Telecom Egypt Records Impressive 30% YoY Revenue Growth in Q3 2023

Telecom Egypt’s Q3 2023: 30% YoY revenue surge, diversified streams, customer growth, resilient EBITDA, and strategic outlook.

In the third quarter of 2023, Telecom Egypt showcased robust financial performance, reporting a 30% year-on-year increase in consolidated revenue, reaching EGP 42.0 billion. The impressive growth was attributed to several key factors driving revenue diversification.

The International Direct Dialing (IDD) segment played a pivotal role, almost doubling YoY, achieving EGP 4.3 billion. This significant uptick was fueled by a 12% YoY surge in traffic and the positive impact of USD appreciation. Cable revenue also experienced substantial growth, marking a 50% YoY increase and reaching EGP 3.1 billion. Additionally, both fixed and mobile data revenues contributed to the positive trend, rising by 18% YoY and totaling EGP 15.9 billion.

Telecom Egypt witnessed substantial expansion in its customer base across various segments. Fixed voice subscribers grew by 9% YoY, reaching 12.4 million, while fixed data subscribers increased by 8% YoY, totaling 9.3 million. Mobile subscribers experienced a 6% YoY growth, reaching 12.5 million.

The company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) exhibited impressive performance, surging to EGP 17.6 billion, achieving a robust margin of 42%. This increase was driven by an improved revenue mix across various segments.

Operating profit reached EGP 10.6 billion, indicating a notable 23% YoY growth, despite facing a challenging environment with a 38% YoY inflation in Depreciation and Amortization (D&A) costs.

Net profit demonstrated substantial growth, rising by 48% YoY and reaching EGP 9.1 billion. This remarkable performance was attributed to positive operational results and a significant 67% YoY increase in investment income, reaching EGP 3.4 billion. The company navigated through 3.7 times higher interest expenses, showcasing resilience in its financial strategy.

In-service Capital Expenditure (CapEX) reported EGP 11.7 billion, reflecting an in-service CapEX/sales ratio of 28%. The cash CapEX, including license costs, amounted to EGP 18.4 billion, implying a cash CapEX/sales ratio of 44%. Excluding license payments, the cash CapEX/sales ratio stood at 37%.

Telecom Egypt reported a net debt of EGP 35.9 billion, with the net debt/EBITDA ratio remaining flat at 1.5x on an annualized basis, compared to 1.4x in FY 2022. This stability was achieved despite a 51% increase in gross debt, primarily due to foreign currency exposure revaluation.

Net operating cash flow reached EGP 11.4 billion, while Free Cash Flow to the Firm (FCFF) amounted to a negative EGP 2.3 billion. The negative FCFF was primarily driven by increased vendor payments to secure CapEX and as a hedge against expected foreign exchange fluctuations.

Telecom Egypt’s Q3 2023 results showcase a resilient financial performance, demonstrating the company’s adaptability and strategic positioning in a dynamic market environment.

I’m pleased with our 9M 2023 financial results, as we head towards year-end on a strong note. Total revenue amounted to EGP 42.0bn, culminating from good broad-based growth across all business units, and reflecting the value of our consistency in enhancing our services. Retail came through at the top again with EGP 23.2bn in revenue, up 16% YoY, driven by meaningful growth in fixed & mobile data services. Our wholesale also gained traction with EGP 18.8bn in revenue, up a strong 52% YoY. Across the board, we once again recorded an increase in customer numbers. EBITDA margin came in at 41.9% and operating profit grew by 23% YoY.

Our margins remained resilient against the inflationary pressures witnessed across the various cost elements in 9M 2023 (particularly the higher interest expense and currency devaluation), thanks to organic operational performance and continued savings from the national roaming agreement. Management continued to strategically procure and settle its CapEX requirements upfront, as such FCFF was strained, amounting to a negative EGP 2.3bn mainly due to the increase in vendor payments as a mean of hedging against expected FX fluctuations in 2024 and other unforeseeable risks given the current volatile situation in the region.

We continue to innovate and deliver, keeping in mind the rapidly changing needs of our partners and end users. A case in point is the recently launched WeConnect cross-connection ecosystem, which reflects our dedication to focus on our partners’ connectivity needs by designing solutions and further developing our well-established infrastructure to create sustainable financial returns and increase our shareholder value.

Looking ahead to 2024, our strategy will be to focus on the pathways that will deliver significant and sustainable profitability. We will pursue and prioritize different growth options and opportunities to monetize our assets, especially U.S. dollar-generated assets, to bring more agility to the investment outlays for our core business, and to manage our operating costs. We will continue to deploy and develop innovative technologies to enhance the business and improve the end-user experience while enhancing our pricing and marketing strategies. I remain confident in our long-term trajectory as we already have the right formula in place for continued success and long-term growth.

Mohamed Nasr, Managing Director and Chief Executive Officer, Telecom Egypt

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