1. July 07
th
, 2014
Contacts CFG Research Contacts Sales Team
Mehdi Ammouri
+212 522 488 363
m.ammouri@cfgmorocco.com
Mohammed Essakali
Bachir Tazi
Othman Benouhoud
Mourad Zidouh
+212 522 250 101
CFG Research 1
Company Update
New scope, new rating
Maroc Telecom – Buy (vs. Hold) – Target price: MAD 117.4 (vs. MAD 106.8)
We rate as a BUY Maroc Telecom following the new acquisitions integration (MAD +11.9 per share). We have adjusted upward our target
price by MAD +10.6 to MAD 117.4, a 22% upward potential. The pursuit of competitive pressure in domestic Mobile (vs. attenuation
expected previously) has an impact of MAD -1.6 to our target price. We are comfortable regarding our BUY rating, insofar as our core
scenario is based on conservative assumptions regarding the new perimeter.
Recall of Q1-14 results
Even though the group comforted our scenario of a recovery in terms of sales starting
2014, revenues stood bellow our expectations (+0.4% vs. CFGE +2.7%) due to the counter
performance of Domestic Mobile with revenues at MAD 3,849m vs. MAD 3,965m
expected. By contrast, the good surprise came from domestic Fixed-line which rose by
5.3% while we were expecting a decline of 2.8%.
Subsidiaries’ revenues are above our expectations (+12.3% vs. CFGE +10.4%) with a good
surprise from Gabon while the other countries are globally in line.
EBITDA and EBIT margins declined respectively by 4.2pts and 5.4pts vs. CFGE of -1.4pt
and +0.7pt due to 1/higher interconnection cost in Morocco, 2/ higher taxes (mainly in
Burkina Faso) and 3/ higher depreciation costs both in Morocco and in the Subsidiaries.
Finally, the group confirmed its annual guidance: i/Slight decline in EBITDA and ii/Slight
growth in capital expenditure.
We note from Q1-14 release: i/ continuing intense competitive pressure on domestic
Mobile , ii/ encouraging performance on domestic Fixed- which is coming through after
being undermined by Mobile; and iii/ shifting margins, which seems now structural
(interconnection costs and higher depreciations).
Main Adjsutments to our model
One the one hand, we have integrated the new acquisition (starting 1st
January 2015)
based on voluntarily-conservative assumptions due to the lack of information available to
date. Hence, we forecast: i/ a 2014E
-2018E
revenues CAGR of +8.3% (+4.2% in a pro forma
basis) vs. +2.8% ex-Moov, ii/ a 2014E
-2018E
EBITDA CAGR of +6.5% (+4.2% in pro forma
basis) vs. +2.3% ex-Moov, iii/ a 2014E
-2018E
EPS CAGR of +5.6% (in pro forma basis) vs.
+2.9% ex-Moov.
On the other hand, we have adjusted our previous domestic revenues forecasts as
follows: i/ for Mobile, with 2014E
-2018E
revenues growth sequence of -4.0%, 0% and
+1.6% vs. -1.3%, +1.1% and +2.6% previously to reflect the continuing competitive
pressure vs. attenuation starting 2014 expected previously and ii/ for Fixed-line and
Broadband, 2014E
-2018E
revenues growth sequence of +2.0%, +1.9% and +1.7% vs. -4.4%,
-0.9% and +1.0% previously to reflect the accelerating pace of customer base growth and
the redefinition by the regulator of the unbundling framework.
Opinion and Valuation
We upgraded our rating to BUY following the raise of our target price to MAD 117.4
(MAD +10.6) ir a 22% increase potential.
This revision of our target price is justified by:
1. MAD +11.9 per share, with the integration in our business plan of the new
acquisitions (Moov) starting 1 January 2015,
2. MAD -1.3 per share, integrating pursuit of the strong competitive pressure in
Morocco, while initially we were expecting attenuation starting 2014.
Risks
• Upsides: i/new acquisitions, ii/ attenuation of competitive pressures in Morocco,
iii/ faster restructuring of the Moov assets.
• Downsides: i/Integration issues of the Moov assets, ii/ increasing competitive
pressures in Morocco, iii/regulation pressures both in Morocco and in the
Subsidiaries,
RIC: IAM .CS BB: IAM M C
Keydata
Price (MAD) 96.4
Target price (MAD) 117.4
Potential 21.8%
Market capitalisation (MADm) 84,745
VWAP -1 year (MAD) 97
Highest -1 year 111
Lowest -1 year 87
1 year average daily volume (MADk) 12,076
2013 2014E
2015E
Sales (MDH) 28,559 28,718 34,512
EBITDA(MDH) 16,213 15,577 17,447
EBIT (MDH) 10,978 10,582 11,175
NIGS (MDH) 5,540 5,926 6,459
EV/EBITDA(x) 6.4 6.7 6.0
EV/EBIT (x) 9.5 9.8 9.3
P/E (x) 15.3 14.3 13.1
P/B (x) 5.5 5.4 5.2
Dividend Yied 6.5% 7.0% 7.6%
ROE 36.1% 37.7% 39.7%
Price performance chart
Share price performance 3m 6m 12m
Absolute performance -3.5% -0.6% -4.6%
Rel. to CFG25 -0.2% -1.0% -9.3%
0
20
40
60
80
100
120
140
j-12 d-12 j-13 d-13 j-14
15,000
16,000
17,000
18,000
19,000
20,000
21,000
M aroc Telecom CFG 25

2. July 07
th
, 2014 Maroc Telecom
CFG Research 2
Morocco: Two distinct market segments and two opposite dynamics
Mobile Morocco: Same old story, same old song
Domestic Mobile continues to suffer from a very negative momentum, with a continuing lower ARPM not fully compensated by increasing
outgoing usage (grah-1). This price war that was initiated in the beginning (since February 2010) by Inwi (n°3 ; 28.1% market share), is now
supported by Méditel (n°2 ; 29.6% market share) with a net adds market share of 50% during Q1-14 after 66% in Q4-13 (gaph-2).
While we were expecting an attenuation of the competitive pressure on domestic Mobile, the actual market momentum and IAM’s Q1-14
results push us to downgrade our previous forecasts. Hence, we have revised downward our 2014E-2016E Mobile revenues sequence to
-4.0%, 0% et +1.6% vs. -1.3%, +1.1% et +2.6% previously.
Graph 1 – ARPM and outgoing usage
evolution (Market)
Graph 2 – Net adds evolution (Market) Graph 3 – Market share forecasts change
(MT)
78%
66% 52%
88%
113% 113%
125%
138%
100%
T1-12 T3-12 T1-13 T3-13 T1-14
ARPM Outgoing usage
T1-12 T2-12 T3-12 T4-12 T1-13 T2-13 T3-13 T4-13 T1-14
Maroc Telecom Méditel Inwi
38.6%
43.7%
42.9%
41.0%
39.6%
44.2%
43.8%
2013 2014E 2015E 2016E
New Old
Source: ANRT, CFG Research Source: ANRT, CFG Research Source: ANRT, CFG Research
Fixed-line and Internet: A market with a strong potential that must be shared
Unlike Mobile market, Fixed-line and Broadband are benefiting from a more favourable momentum, thanks to the success of double-play
offers. Broadband, the main growth driver of this segment (graph-4), is benefiting for strong fundamentals (low penetration rate, low rate
of NICTs equipment, M2M surge) that should allow steady growth over the 5 upcoming years.
Regarding Maroc Telecom, we have revised our forecasts in two stages, taking into account: i/Fixed-line and Broadband customer base
accelerating growth (graph-5) and ii/ the regulatory unbundling framework redefinition and that should see IAM Net Adds market share
decline gradually (graph-6).
Hence, our new 2014E-2016E Fixed-line &Broadband growth stands at +2.0%, +1.9% and +1.7% vs. -4.4%, -0.9% and +1.0% previously.
Graph 4 – Broadband and Fixed-line
customer base (Market)
Graph 5 – Broadband penetration
(Market)
Graph 6 –Broadband net adds market
share (MT)
114
156
139
127
100
125
119
114
107
T1-12 T3-12 T1-13 T3-13 T1-14
Broadband Fixed-line
23.4%
25.7%
20.8%
28.6%
34.6%
40.0%
45.3%
21.0%
18.4%
15.4%
2012 2013 2014E 2015E 2016E
Households penetration Fixed-line penetraation
80.0%
65.0%
99.3% 99.9%
95.0%
2012 2013 2014E 2015E 2016E
Net adds broadband market share
Source: ANRT, CFG Research Source: ANRT, CFG Research Source: ANRT, CFG Research
Impact on valuation:
Other things being equal, our new assumptions in Morocco have a negative impact of MAD -1.3 to our target price at MAD 105.5 per share
vs. MAD 106.8 previously (without taking into account the new acquisitions).

3. July 07
th
, 2014 Maroc Telecom
CFG Research 3
New scope: Significant potential and significant cross-country gap
Investment case:
The new assets (known under « Moov » brand), that the group is currently finalizing the acquisition (that we expect for 1st January 2015),
will allow IAM to increase its exposure to Sub-Saharan Africa (41% FY15E vs. 27% FY13) and fundamentally change its growth profile with
2014E-2018E Consolidated revenues CAGR of +8.3% (+4.2% on pro forma basis) vs. +2.8% ex-Moov.
Countries (tab-1) where these assets are located (ex-Gabon) show low penetration rates which implies significant growth prospect but with
significant competitive disparities. As an example, Ivory Coast, the most important market in term of population, is also the most
competitive with 6 operators out of which two most dominant (Orange and MTN) and where Moov is only n°3. At the other extreme, RCA,
where penetration is very low (<26%) and with 6 players, presents a high political risk profile.
Hence, with an additional population covered of 62m (ex-Gabon) vs. 72m for the actual perimeter (ex-Morocco) and a penetration rate of
62% vs. 111% for the actual (ex-Morocco), Moov assets should generate an important growth relatively to local competitors if the group
manages to implement quickly a strategy based on: i/network differentiation (Coverage and QoS) and ii/a proactive pricing policy.
Table 1 – New scope markets Characteristics
Ivory Cost Benin Togo Niger RCA Gabon*
Population (in million) 24.1 10.3 6.8 16.6 4.6 1.6
Mobile penetration 81.9% 87.1% 57.6% 31.4% 25.8% 188.2%
Mobile market 19.7 9.0 3.9 5.2 1.2 2.9
Nbr operators 6 5 2 4 4 4
Moov market share 21% 33% 43% 10% 28% 15%
Market position 3 2 2 3 3 3
* M aroc Telecom is already present via Gabon Telecom
Source : Données de marché, CFG Research,
Forecasts:
Due to the lack of information available to date regarding the Moov assets, we have voluntarily taken conservative assumptions (graph-7,
8, 9). Hence, based on what we said before, we forecast revenue, EBITDA and EPS growth as following:
• 2014E-2018E Revenues CAGR of +8.3% (+4.2% on pro forma basis) vs. +2.8% ex-Moov,
• 2014E-2018E EBITDA CAGR of +6.5% (+4.2% pro forma basis) vs. +2.3% ex-Moov,
• 2014E-2018E EPS CAGR of +5.6% (+4.1% on pro forma basis) vs. +2.9% ex-Moov,
EBITDA margin rapid improvement (graph-8) is supported by the important capex (graph-10) that the group has to make to expand the
network coverage and improve Quality of Service (QoS), necessary conditions to support a network differentiation strategy that should
allow a to implement a proactive pricing policy . Also, the fact that Moov assets are pure mobile players, EBITDA margin, even at maturity,
will remain lower to that of the rest of the group due to: i/lower gross margin and ii/no Mobile-Fixed-line synergy. Recall that, with a 22.3%
FY13 EBITDAm, Moov assets shall present significant potential for improvement, especially if we take into account IAM management’s
track record in turning around new acquisitions.
Graph 7 – 2014E
-2018E
Revenues growth Graph 8 –2014E
-2018E
EBITDA margin
evolution
Graph 9 –2014E
-2018E
Capex evolution
2.7%
5.3%
16.5%
10.9%
2.5%
0.6%
3.1%3.0%
4.1%
2.8%0.5%
4.6%
13.5%
4.5%
0.1%
2014E 2015E 2016E 2017e 2018e
Group incl. Moov Group excl. Moov Moov
53.0%
50.7%
39.0%
40.0%
54.5% 53.7%54.2% 53.8%
51.3%51.5%50.7% 50.6%
29.0%
31.0%
35.0%
2014E 2015E 2016E 2017e 2018e
Group incl. Moov Group excl. Moov Moov
17.2%
40.0%
30.0%
17.2%17.2% 17.2%17.1%
19.7%
18.4%
17.7%
22.5% 21.4%
50.0%
25.0%
20.0%
2014E 2015E 2016E 2017e 2018e
Group incl. Moov Group excl. Moov Moov
Source: CFG Research Source: CFG Research Source: CFG Research
Still under the assumption of an integration of the new acquisitions starting 1st January 2015, net debt should stand at 0.6x 2015E
DN/EBITDA and stay at this level until 2017E and then decline gradually due to lower capex (end of Moov coverage rollout). Hence, the
group should maintain an important leverage capacity (up to 2x DN/EBITDA) to make new acquisitions.
Impact on valuation :
We value Maroc Telecom using the DCF method with a target price of MAD 117.4 per share. We have taken into account the new assets
(Moov) integration starting 1st
January 2015 and based on deliberately-conservative assumptions (due to the lack of information available
to date). Hence, the new assets have a positive impact of MAD +11.9 to our target price at MAD 117.4 (22% upward potential).
Risks:
Main risks to our valutaion to our rating are (in order of importance):
• Upsides: i/new accretive to shareholders acquistions, ii/ attenuation of competitive pressures in Morocco, iii/ faster
restructuring of the Moov assets.
• Downsides: i/Integration issues of the Moov assets, ii/ increasing competitive pressures in Morocco, iii/regulation pressures
(taxes, fines ou infrastructure sharing) both in Morocco and in the Subsidiaries,

4. July 07
th
, 2014 Maroc Telecom
CFG Research 4
Summary financials
P&L -In MADm 2013 2014
E
2015
E
2016
e
Total revenues 28,559 28,718 34,512 36,086
Change in % -4.3% 0.6% 20.2% 4.6%
EBITDA 16,213 15,577 17,447 18,574
Change in % -3.0% -3.9% 12.0% 6.5%
EBITDAmargin 56.8% 54.2% 50.6% 51.5%
EBIT 10,978 10,582 11,175 12,125
Change in % 0.1% -3.6% 5.6% 8.5%
EBITmargin 38.4% 36.8% 32.4% 33.6%
Financial result -374 -333 -410 -511
Net Income GS 6,359 6,821 7,427 8,013
Change in % -12.7% 7.3% 8.9% 7.9%
EBTmargin 22.3% 23.8% 21.5% 22.2%
Net Income GS 5,540 5,926 6,459 6,938
Change in % -17.4% 7.0% 9.0% 7.4%
Simplified BS -In MADm 2013 2014
E
2015
E
2016
e
Fixed assets 35,919 35,873 41,305 42,983
Working Capital -9,198 -8,956 -10,417 -10,814
Economic Asset 26,721 26,917 30,888 32,169
Shareholders Equity 15,330 15,718 16,257 16,747
Minorities 4,602 4,677 4,751 4,858
Net debt 6,789 6,521 9,880 10,564
Capital Employed 26,721 26,917 30,888 32,169
Financial ratios 2013 2014
E
2015
E
2016
e
ROCE 24.7% 27.1% 25.0% 26.0%
ROE 36.1% 37.7% 39.7% 41.4%
ROA 15.4% 16.5% 15.6% 16.1%
DN / EBITDA 0.4x 0.4x 0.6x 0.6x
EPS 6.3 6.7 7.3 7.9
Valuation multiples 2013 2014
E
2015
E
2016
e
EV/Sales (x) 3.6x 3.6x 3.0x 2.9x
EV/EBITDA(x) 6.4x 6.7x 6.0x 5.6x
EV/EBIT(x) 9.5x 9.8x 9.3x 8.6x
P/E(x) 15.3x 14.3x 13.1x 12.2x
P/B (x) 5.5x 5.4x 5.2x 5.1x
DY 6.5% 7.0% 7.6% 8.2%

5. July 07
th
, 2014 Maroc Telecom
CFG Research 5
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