TE

22
MARCH, 2016
SOURCE: PRIME
SOURCE: PRIME
We assume a predatory discount to VFE ARPU by 2017, which would lead to a mobile voice and data
average ARPU of EGP 17.88, anticipated to drop over the horizon by 0.5% driven from leveled
competition. However, with almost no barriers to entry, and transmission infrastructure already in
place while capitalizing on a huge retail outlets existing thanks to TE data and TE centrals. We would
see mobile subscriptions jump positively impacting mobile internet that would also grow on the back
of an under-penetrated nation. We conservatively set the segment`s COGS to Sales at 30%, taking into
consideration VFE COGS to Sales range of c. 30%, and considering fees for other operators’ networks
accessibility. SG&A expenses are anticipated to initially show up high, as a matter of launching
expenses and nationwide advertisement and marketing that trim down later. We set 2017 SG&A at
60%, and take it down to 25% by 2020.
TE Mobile Operations 2017F 2018F 2019F 2020F CAGR
Mobile Subscriptions - mn 4.9 10.2 16.1 22.4 65.8%
Mobile Internet Users - mn 1.72 4.08 7.25 11.22 86.7%
ARPU EGP/month 17.88 17.79 17.70 17.61 -0.5%
Revenues - EGP mn 1,425.78 3,044.95 4,962.41 7,110.01 70.8%
2- IGW Liberalization
We based the liberalization adverse effect on our estimated upcoming Vodafone and Orange
subscriptions market share. As both would then join Etisalat and operate their own IGW. The impact of
liberalization is anticipated to fall on Domestic Wholesale and International Carriers Affairs; dropping
massively in comparison to our base case scenario.
IGW liberalization would lead to wasting EGP 14.6bn from the base case anticipated IGW revenues
from 2017 to 2020, however on a net revenues basis TE would gain EGP 1.94bn over lost IGW revenues
from following scenario 1 driven from the projected mobile revenues of EGP 16.5bn over same time
duration; neglecting time value of money.
TE IGW Revenues – EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Domestic & ICA Revenues - Pre IGW 5,903.9 5,783.2 5,686.9 5,563.1 5,370.6 5,197.2 -2.5%
VFE & Orange - Market Share 76.8% 76.5% 72.9% 69.0% 64.7% 61.4%
Domestic & ICA Revenues - Post IGW 5,903.9 5,783.2 1,543. 1,722.72 1,895.8 2,007.9 -19.4%
Change 2.3% -2.0% -73.3% 11.6% 10.0% 5.9%
3- Fixed Voice & Broadband
The agreed up on regulatory reforms also stated liberalizing fixed voice operations for EGP 100mn per
operator, but we do not see takers. We maintain our assumption for TE being the sole Fixed-wired
services provider given its owned infrastructure. In addition to that the segment is already in its
declining stage being under mobile substitution. Leaving no room for competition and expansion;
except for Enterprise users that we believe have preference for TE, due to its inclusive offers of voice
and data at appealing priced packages. We also do not see internationally-backed up operators
targeting competition over such segment unless they have already been there long enough; to avoid
CAPEX that should be directed to other segments with growing potential.
Fixed BB services are already liberalized, with 4-operators competing all together. We do not see
adverse effect on TE`s base case data assumptions, as the adverse effect of transmission revenues will
be passed to DW BU and ICA BU.

23
MARCH, 2016
SOURCE: PRIME
SOURCE: PRIME
SOURCE: PRIME
4- TE Aggregate Revenues … A Drop in Wholesale … Cured by Mobile Operations
Total Revenues – EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Retail Revenues
Change -7.8% -5.2% -6.0% -3.7% -2.5% -1.6%
Change 35.4% 21.5% 18.4% 16.7% 15.6% 7.8%
Other Revenues - EU BU 89.0 90.8 92.6 94.4 96.3 98.3 2.0%
Change 17.1% 2.0% 2.0% 2.0% 2.0% 2.0%
Mobile Operations 0.0 0.0 1,425.8 3,044.9 4,962.4 7,110.0
Change 113.6% 63.0% 43.3%
Total Retail Revenues - EGP mn 5,474.0 5,895.9 7,753.6 9,916.4 12,465.1 14,972.9 22.3%
Change 9.3% 7.7% 31.5% 27.9% 25.7% 20.1%
Wholesale Revenues
Domestic BU revenues 2,926.0 2,954.7 798.6 915.6 1,049.3 1,155.5 -17.0%
Change 8.3% 1.0% -73.0% 14.6% 14.6% 10.1%
ICA Revenues 2,977.4 2,828.5 744.4 807.1 846.5 852.3 -22.1%
Change -2.9% -5.0% -73.7% 8.4% 4.9% 0.7%
IC&N Revenues 807.0 824.8 847.7 875.6 895.8 913.7 2.5%
Change -41.5% 2.2% 2.8% 3.3% 2.3% 2.0%
Total Retail Revenues - EGP mn 6,710.4 6,608.0 2,390.8 2,598.3 2,791.6 2,921.6 -15.3%
Change -6.1% -1.5% -63.8% 8.7% 7.4% 4.7%
Total Revenues 12,184.4 12,503.9 10,144.3 12,514.7 15,256.7 17,894.5 8.0%
Change 0.2% 2.6% -18.9% 23.4% 21.9% 17.3%
Contribution to Revenues
Voice 22.6% 20.9% 24.2% 18.9% 15.1% 12.7%
BB 21.6% 25.5% 37.2% 35.2% 33.4% 30.7%
Other Revenues - EU BU 0.7% 0.7% 0.9% 0.8% 0.6% 0.5%
Mobile Revenues 0.0% 0.0% 14.1% 24.3% 32.5% 39.7%
Domestic BU 24.0% 23.6% 7.9% 7.3% 6.9% 6.5%
ICA BU 24.4% 22.6% 7.3% 6.4% 5.5% 4.8%
IC&N BU 6.6% 6.6% 8.4% 7.0% 5.9% 5.1%
Operational Costs & Margins …
As a matter of mobile operations launching, we see 2017, the lowest in GPM due to salaries and wages
and other operational expenditure pressuring margins; however, we also account for annual fees for
accessing mobile networks. As we proceed, margins are anticipated to regain superiority.
Operating Cash Costs – EGP mn 2015 2016F 2017F 2018F 2019F 2020F CAGR
Total Operating Cash Costs 3,205.9 3,340.9 2,712.1 3,442.3 4,287.7 5,065.2 9.6%
Change 7.20% 4.20% -18.82% 26.92% 24.56% 18.13%
Total Other Op. Costs 2,313.3 2,452.9 2,601.3 2,758.8 2,926.1 3,103.8 6.1%
Change 1.98% 6.04% 6.05% 6.05% 6.06% 6.07%
COGS 5,519.3 5,793.9 5,313.4 6,201. 7,213.8 8,168.6 8.2%
Change 4.95% 4.98% -8.29% 16.71% 16.33% 13.24%
COGS/Sales 45.30% 46.30% 52.4% 49.6% 47.3% 45.7%
GPM 54.70% 53.70% 47.62% 50.45% 52.72% 54.35%
SG&A & EBITDA 2015 2016F 2017F 2018F 2019F 2020F CAGR
SG&A - EGP mn 3,229.1 3,369.9 3,518.8 3,688.8 3,867.4 4,010.2 4.43%
Change 5.43% 4.36% 4.42% 4.83% 4.84% 3.69%
% of Revenues 26.50% 26.95% 34.69% 29.48% 25.35% 22.41%
EBITDA - EGP mn 3,112.9 3,140.0 992.7 2,158.2 3,028.3 4,188.9 6.12%
EBITDA margin 25.55% 25.11% 9.79% 17.25% 19.85% 23.41%

24
MARCH, 2016
SOURCE: BLOOMBERG
SOURCE: BLOOMBERG, PRIME
VFE Stake Sale …
We believe that TE does not have sufficient cash for incurring the MVNO license and 4G spectrum, as
the company has a low debt to equity policy. We maintain the company`s capital structure over the
horizon, which necessitated VFE stake sale; holding on to the stake might lead to massively shrinking
retained earnings and no dividend payout which does not seem achieving the government`s goals
being the majority stake holder at TE.
In addition to a probable duplication in CAPEX for the licenses, incurred directly and through the
company`s proportionate stake, that might dilute VFE`s retained earnings and then evaporate TE`s
withheld equity share.
The sale will also be necessary to take place before launching the mobile operations in order to avoid
adverse international arbitration from probable lawsuits filing from the 3 operators international
mother companies.
Egypt remains the highest margin-recognizing market for Vodafone Group globally, even after TE`s
mobile market entrance and VFE market share dilution. So within this scenario we assume that
Vodafone Group will buyout TE`s stake at an EV/EBITDA of 5.4x, calculated from average comparables
leading EV/EBITDA. The sale will take place in 2017, before TE launches mobile operations.
The sale will provide TE with the necessary cash needed for funding the licenses, while adding an after
tax capital gain of EGP 2.5bn to 2017`s stressed operations to end the year on a y-o-y increase. A
dividend of EGP 1.12/share would then be distributed equivalent to EGP 2bn, given the high CAPEX
level.
EV/EBITDA - 2017 EBITDA margin EBITDA – EGP mn EV – EGP mn TE Share Stake Sale – EGP mn
5.41 42% 5,751 31,113.64 45.0% 13,985.58
BV - 2016 10,809.56
Capital Gain 3,176.02
After-tax Capital Gain 2,540.81
Ticker Name EV/EBITDA Next Yr
ETEL EY Equity TELECOM EGYPT 3.73
TKG SJ Equity TELKOM SA SOC LTD 3.10
BEZQ IT Equity BEZEQ THE ISRAELI TELECOM CO 7.99
BATELCO BI Equity BAHRAIN TELECOM CO 4.32
OTEL OM Equity OMAN TELECOMMUNICATIONS CO 4.70
STC AB Equity SAUDI TELECOM CO 6.26
IAM MC Equity MAROC TELECOM 6.60
PTNR IT Equity PARTNER COMMUNICATIONS CO 6.16
DU UH Equity EMIRATES INTEGRATED TELECOMM 4.43
CEL IT Equity CELLCOM ISRAEL LTD 5.95
ORDS QD Equity OOREDOO QSC 4.24
VOD SJ Equity VODACOM GROUP LTD 7.48
GTHE EY Equity GLOBAL TELECOM HOLDING 2.42
MTN SJ Equity MTN GROUP LTD 4.64
ZAIN KK Equity MOBILE TELECOMMUNICATIONS CO 4.81
EEC AB Equity ETIHAD ETISALAT CO 6.80
SAFCOM KN Equity SAFARICOM LTD 7.27
ETISALAT UH Equity EMIRATES TELECOM GROUP CO 6.49
Average 5.41

25
MARCH, 2016
SOURCE: TE, PRIME
SOURCE: TE, PRIME
CAPEX- EGP MN (LHS) …
CAPEX- EGP MN (LHS) …
CAPEX …
In Scenario 1, we tested for the probability of
TE proceeding with the fiber optics project
while incurring the licenses costs. We
extended the fiber optics implementation
beyond 2019, but smoothing percentage of
sales down from the company`s indication to
8% in 2017, stabilized in 2018 and then
gradually increasing over the horizon.
Scenario 2 … We Tested for Scenario 1 … Less the Fiber Optics implementation over
medium term
The only difference in this Scenario over
Scenario 1, is the assumption of an annual
CAPEX equivalent to 5% of sales over the
horizon, beyond 2016 20% of sales assumed
CAPEX, which the company has already
started incurring. We remind that in 2016 we
assumed a 20% of sales CAPEX down from
the company`s indication of 22-25%, as its
already around 20% y-o-y higher than 2015`s
EGP 2.08bn CAPEX. And is believed to be
sufficient for a 2.5mn more connections.
17.1%
20.0%
57.3%
8.0%
15.0%
20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
-
2,000
4,000
6,000
8,000
2015E 2016F 2017F 2018F 2019F 2020F
CAPEX % of Revenues
17.1%
20.0%
54.3%
5.0% 5.0% 5.0%
-10.0%
10.0%
30.0%
50.0%
70.0%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2015 2016F 2017F 2018F 2019F 2020F
CAPEX % of Revenues

26
MARCH, 2016

27
MARCH, 2016
PRIME SALES TEAM
Hassan Samir Managing Director +202 3300 5611 hsamir@egy.primegroup.org
Mohamed Ezzat Head of Sales & Branches +202 3300 5784 mezzat@egy.primegroup.org
Shawkat Raslan Heliopolis Branch Manager +202 3300 5110 sraslan@egy.primegroup.org
Amr Saber Team Head-Institutions Desk +202 3300 5659 asaber@egy.primegroup.org
Amr Alaa, CFTe Manager +202 3300 5609 aalaa@egy.primegroup.org
Mohamed Elmetwaly Manager +202 3300 5610 melmetwaly@egy.primegroup.org
Emad Elsafoury Manager +202 3300 5624 eelsafoury@egy.primegroup.org
RESEARCH TEAM
* research@egy.primegroup.org +202 3300 5728
HEAD OFFICE
PRIME SECURITIES S.A.E.
Regulated by CMA license no. 179
Members of the Cairo Stock Exchange
2 Wadi El Nil St., Liberty Tower,
7th-8th Floor, Mohandessin, Giza, Egypt
Tel: +202 33005700/770/650/649
Fax: +202 3760 7543
Disclaimer
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