Global Telecom Holding S.A.E. (GTH) – (GTHE.CA) (Previously Orascom Telecom Holding S.A.E.) a leading provider of mobile telecommunications in Africa, Asia and North America, announces its consolidated financial and operating results for the third quarter ending September 30, 2013.
3Q13 Highlights
Total subscribers grew 4% YoY to approximately 88 million.
Revenue of USD 861 million, an organic3 decline of 1% YoY, impacted by regulatory and governmental actions.
Operating Income increased 5% YoY to USD 249 million.
EBITDA remained stable YoY organically, amounting to USD 408 million, impacted by one-off charges of USD 7 million.
Group EBITDA margin of 47.4%. EBITDA margins for the major subsidiaries were as follows: Djezzy 57.2%, Mobilink 43.1%, and banglalink 36.3%.
Net Income before Minority Interest stood at USD 51 million, negatively impacted by financial expenses of USD 127 million and positively offset by foreign exchange gain of USD 13 million.
Net Debt stood at USD 2.4 billion, decreasing 10% compared to 4Q12; with Net Debt/EBITDA5 of 1.5x as at September 30, 2013.
Ahmed Abou Doma, Chief Executive Officer, comments:
Our operations continued to be negatively impacted by regulatory and government actions. Our revenue stood at USD 861 million for the quarter, representing an organic decline of 1% compared to last year. In spite of the adverse conditions in Algeria, Pakistan and Bangladesh, EBITDA remained stable organically YoY, amounting to USD 408 million. However, EBITDA included one-off items in total of USD 7 million; rebranding cost associated with Mobilink and GTH’s restructuring charges, without these one-offs, EBITDA would have grown 2% YoY
organically.
Reported results in US dollar were adversely impacted by the local currency devaluation against the US dollar, mainly in Pakistan. Our subscribers increased 4% YoY to approximately 88 million customers, driven by growth in Pakistan and Bangladesh. We launched 3G services in Bangladesh on October 10, 2013 after the conclusion of the 3G spectrum auction few weeks earlier. In Algeria, Djezzy was awarded a provisional 3G license on October 14, 2013.
Total subscribers increased 4% YoY to approximately 88 million customers by the end of 3Q13, driven by steady
growth in Pakistan and Bangladesh, and strong additions in Canada and Sub-Saharan Africa.
In Algeria, despite the on-going limitations, Djezzy increased the subscriber base by 2% YoY to 17.0 million.
In Pakistan, Mobilink subscribers grew 4% YoY to 37.4 million customers, as a result of continued churn
management coupled with a focus on reactivation offers, the launch of competitive bundles and data products.
In Bangladesh, banglalink’s subscribers’ base increased 5% YoY to 28.1 million customers, driven by high gross
additions.
In Sub-Saharan Africa, subscribers increased by 10% YoY, mostly driven by additions to Zimbabwe’s subscriber
base, with the number of subscribers growing 6% YoY. In Canada, subscribers of WIND Mobile increased by 25%, through its strategic focus on “Value Plus” attracting both postpaid and prepaid customers.
Reported revenue for the third quarter was negatively impacted by the local currency devaluation against the US
dollar, mainly in Pakistan. In Bangladesh, the local currency continued to appreciate against the US dollar. For
more details on the foreign exchange rates applied to the financial statements, please refer to the appendix.
Group revenue amounted to USD 861 million for 3Q13, an organic decline of 1% YoY, impacted by regulatory and governmental actions.
In Algeria, revenue increased 0.3% YoY in local currency, driven by growth in mobile data revenues.
In Pakistan, revenue grew 4% YoY in local currency, supported by higher VAS, data and other revenue as well as a higher subscriber base.
In Bangladesh, revenue decreased 15% YoY in local currency, due to lower usage per subscriber, affected by the implementation of the regulatory directives of disconnecting suspected VoIP customers. Shortfall in revenue was slightly offset by higher VAS, interconnect and data revenue.
Telecel Globe’s revenue increased by 2% YoY, supported by higher revenue in Burundi, despite the prolonged
negative impact of the on-going security situation in CAR on top line.
In Algeria, Djezzy’s ARPU decreased 4% YoY in local currency, as Djezzy continues to face various challenges
regarding the approval of its commercial offerings.
In Pakistan, Mobilink’s ARPU remained relatively stable YoY in local currency, as a result of price increase
initiatives for base tariffs and offers implemented during 1Q13, alongside the introduction of new products and
bundles during 3Q13.
In Bangladesh, banglalink’s ARPU decreased 19% YoY in local currency, due to the implementation of a 10 seconds pulse for all packages in October 2012, alongside the impact of applying the regulatory directives of disconnecting high value suspected VoIP customers.
Consolidated EBITDA for 3Q13 remained organically stable YoY, despite the challenges imposed via regulatory and governmental actions and its impact on our operations. Reported EBITDA in US dollar decreased 4% YoY.
However, EBITDA included one-off items in total of USD 7 million; rebranding cost associated with Mobilink and
GTH’s restructuring charges, without these one-offs, EBITDA would have grown 2% YoY organically.
In Algeria, EBITDA decreased 2% YoY in local currency, due to the lack of competitive pricing plans for B2B and
high value customers, which led to almost flat revenue YoY, in parallel with the increase in HR and rental costs.
In Pakistan, EBITDA increased 4% YoY in local currency, supported by higher VAS, data and other revenue, a
higher subscriber base and cost optimization efforts.
In Bangladesh, EBITDA grew 5% YoY in local currency, despite the YoY decline in revenue. EBITDA growth was
supported by savings on G&A and network costs, and lower SIM tax subsidy as well as cost optimization efforts.
Consolidated EBITDA margin for the third quarter of 2013 was 47.4%, supported by solid GSM margin of 47.7%,
due to relatively stable EBITDA margins in Algeria, Pakistan and Bangladesh.
Net Income
Net Income attributable to Equity Holders of the Parent amounted to USD 46 million for the quarter, negatively
impacted by financial expenses of USD 127 million, and share of loss of associates of USD 35 million, positively
offset by foreign exchange gain of USD 13 million. EPS for the three months ended September 30, 2013 amounted to USD 0.05/GDR.
CAPEX
Total CAPEX for the quarter increased 256% YoY to USD 196 million. In Pakistan, CAPEX increased 101% YoY
following the commencement of network swap program, which is currently on-going in the Southern regions. In
Bangladesh, CAPEX increased 548% due to the commencement of network swap prior to the launch of 3G
services, which took place on October 10, 2013. CAPEX for Telecel Globe remained low for the quarter.
Cash and Debt
Net debt declined 10% for the third quarter of 2013 to reach USD 2.4 billion in comparison to USD 2.7 billion as at
December 31, 2012, leading to Net Debt/EBITDA of 1.5x as of September 30, 2013.
GTH Operations
The Group operates in seven countries with favourable dynamics in Africa, Asia and North America. It is worth
highlighting that GTH serves a population of 459 million people with an average mobile penetration rate of 54%.
Orascom Telecom Algeria S.p.A (“OTA” or “the company”) operates a GSM network in Algeria and provides a
range of prepaid and postpaid products encompassing voice, data and multimedia, using the corporate brand
“Orascom Telecom Algerie” and the dual commercial brand of “Djezzy” and “Allo”. OTA is focusing on maintaining value through key strategic pillars. These strategic pillars are oriented towards value segmentation, distribution control, operational excellence, new revenue streams and assets monetization, control of regulatory risks, and finally retaining key staff members as well as introducing new talent development programs.
OTA continued to face various challenges due to actions from a number of government authorities. In particular,
the bank of Algeria in our view issued an unfounded decision during 2Q10, instructing banks not to process any
overseas foreign currency transfers by OTA leading to a very negative impact on OTA’s network and reputation.
Nevertheless, the company maintained its leadership position with a market share of approximately 52.6%3,
controlling the largest distribution across all 48 provinces (Wilayas) and operating the largest network with 7,588
sites (including extension racks) by the end of 3Q13. Djezzy was awarded a provisional 3G license on October 14, 2013. The final license with the relevant coverage obligations are expected to be granted after payment of fees, satisfaction of conditions indicated in the tender documents and receipt of clearances and approvals from various governmental authorities. The license will cost DZD 3 billion (approx. USD 40 million) and will be valid for 15 years.
The operator received an exceptional approval from the Bank of Algeria, allowing it to make foreign payments to
acquire equipment exclusively dedicated to 3G technologies.
OTA launched several promotions during Ramadan targeting the key customers’ segment. These promotions
included “Liberty Ramadan from shour to ftour” for all Djezzy carte customer base, the “100% Rabhine” for the
entire Allo customer base, and a Ramadan option of additional 100 minutes when consuming DZD 100 for
postpaid customers. The VAS activity distinguished itself on the marketplace through the launch of “Scoop Dine”,
the content service platform of OTA with specific religious content for Ramadan. Additional VAS services were
launched during 3Q13, including “SMS Boukala” and Facebook related ones as the “Boukala” app and the “Muslim Inventions” contest. Competitive roaming tariffs to pilgrims heading to Mecca were also communicated during the period. Several events were held for elite customers and partners were organized all over Algeria including a khaima for 2,000 people in Algiers featuring well-known artists. OTA continued to sell its mobile
telecommunication services through indirect channels (distributors) and through 87 owned “Djezzy” branded
shops. The eight exclusive national distributors cover all 48 provinces (Wilayas) and are distributing OTA’s
products through 19,000 authorized points of sale (POS).
Djezzy’s subscribers’ base stood at 17.0 million customers, despite the regulatory constraints that limited its ability to compete effectively. Revenue increased 0.3% YoY to DZD 36.3 billion, as a result of higher data revenue. EBITDA decreased 2% YoY to DZD 20.8 billion, due to the lack of competitive pricing plans for B2B and high value customers, in parallel with the increase in HR and rental costs.
Pakistan Mobile Company Limited (PMCL) operates under the brand “Mobilink” and has established itself as a
market leader amongst Pakistan’s Mobile network operators, providing prepaid and postpaid voice and data
services to individuals and corporate clients across Pakistan. Mobilink is focused on retaining and strengthening
its market share to achieve revenue growth, whilst continuing to reduce operational costs.
The political and economic landscape coupled with harsh weather conditions and floods, impacted the operating
environment during 3Q13, and were further aggravated by a power shortage. The government increased
commercial electricity tariffs by 30% effective October 1, 2013. At the same time, the government increased
petroleum prices by 5% to PKR 108/liter. Effective July 1, 2013, withholding tax on recharge was increased by 5% to 15%. The devaluation of the local currency against the US dollars continued, losing more than 10% YTD. After the PTA Chairman took charge, the preliminary process for 3G spectrum auction was initiated.
During the quarter and in order to deal with the seasonality and economic slowdown, Mobilink introduced a
pioneering “full control” bundle portfolio, which combined multiple voice bundles in a customer friendly
interface. Such a unique offer allowed Mobilink with the flexibility to craft specially designed products for
different value segments. Multiple weekly and monthly offers were added to enrich the product portfolio.
Mobilink implemented several initiatives to expand subscribers’ base and maintained an aggressive stance on SIM selling churn management. The operator offered competitive acquisition and reactivation campaigns during the quarter, by welcoming back subscribers with an upfront incentive of on-net minutes, SMS and MBs alongside
attractive offers of bonus minutes on recharge.
In mobile internet, Mobilink continued its focus on data by offering news and cinema apps as well as launching
multiple data bundles. An educational portal “Mobile Academy” was launched on Android platform and operator
billing was introduced for well-known WAP portals. Handsets from major brands such as Blackberry, Nokia and
HTC were offered during the quarter. The operator conducted an on-ground activation to educate valuable
customers about mobile internet covering market places and universities across multiple cities nationwide. In
addition, Mobilink launched special offers for VIP customers including free voice minute on domestic remittances
processed through MobiCash. Event specific VAS content, GPRS, and voice offers as well as discounts on
international dialling and roaming were launched. The VAS portfolio was enriched during the quarter by adding
innovative services such as “My Status” and “Bolay Facebook”.
Mobilink’s revenue and EBITDA increased 4% and 4.5% YoY to PKR 26.7 billion and PKR 11.5 billion respectively, driven by higher VAS, data and other revenue alongside a higher subscriber base, which grew 4% YoY to 37.4 million customer with a stable ARPU YoY. Growth in subscribers’ base resulted from continued management of churn coupled with a focus on reactivation offers, the launch of competitive bundles and data products.
Banglalink Digital Communications Limited (“BDCL”) provides its services under two main brand names: “banglalink” and “Icon”. BDCL’s marketing strategy is oriented towards targeting different consumer segments
with tailored products and services to cater for the needs of these segments.
Banglalink paid the final instalment of the 2G license renewal during August 2013. On September 8, 2013,
banglalink was officially announced as one of the winners of the 3G spectrum auction, conducted by BTRC.
Total price for the 5MHz block of 3G spectrum acquired was USD 110.25 million, inclusive of 5% VAT and the license is valid for 15 years. The government will allow banglalink to offer LTE and 4G services over its 3G spectrum, as well as on the existing 2G spectrum, subject to permissions. banglalink launched 3G services on October 10, 2013.
The government directed all mobile operators to complete the MNP process within seven months effective June
13, 2013. Mobile operators were instructed to finalize the details of the MNP process and governance modality
jointly. However, MNOs have responded that timing is not appropriate considering the 3G process, the timeline to
implement MNP is not feasible and the timeline should be set realistically only after consultation.
During 3Q13, banglalink continued to launch attractive services and offers to the market promoting voice, VAS
and data. banglalink launched new mixed offers with data and voice. A new package targeting youth segment
“banglalink Play” was launched, the package is a friends and family based offer with free Facebook browsing and
attractive data offer, in addition to “My Offer” a need based offer designed based on the customer usage
behaviour, with attractive tariff for reactivated customers and handset bundle offer.
banglalink’s revenue decreased 15% YoY to BDT 10.0 billion, due to lower usage per subscriber, affected by the
implementation of the regulatory directives of disconnecting suspected VoIP customers. The shortfall in revenue
was slightly offset by higher VAS, interconnect and data revenue. In addition, fifteen days of national strikes
during 3Q13 negatively impacted the business. banglalink subscribers grew 5% YoY to 28.1 million customers.
EBITDA increased 5% YoY to BDT 3.6 billion despite the YoY decline in revenue. EBITDA growth was supported by savings on G&A and network costs, and lower SIM tax subsidy as well as cost optimization efforts. During 2013, banglalink’s churn rate improved due to the implementation of a price leadership strategy that led to higher
customers retention compared to 2012.
Globalive Wireless Management Corp. (“Company” or “GWMC”), operates its wireless business under the brand
name WIND Mobile, is a Canadian wireless services provider.
During 3Q13, WIND Mobile continued to deliver on its “value plus” strategy by adding both postpaid and prepaid
subscribers while carefully managing economics for voice and mobile broadband customers. WIND Mobile added 16,376 net subscribers and closed the quarter with a total of 636,827 active subscribers, maintaining its position as the fourth largest wireless carrier in the Canadian market. Experiencing strong year-over-year growth, WIND Mobile achieved a 25% growth in subscribers and a 9% growth in ARPU compared to 3Q12.
On the commercial front, WIND Mobile continued to lead in “real unlimited” and “no contract” proposition in Canada supported by managed subsidies and the aforementioned value plus positioning. By end of 3Q13, WIND
Mobile’s distribution footprint and branded points of sale expanded to 314 retail properties across the country.
Population coverage continued to exceed 14 million with more than 1,328 sites on air.
WIND Mobile also launched multiple iconic devices throughout the quarter, including the Samsung Galaxy Note III
and the HTC One. These were not only in line with major operators, but also complemented WIND Mobile’s
existing device lineup featuring the SONY Xperia L, BlackBerry Q5 and the Huawei Ascend Mate. In terms of the
WIND Mobile brand, the company launched its new brand positioning during 2013 Back to School timeframe to further distinguish from the new wireless entrant category.
