3. Brief of WE
WE is Egypt's primary telephone company. It started in 1854 with the first
telegraph line in Egypt. In 1998, it replaced the former Arab Republic of Egypt
National Telecommunication Organization (ARENTO).
Telecom Egypt Company is an Egypt-based joint stock company that provides
landline, retail and wholesale telecommunication services. The Company's retail
telecommunication services include access, local, long distance and international
voice, Internet, data and other telecommunications-related services. Its wholesale
services include broadband capacity leasing, Internet service and national and
international interconnection services.
4. Subsidiaries
TE Data- S.A.E. (95.04%), an Internet service provider;
The Egyptian Telecommunication Company for Information Systems (Xceed) -
S.A.E. (97.66%);
Middle East Radio Communication (MERC) - S.A.E. (50.90%),
a company engaged in wireless communications; Centra Technologies - S.A.E.
(58.76%),a manufacturer and distributor of personal computers;
Telecom Egypt France (100%),
TE Investment Holding (100%).
5. Investments
Vodafone Egypt - 44.95% Ownership
Egypt Trust - 35.71% Ownership
Ideavelopers - 18.75% Ownership
Nokia Siemens Networks - 10% Ownership
CITC (Civil Information Technology Company) - 10% Ownership
Arab Company for PC Manufacturing - 10% Ownership
Quicktel - 5.71% Ownership
6. OUR VISION
To shape the future of telecommunication services in the region through world-
class customer centricity, attraction and retention of highly talented people while
maximizing shareholder value.
7. Our Mission
Telecom Egypt is committed to being the best source of total communication
solutions, while dedicating its resources to build a better tomorrow for its
employees and community through responsive services and honest business
practices.
12. Liabilities
Non Current Liabilities 2022 2021 2020
Loans and credit facilities 20,390,098 10,966,681 3,278,144
Lease liabilities 698,100 630,062 0
Creditors and other credit balances 6,259,706 4,165,062 5,083,404
Deferred Tax liabilities 0 1,396,449 1,148,477
Total Non current liablities 27,347,904 17,158,254 9,510,025
Current Liabilities
loans and facilities installments 10,353,603 5,295,946 16,975,203
Lease liabilities 157,220 116,462
Creditors and other credit balances 24,535,926 14,208,450 11,973,704
Credit Balances With Subsidaries and
associates
6,771,714 7,854,290 5,395,234
Accured Income Tax 783,592 547,293
Provisions 763,973 1,039,354 852,201
Total Current liablties 43,366,028 29,061,795 35,196,342
Total Liabilites 70,713,932 46,220,049 44,706,367
Total Equity and Liabilities 106,167,970 80,961,651 74,766,991
14. Liquidity
Ratio 2022 2021 2020
Current Ratio 0.48 0.48 0.43
Quick Ratio 0.43 0.41 0.38
Cash Ratio 0.14 0.08 0.05
Working Capital (22,503,905) (15,115,612) (20,029,309)
16. Comments
Liquidity ratios are always reflecting current assets and cash less than current
liabilities as of the industry nature.
Ex. Vodafone 2007
Communication companies display the lowest ratio of working capital to sales
across sectors and have one of the highest capital expenditures ratios. Their
working capital efficiency is used to support the funding of their capital
expenditures and the latter is increasing due to growing demand for network
infrastructure, increasing data consumption, and rapid technological innovation
(Crédit Agricole)
19. Comments
Operating profit margin in 2022 is very high compared to 2020 and 2021 as of the
other income in 2022
Other Operating Income 4,301,831 666,507 538,546
Operating Profit 8,085,868 4,182,155 2,887,791
21. Comments
Net profit margin is very low in 2020 compared to 2021 and 2022 as of the high
financing cost in 2020 compared to its revenue.
Net Profit 7,345,893 6,955,931 2,159,526
Operating Revenue 32,916,304 27,787,127 24,595,916
Net Finance Cost (1,380,654) (586,404) (1,481,523)
23. Comments
Inventory items are not considered in the
analysis as WE is operating in telco industry in
which revenue is mainly generated from services
and inventory is mainly for spare parts and
utilities.
Massive improvement in DSO (Less) and DPO
(More) which is reflected in the Cash ratio that
gives more liquidity.
24. Debt &
Market
Debt Management
Debt Ratio 67% 57% 60%
Times Interest
Earned
5.86 7.13 1.95
Market Value Ratios
Price/Earning
Ratio
2.61 2.73 11.49
25. Comments
TIE is very high in 2020 compared to 2021 and
2022 as of high financing cost
Net Finance Cost (1,380,654) (586,404) (1,481,523)
27. Assets
Common Size Analysis
Balance Sheet 2022 2021 2020
Assets
Non Current Assets
Fixed assets 46.71% 52.07% 49.80%
Project In Progress 13.10% 7.57% 8.67%
Investment in subsidaries and associates 6.26% 8.21% 8.89%
Available for sale Investments 0.07% 0.09% 0.10%
Other Assets 14.18% 14.83% 12.25%
Deferred Tax Asstes 0.02% 0.00% 0.00%
Total Non-Current Assets 80.35% 82.77% 79.71%
Current Assets
Inventories 2.04% 2.41% 2.62%
Tradeand notes receivables 6.20% 5.88% 8.21%
Debtors and other debit balances 5.60% 6.07% 7.32%
Debit Balances With Subsidaries and associates 0.00% 0.00% 0.00%
Cash & Cash Equivelant 5.80% 2.86% 2.12%
Total Current Assets 19.65% 17.23% 20.29%
Total Assets 100.00% 100.00% 100.00%
28. Comments
Major non-current assets reflected because of
type of industry as major assets rely on license
and right of use and lands and machines.
Constitutes 80% of total assets.
33. Income
Statement
Income Statement 2022 2021 2020
Operating Revenue 100.00% 100.00% 100.00%
Operating costs -66.85% -65.69% -67.29%
Gross Profit 33.15% 34.31% 32.71%
Other Operating Income 13.07% 2.40% 2.19%
Selling and distribution
Expenses
-8.89% -9.53% -9.86%
General and administrative
expenses
-11.14% -11.63% -11.83%
ECL Provision -1.23% -0.11% 0.00%
Other operating expenses -0.40% -0.38% -1.47%
Operating Profit 24.56% 15.05% 11.74%
34. Comments
Other operating income
constitutes about more than 50%
of the net income in 2021-2022
Due to investments in associates
like Vodafone and leases for its
lines and infrastructure.
35. Income
Statement
Finance income 0.76% 2.22% 0.09%
Finance cost -4.96% -4.33% -6.11%
Net Finance Cost -4.19% -2.11% -6.02%
Income from
investment in
subsidaries and
associates
4.83% 16.62% 5.43%
EBT 25.20% 29.56% 11.14%
Income Tax -3.47% -3.63% -0.17%
Deferred Tax 0.59% -0.89% -2.19%
Total Income Tax -2.88% -4.52% -2.36%
Net Profit 22.32% 25.03% 8.78%
36. Comments
Tax/EBT ratio went from 15% to 11% due to heavily
investing taking advantage of the tax advantage.
38. Trend
Analysis of
Assets
Trend Analysis
Balance Sheet 2022 2021 2020
Assets
Non Current Assets
Fixed assets 133% 113% 100%
Project In Progress 215% 95% 100%
Investment in subsidaries and associates 100% 100% 100%
Available for sale Investments 100% 100% 100%
Other Assets 164% 131% 100%
Deferred Tax Asstes 0% 0% 0%
Total Non-Current Assets 143% 112% 100%
Current Assets
Inventories 111% 100% 100%
Tradeand notes receivables 107% 78% 100%
Debtors and other debit balances 109% 90% 100%
Debit Balances With Subsidaries and associates 810% 0% 100%
Cash & Cash Equivelant 388% 146% 100%
Total Current Assets 138% 92% 100%
Total Assets 142% 108% 100%
39. Trend
Analysis of
Equity
Equity 2022 2021 2020
Capital 100% 100% 100%
Reserves 109% 102% 100%
Retained earnings 161% 157% 100%
Total Equity 118% 116% 100%
40. Trend
Analysis of
Liabilities
Non Current Liabilities 2022 2021 2020
Loans and credit facilities 622% 335% 100%
Lease liabilities 0% 0% 0%
Creditors and other credit balances 123% 82% 100%
Deferred Tax liabilities 0% 122% 100%
Total Non current liablities 288% 180% 100%
Current Liabilities
loans and facilities installments 61% 31% 100%
Lease liabilities 0% 0% 0%
Creditors and other credit balances 205% 119% 100%
Credit Balances With Subsidaries and associates 126% 146% 100%
Accured Income Tax 0% 0% 0%
Provisions 90% 122% 100%
Total Current liablties 123% 83% 100%
Total Liabilites 158% 103% 100%
Total Equity and Liabilities 142% 108% 100%
41. Comments
Spending in investing reduces liquidity and reflects
more liquidity risk but is reasonable as income from
investing is supposed to be with (-ve) value
42. Trend
Analysis for
income
statement
Income Statement 2022 2021 2020
Operating Revenue 134% 113% 100%
Operating costs 133% 110% 100%
Gross Profit 136% 118% 100%
Other Operating Income 799% 124% 100%
Selling and distribution Expenses 121% 109% 100%
General and administrative expenses 126% 111% 100%
ECL Provision 0% 0% 0%
Other operating expenses 36% 29% 100%
Operating Profit 280% 145% 100%
43. Comments
The company has gross in its
Profits from 2019 to 2022
Has good control over cost as
gross profit is on the same
level over the trend
44. Trend
Analysis for
income
statement
2022 2021 2020
Finance income 1169% 2863% 100%
Finance cost 109% 80% 100%
Net Finance Cost 93% 40% 100%
Income from investment in subsidiaries and
associates
119% 346% 100%
EBT 303% 300% 100%
Income Tax 2699% 2383% 100%
Deferred Tax -36% 46% 100%
Total Income Tax 163% 216% 100%
Net Profit 340% 322% 100%
EPS 440% 421% 100%
49. WACC
As per WE 2022 report, there are projects in progress which
need to be financed.
TE is financing those projects from the Capital only, therefore
there is no weight or cost of dept.
Based on the above information the percentage of equity to
total value of capital is 100%
50. WACC
Weight of Equity = 1
WE Capital
WE issued and fully paid-up capital is L.E
17,070,716,000, represented in E 1,707,071,600
shares at a per value of L.E 10 each.
WACC
=
Weight
of
Equity
X
Cost of
Equity
51. WACC
Cost of Equity (Re) = Rf + βE (RM - Rf)
Rf (Risk Free Rate) = 14.4% (Based on the CBE
interest rate for corporates)
βE = 0.7 (as the Telecommunication industry is
less impacted by any Market Risk)
(RM - Rf) Market Risk Premium = Expected rate
of return – Risk Free Rate
Using the SML or CAPM approach
52. WACC
WE company earning per share for the year 2022 is L.E 3.83
Expected rate of return = 3.83 / 10 = 0.383
WACC = Weight of Equity x Cost of Equity
= (1) x (14.4% + (0.7 x (38.3% - 14.4%))
= 31%
WACC = 31%
54. Comments
The company has an issue in storing inventory,
defected gets sold at a low price each year.
Cash equivalent has increased in time deposits in
2022 and went to advantage from tax advantages
from loans which increased to 30% of total assets in
2022 compared to 2021 20% of Total Assets.
55. Comments
The company has excellent cost management
The company has good diversification in revenue
streams
57. Recommendations
1. Debt management: as debt has increased significantly in
the recent 2 years, we must maintain a strong balance sheet.
Evaluate options for refinancing or restructuring debt as
needed.
2. Sustainability: Embrace sustainable practices and consider
environmental, social, and governance (ESG) factors in
business decisions, which can attract socially responsible
investors and customers.
58. Recommendations
3. Continue to expand its international presence: Telecom
Egypt already has a significant international presence, but it
could continue to expand by investing in new markets and
expanding its existing partnerships. This would help the
company to diversify its revenue stream and reduce its
reliance on the Egyptian market.
