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MOBINIL

JAZIRA SECURITIES BROKERAGE


Wednesday, July 28, 2010 RESULTS UPDATE

Most of the Bad News is Discounted by Now BUY


Market Price (EGP/share) 156
Mobinil issued 1H FY10 results yesterday, which came close to our expectations. We were concerned in our latest report dated May 16, 2010,
that the Q1 FY10 weak results would grow even weaker over the remaining quarters of the year, as a result of the market relative saturation Latest Target (EGP/share) 193
and regulatory issues regarding the lack of new dialing numbers. Active subscribers numbers have came below our expectations, but we Upside (Downside) 24%
expect in 2H that Mobinil will manage to capture more new subscribers to come close to our full year FY10 expected figure of 27.6 mn up
Results impact on projections Minimal
from 25.1 mn at the end of June 2010. Given that Mobinil is the largest player in the Egyptian mobile market, it was the most harmed from the
limited dialing numbers among Egypt’s mobile operators, this along with the fierce competition rendered the spread in subscribers base Mo- Results impact on value Minimal
binil had over Vodafone to shrink from 5.7% in March 2010 to 1.4% in June 2010.
RIC EMOB.CA
ARPU fell mildly during the quarter, reflecting a 2.3% qoq drop to EGP33.9 in Q2 FY10 compared to EGP34.7 in Q1 FY10. Our expec-
tations of EGP31.7 for all of FY10, is based on Mobinil capturing a greater pool of new subscribers in 2H FY10 than it managed in 1H. So, our Full Name: Egyptian Company for Mobile Services
assumption of a lower ARPU would occur once Mobinil finds incentive to lower prices when it has access to more SIM cards to sell. Short Names Mobinil,
ECMS
Revenues reversed its upward trend as we expected and 1H FY10 revenues witnessed a 2.7% decline compared to our previous projec-
tions of a full year decline of 2.9%. The third quarter is normally the most active, and we expect Q3 results would reveal more in what direc- Shareholders Ownership stake
tion our expectations should be adjusted for the full year.
Mobinil Telecommunications (MT) 51.03%
EBITDA margins improved in Q2, but still on a semi annual basis EBITDA figure dropped 16.3% in 1H FY10 compared to our projec- France Telecom in MT 71.25%
tion of a FY drop of 16.4%. However, with a low level of customer uptake in Q2, it was normal to improve margins, but once Mobinil is
granted the new 11 digital dial code, it will move again aggressively to expand subscribers, which may result in further squeeze in margins. Orascom Telecom in MT 28.75%
Orascom Telecom 20.00%
Net income declined 29% and 23% in 2Q and 1H FY10 respectively, while we expect full year net income to drop by 27% in FY10.
Furthermore, since the company will require to expand its interest bearing debt in Q3 to finance the US$130 mn acquisition of Linkdotnet in Free Float 28.97%
July 2010, we expect that the company may witness further decline acceleration in the bottom line this year if it can’t manage to im-
M obinil Price Chart (EGP)
prove on the operational level. 250

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All in all, we believe that Q3 would provide a clearer picture on how the year would end... 210

190
We changed our recommendation to buy from hold that was attached to the May report, since we see that 2H FY10 will be better or at 170

least at par with the market’s current expectations as the latter was brought down by 1H results close to our expectations. Furthermore, we be- 150

lieve that most of the negative impact of the 1H FY10 results have already been discounted in the market. J-
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Mobinil KPIs Q1 FY09 Q1 FY10 Change Q2 FY09 Q2 FY10 Change 1H FY09 1H FY10 Change FY09 a FY10 e Change FY ending Dec. 2009a 2010e 2011f 2012f
Closing Subscribers (mn) 21.2 26.1 23.3% 22.9 26.1 14.4% 22.9 26.1 14.4% 25.4 28.9 14.2% Revenues (EGP mn) 10,807 10,488 10,985 11,707
Active Subscribers (mn) 20.3 24.7 21.6% 22.0 25.1 14.0% 22.0 25.1 14.0% 24.1 27.6 14.2%
EBITDA Margin 46.9% 40.4% 39.5% 39.1%
Postpaid (mn) 0.7 0.7 6.8% 0.7 0.8 13.3% 0.7 0.8 13.3% 0.7 0.7 5.0%
Prepaid (mn) 19.7 24.0 22.1% 21.3 24.3 13.9% 21.3 24.3 13.9% 23.5 26.8 14.4% EPS (EGP) 18.8 13.6 15.9 18.4
Calculated ARPU (EGP) 42.0 34.7 -17.3% 42.9 33.9 -21.1% 42.2 34.4 -18.5% 39.1 31.7 -19.0% DPS (EGP) 9.5 9.5 10.0 12.0
PER 8.3 11.4 9.8 8.5
Net Revenues (EGP mn) 2,490 2,546 2.2% 2,725 2,530 -7.2% 5,215 5,076 -2.7% 10,807 10,488 -2.9%
EBITDA (EGP mn) 1,215 1,021 -16.0% 1,318 1,099 -16.6% 2,533 2,120 -16.3% 5,070 4,236 -16.4% DY 6.1% 6.1% 6.4% 7.7%
EBITDA % 48.8% 40.1% -17.8% 48.3% 43.4% -10.1% 48.6% 41.8% -14.0% 46.9% 40.4% -13.9% EV/EBITDA 4.0 4.6 4.3 3.9
Net Income (EGP mn) 424 357 -15.8% 536 381 -28.9% 960 737 -23.2% 2,038 1,482 -27.3%
Q1 and 1H FY09 results as reported without proforma adjustments Source: Mobinil results & Jazira Capital forecasts Net Debt (EGP mn) 5,055 4,566 3,906 3,079

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MOBINIL
JAZIRA SECURITIES BROKERAGE
Wednesday, July 28, 2010 RESULTS UPDATE

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