investor presentation - gtelecom.cominvestor+present… · 2017 investor presentation ......

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7 Investor Presentation

September 2017

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Disclaimer

This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Global Telecom Holding

S.A.E. (the "Company"). Further, it does not constitute a recommendation by the Company or any other party to sell or buy shares in the Company or any other

securities.

This presentation includes statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the

use of forward-looking terminology, including, without limitation, the terms "continue", "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal",

"target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than

statements of historical facts included in this presentation, including, without limitation, those regarding the Company’s prospects, the turnaround of Algeria,

including the ongoing structural measures aimed at improving performance, realization of the synergies of the Warid transaction, operational and network

development and network investment, including expectations regarding the roll-out and benefits of 3G/4G/LTE networks, as applicable, capital expenditure and

growth strategies are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other

factors which, may cause the actual results, financial condition, performance, liquidity, dividend policy or achievements of the Company, or industry results, to be

materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in

which the Company will operate in the future. Important factors that could cause the Company's actual results, performance or achievements to differ materially

from those in the forward-looking statements include, among others, the prices of, and demand for, the Company's products and services, the actions of

competitors, the availability of credit, governmental regulation of the telecommunications industry in countries in which the Company operates, the effects of political

uncertainty and economic conditions in the relevant areas in the world, the impact of foreign currency rates, taxation, and/or unforeseen litigation, investigations or

other regulatory actions. Forward-looking statements should, therefore, be construed in light of such factors and undue reliance should not be placed on forward-

looking statements.

These forward-looking statements speak only as to circumstances existing as of the date of this presentation. The Company expressly disclaims any obligation or

undertaking (except as required by applicable law or regulatory obligation including under the rules of the Egyptian Exchange), to release publicly any updates or

revisions to any forward-looking statement, whether as a result of new information, future events or otherwise.

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GTH – established market position in highly populated countries…

Pakistan38%

Algeria42%

Bangladesh20%

Algeria45%

Pakistan38%

Bangladesh17%

Pakistan 43%

Algeria36%

Bangladesh21%

USD 2.2 billion

USD 1.0 billion

USD 0.9 billion

1 Operating free cash flow defined as underlying EBITDA – Capex (excluding licenses)3 Customer market share4 Source: data.worldbank.org

Algeria#1 Market position3 (share - 36%)

(3 Player Market)

Demography4

• Population: 40 million

• Population below 24 years: 45%

Macro-economic4

• Real GDP growth: 3.6%

• GDP (PPP) per capita: USD 14,310

Pakistan#1 Market position1 (share - 38%)

(4 Player Market)

Demography4

• Population: 190 million (6th

largest)


Macro-economic4



Bangladesh

#3 Market position1 (share - 25%)

(3 Player Market)

Demography4

• Population: 161 million (8th largest)


Macro-economic4



…Similar markets and phases of development

• 400 million population• 50% below 24 years • 100 million clients

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Mobile-connected societies with high growth potential…

72% 73%

115%

PAK BGD ALG

421

254345

PAK BGD ALG

…traditional business still

growing and appetite for

innovation

Mobile Penetration1 (%)

Data Usage2 (MB/User)

Western Europe Avg: 121%

Western Europe4

Avg: 4,041 MB/User

Mobile Data Penetration2 (%)

48% 50%40%

PAK BGD ALG

Western Europe 1

Avg: 86%

26%

12%

31%

PAK BGD ALG

Western Europe Avg: 86%

Smartphone penetration3 (%)

Source: Company data, WCIS, Cisco estimates, World Bank Group1 2016, based on WCIS data2 Based on Company data. Data usage calculated on active customers in the last 3 months as of 30 September 20163 Penetration computed as smartphone connections divided by total mobile connections4 2016, based on Cisco estimates (monthly usage data) and company calculations

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GTH markets at a glance

CONCLUDE INTEGRATION,

NETWORK EXPANSION AND

DELIVER SYNERGIES

TURNAROUND WITH GROWTH IN

SMARTPHONE AND DATA ACCESS

NETWORK EXPANSION AND

DIGITAL STRATEGY

Pakistan Algeria Bangladesh

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Pakistan: fuelling momentum as market leader

INTEGRATIONNETWORK

DEVELOPMENTDIGITAL AGENDA

• Enhancing customer proposition through network development

• Focus on:

• Data coverage increase

• Network modernization

• Warid (#5) acquired in July, 2016

• 3G offered to Warid customers in 30 cities

• 4G/LTE offered to Mobilinkcustomers in 17 cities

• On-net products: in the market

• January 2017: rebrand to “Jazz”

• Synergies: 68% run-rate achieved ~ PKR 8.2 billion (USD 78 million)

• Growing MFS with focus on transactions and wallets top-ups

• Jazz Xlr8 (Incubation Centre)- Largest Incubator/Accelerator of

Pakistan launched

- 30 start-ups to join the program

- First 5 start-ups to represent JazzXlr8 at GSMA (4YFN)

…banking the unbanked, enhancing customer proposition through network, bringing synergies with integration

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Algeria: fixing the business

STRUCTURAL ISSUES NEW FRAMEWORK RENEWED FOCUS

• Right partner (FNI – Algeria Government)

• SMP status lifted in Q3 2016

• Heavy investment in technology

• Major internal transformation

• Legacy under-investment in network & systems

• Significant Market Player status

• Asymmetry in MTRs

• Restrictions on 3G roll-out

• Stagnant Organization – Loss of talents

• 2G position, 3G parity, 4G/LTE leadership

• Data centric pricing – First in Market

• Refreshed Brand –Network/Emotion

• Focus on both Indirect & Direct Distribution

• New leadership team – Urgency

• Organization Redesign –Lean/Agile

STAGNATION BACK TO BASICS GROWTH

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Bangladesh: getting back our position in the market…

ORGANIZATIONAL

TRANSFORMATION

NETWORK

DEVELOPMENT

STABILIZING MARKET

POSITION

• Focus on substantially improving 3G network

• Regional Network and Distribution alignment focused on ROI

• Fiber transmission – Leased Capacity Model

• Managed services in FLM and Customer Service

• Designed for Shared Services

• Move to digital talents and automating process in all areas

• Open plan, hot-desking and refreshed culture

• Closed the gap to #2 by 3 points in 2016

• New spectrum is expected during 2017

• National Incubation center launched

• Indirect distribution refresh –Cluster mode

…on the back of network investments and digital strategy

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Our Strategy

Deliveringon strategy

Pe

rform

ance

Transfo

rmatio

n

Ne

w R

eve

nu

Stream

s

$

$$

$

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Q2 2017 financial highlights

Service revenue(USD MILLION)

732

334 43.6

- 0.9% organic1 YoY+ 9.3% reported YoY

98.7

Mobile customers(MILLION)

Underlying EBITDA(USD MILLION)

Underlying EBITDA margin (%)

+ 12.1 million YoY²

1 Revenue and EBITDA organic growth are non-IFRS financial measures that exclude the effect of foreign currency movements and other factors, such as businesses under liquidation, disposals, mergers and acquisitions; in the organic calculation, Warid is pro-forma consolidated within GTH’s results with effect from 1 January 2016.

² Customers number includes Warid customers

► Service revenue declined organically 1% YoY:

• Performance in Algeria and Bangladesh

• Partially offset by strong growth in Pakistan

► Mobile data revenue organic growth of 52% YoY

► Underlying EBITDA declined organically 2% YoY:

• Strong performance in Pakistan

• Offset by a decline in Algeria and Bangladesh

► Continued solid underlying EBITDA margin of 43.6% and reported EBITDA margin of 42.9%

► Continued customer growth of 14% YoY, with 12.1 million customers added due to strong performance in Pakistan and the consolidation of Warid

- 2.0% organic1 YoY+ 2.4% reported YoY

- 3.4 p.p. YoY

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Pakistan: Synergies Target Delivered, Spectrum Investment for Future Growth

► Merger integration progress:

• Annual run rate target of synergies > USD 115 million achieved well ahead of schedule

• Network integration activities in progress

► Acceleration of data revenue (+46% YoY)

► Underlying EBITDA increase supported by strong revenue growth and synergies

► Underlying EBITDA margin expansion to 44.7%, +4.6 p.p. YoY and +1.5 p.p. QoQ

► Jazz won the auction for 10 MHz in the 1800 MHz band; payment of USD 295 million (+10% withholding tax) made in Q2

5.96.8

17.7%18.0%

0

2Q16 2Q17

49.3 52.5

2Q16 2Q17

TOTAL REVENUE

(PKR BILLION)

EBITDA AND EBITDA MARGIN

( P K R B I L L I O N A N D % )

MOBILE CUSTOMERS

( M I L L I O N )

CAPEX EXCL. LICENSES

AND LTM CAPEX/REVENUE

( P K R B I L L I O N A N D % )

+6.9% YoY +6.4% YoY

+28.3% YoY

+19.1% YoY underlying +14.0% YoY

35.7 36.2 37.7

2.1 2.5 2.7

2Q16 1Q17 2Q17

Mobile Other

37.8 38.7 40.4

13.616.2

17.5

36.0% 41.8% 43.3%

0.0

10. 0

2Q16 1Q17 2Q17

NOTE: Q2 2016 pro-forma results assume that the results of Warid have been consolidated (including intercompany eliminations) with effect from 1 January 20161 Q2 2016 EBITDA negatively impacted by performance transformation costs of PKR 1.7 billion. Q2 2017 EBITDA negatively impacted by performance transformation/integration costs of PKR 0.6 billion

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Algeria: turnaround in progress

► Revenue trend gradually improving:

• Accelerating data revenue in Q2 (+89% YoY)

• Strong focus on customer base retention with launch of new tariff portfolio

► Leadership in 4G/LTE population coverage

► Challenging environment and intense competition:

• Continued high inflation

• New Finance law in force since January 1: increase in VAT and tax on recharges

• Intense competition on data pricing

► Underlying EBITDA margin at 45.2%:

• Excluding finance law impact, underlying EBITDA margin would have been at 48%

► Gross dividends of ~USD 150 million (60% of 2016’s net income) to be distributed in Q3 2017

1 Q2 2016 EBITDA negatively impacted performance transformation costs of DZD 21 million

4.7

3.1

14.9%15.5%

0

2Q16 2Q17

16.3 15.5

2Q16 2Q17

T O T A L R E V E N U E

( D Z D B I L L I O N )

M O B I L E C U S T O M E R S

( M I L L I O N )

-8.0% YoY -4.9% YoY

-18.7% YoY

-18.6% YoY underlying1 -33.7% YoY

14.012.5

11.4

51.1% 49.2% 45.1%

0.0

10. 0

2Q16 1Q17 2Q17

27.2

25.0 24.9

0.4

2Q16 1Q17 2Q17

Mobile Other

27.4

25.5 25.3

0.5

0.2

E B I T D A A N D E B I T D A M A R G I N

( D Z D B I L L I O N A N D % )

C A P E X E X C L . L I C E N S E S

A N D L T M C A P E X / R E V E N U E

( D Z D B I L L I O N A N D % )

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Bangladesh: sustained data growth, spectrum disadvantage

► Continued aggressive competition on customer acquisition

• 0.2 million QoQ customer growth

► Strong growth in data revenue of 32% YoY, benefitting from smartphone penetration increase, resulting in 9% YoY data customer growth

► Underlying EBITDA declined as a result of revenue trend and higher costs for acquiring new customers

• Margin still above 40%, notwithstanding the revenue trend

► 3G population coverage ~68%, gradually closing the gap vs competition

► Focusing on the regulatory agenda: 4G/LTE, spectrum, towers

1 Q2 2016 EBITDA negatively impacted by performance transformation and SIM re-verification costs of BDT 0.5 billion

2.6

1.4

22.6% 18.7%

0

2Q16 2Q17

31.1 30.7

2Q16 2Q17

T O T A L R E V E N U E

( B D T B I L L I O N )

M O B I L E C U S T O M E R S

( M I L L I O N )

-3.0% YoY -1.5% YoY

-8.9% YoY

-16.1% YoY Underlying1 -44.6% YoY

5.4 5.54.9

43.7% 46.0% 41.1%

0.0

2Q16 1Q17 2Q17

11.9 11.7 11.6

0.4 0.3 0.4

2Q16 1Q17 2Q17

Mobile Other

12.012.3 12.0

E B I T D A A N D E B I T D A M A R G I N

( B D T B I L L I O N A N D % )

C A P E X E X C L . L I C E N S E S

A N D L T M C A P E X / R E V E N U E

( B D T B I L L I O N A N D % )

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Debt by entity

1 Underlying EBITDA excludes transformation costs and material exceptional items

As at 30 June 2017

Net debt / underlying1 LTM EBITDA

1.7x 2.2x

Gross debt / underlying1 LTM EBITDA

7.9%

Weighted averagecost of debt

Total Gross Debt(USD million)

Type of debt

Entity Loans Bonds Total

GTH Holding 325 - 325

GTH Finance BV - 1,200 1,200

Pakistan 776 55 831

Algeria 348 - 348

Banglalink - 300 300

Total Gross Debt 1,449 1,555 3,004

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Balanced maturity profile

Note: principle amounts of loans and bonds only

As at 30 June 2017

2017 2018 2019 2020 2021 2022 2023

GTH

Djezzy

Mobilink

Banglalink

40

527

305

627

721

68

716

(USD million)

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Q2 2017 income statement

Mainly due to the decrease in depreciation of telecommunication equipment in Pakistan

EBITDA increase was on the back of strong performance in Pakistan

Mainly due to GTH’s bond interest payment and fair value adjustment of Pakistan put option

Mainly due to fair value adjustment of embedded derivatives in financial liabilities contracts of Bangladesh in Q2 2016

Unrealized foreign exchange losses mainly due to BDT depreciating against USD by 3.2% YoY

USD millions 2Q17 2Q16Reported

YoY

Service revenue 731.6 669.3 9.3%

-Of which mobile data revenue 105 63 66.6%

Other revenue 33.5 23.5 42.5%

Total operating Revenue 765.1 692.8 10.4%

Total expenses (436.7) (387.7) 12.6%

EBITDA 328.4 305.1 7.7%

Depreciation and amortization (162.4) (179.9) (9.7%)

(Loss) / Gain on sold properity, equipment, intangibles, goodwill and scrapping

2.6 1.5 74.7%

Impairment loss from assets (1.4) (2.7) (47.7%)

Technical services expense (1.8) (11.1) (83.7%)

Other operating (loss) / gain (0.5) 4.8 n.m

Operating profit 164.9 117.6 40.2%Finance costs (77.2) (53.3) 44.8%

Finance income 3.1 2.1 45.0%

Net foreign exchange (loss) / gain (1.1) 6.2 n.m

Profit before income tax 89.7 72.7 23.4%

Income tax expense (54.6) (46.2) 18.2%

Profit for the period 35.1 26.5 32.5%

Attributable to:

The owners of the parent 7.6 (3.0) n.m

Non-controlling interests 27.5 29.5 (6.7%)

Profit for the period 35.1 26.5 32.5%

EPS (USD) 0.01 0.01 48.2%

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Appendix

FOREIGN EXCHANGE RATES APPLIED TO THE FINANCIAL STATEMENTS

Average rates Closing rates

2Q17 2Q16 YoY 2Q17 2Q16 YoY

Egyptian pound18.1023 8.8661 104.2% 18.1209 8.8864 103.9%

Algerian Dinar 109.0374 109.5438 (0.5%) 107.795 110.3139 -2.3%

Pakistan Rupee 104.81 104.6742 0.1% 104.8325 104.75 0.1%

Bangladeshi Taka80.8557 78.3502 3.2% 80.6424 78.3250 3.0%

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Further information

Investor Relations

Noha Agaiby

Cairo Registered Office Amsterdam Head Office2005C Nile City Towers - Northern Tower Gustav Mahlerlaan 314

Cornish El Nile Ramlet Beaulac 1082 ME Amsterdam

Cairo 11221, Egypt The Netherlands

Tel: +202 2461 5120 E: [email protected]

Visit our websitewww.gtelecom.com

http://www.vimpelcom.com/

investor presentation - gtelecom.cominvestor+present… · 2017 investor presentation ......

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