MobiNil at a Glance (as of 31 December 2003)

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Contents
Message from the Chairman
P A G E
GSM Operations
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Internet
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GSM Operations Support
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Highlights from 2003
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2003 Financial Review
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C O N T E N T S
Message
from the Chairman
Our strategy is regional growth by investing in the
development of telecommunications.
Dear Shareholders,
In 2003, Orascom Telecom (OT) successfully completed its restructuring program. OT has significantly deleveraged its
balance sheet and restructured its short-term liabilities into long-term arrangements. It has divested most of its non-core
sub-Saharan operations. This strategy has enabled OT to fully focus on its core operations: Djezzy (Algeria), Mobilink
(Pakistan), MobiNil (Egypt), Tunisiana (Tunisia) and Iraqna (Iraq), the new license signed in Iraq last December. By focusing
our resources on these operations, OT has aggressively rolled out networks in these countries and achieved substantial
subscriber growth. Equal focus on improving both profitability and growth led to enhanced margins as well as superior
revenue growth.
Our portfolio of assets is more balanced with roughly equal contributions from our three large operations in Algeria, Egypt
and Pakistan; I expect this trend to continue with our two newer operations in Tunisia and Iraq taking more relative
importance in the coming years.
To solidify relations with our shareholders, we increased our transparency by delivering our year end results in less than
75 days, improved the quality of our communication with investors, and enhanced our corporate governance standards
by including three non-executive Board members.
In 2004, our strategy will remain the same: continue to focus on maintaining our leadership in our key markets by delivering
high subscriber growth, exceeding 50% and high profitability. As new opportunities in the GSM world become scarce, we
will focus on highly populated regions with low penetration and high return targets. We also aim to capture more of the
value chain by developing all our GSM support operations.
In five years of existence, OT has become a leading regional GSM operator with true international scale: a subscriber base
expected to break the 10 million mark this year in markets with around 400 million inhabitants. Our increasing scale and
recognized operating expertise gives us the appropriate leverage with our key partners: government bodies, equipment
suppliers and financial institutions. I am convinced OT is strategically, operationally and financially well positioned to
deliver superior growth and profitability in the future.
Sincerely,
Naguib Sawiris
Chairman & CEO
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IRAQ
PAKISTAN
JORDAN
TUNISIA
ALGERIA
SYRIA
CHAD
EGYPT
YEMEN
CENTRAL AFRICAN
REPUBLIC
IVORY COAST
BURKINA FASO
BENIN
TOGO
GABON
CONGO BRAZZIVILLE
UGANDA
BURUNDI
DEMOCRATIC REPUBLIC
OF CONGO
ZAMBIA
ZIMBABWE
Current OT operations
Countries where OT has divested operations
GSM
OPERATIONS
• MobiNil
• Mobilink
• Djezzy
• Tunisiana
• Iraqna
• Sub-Saharan Operations
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O P E R A T I O N S
MobiNil-EGYPT
Orascom Telecom’s first investment in the Middle East started on May 21, 1998 with MobiNil.
MobiNil’s success is the story of a constantly reaffirmed commitment towards the Egyptian society. It has had more than five years
of market leadership, outstanding achievements, and an unwavering pledge to its mission to create value by providing the best quality
service for the maximum number of customers, the best working environment for its employees, and top value for shareholders.
MobiNil has the strongest network in Egypt; 1836 sites, 15 Switches, EFR Voice Clarity Enhancement and state-of-the-art
infrastructure to support the MobiNil network.
MobiNil was the first GSM operator and remains market leader in terms of subscribers and a national coverage of 95% of the
total populated area. It has roaming agreements with 247 operators in 109 countries and includes GSM, non-GSM and satellite
partners. The company also has a broad retail base, with more than 3000 Points of Sale across the nation.
Market Size
The Egyptian GSM market is one of the largest markets in the region. With a total
population of 72 million and a penetration of only 8% (over 6 million subscribers),
Egypt still has strong growth potential.
MobiNil reported active subscribers on December 31, 2003 at 2.9 million compared to
2.282 million at year-end 2002, representing an increase of 31%. In 2003, MobiNil
added 709,214 new net active subscribers compared to 424,000 in 2002, and achieved
higher proportional growth in revenue represented by a 33% increase in MobiNil's top
line. With this it achieved a 52.7% of the GSM subscriber market share.
Customer Segmentation
MobiNil's Postpaid base was 666,696 by the end of 2003, representing a 58% share in
the Postpaid market and a 44% increase over 2002. This has caused the Postpaid Prepaid mix to change to 22% - 78% from a 20% - 80% mix a year earlier. These results
demonstrate the success of MobiNil’s strategy to focus on high ARPU outcomes.
The Prepaid base was 2,324,518 by year end 2003, which represents a 28% increase
over 2002. The Prepaid segment represents the fuel for growth in the Egyptian GSM
market, targeting younger generations with growing needs for communication.
MobiNil continues its approach for providing the market with products and services
that address the different needs of the various segments. In its pursue to provide worldclass standard mobile experience to the market, MobiNil launched MobiNil Life (GPRS
Service) during the third quarter of 2003 to increase the non-voice revenues. This
service provides users with a friendly interface to easily access content including ring
tones and games. MobiNil Life also encompasses Multimedia Messaging Services (MMS).
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Market Indicators
In 2003, MobiNil managed to improve its operational and financial figures and it
reported strong profit growth for the year. MobiNil also reported strong revenue and
EBITDA growth of 33% and 31% respectively. MobiNil managed to increase its blended
ARPU for 2003 to LE 104 million, from LE 100 million in 2002.
Mobile Operators
Currently, MobiNil competes with Vodafone Egypt. In late 2003, MobiNil and Vodafone
reached an agreement with Telecom Egypt in which the two operators are committed
to pay a total of EGP 1,240 million each, spread equally over four years to the National
Telecommunications Regulatory Authority (NTRA). In exchange, Telecom Egypt surrenders
its GSM license to the regulator, thus granting mobile operators access to the 1800
MHZ spectrum. As part of the agreement, the two mobile operators will also be granted
an extension of the duopoly market until 2007, as well as other benefits.
Network Coverage & Roaming
MobiNil expanded network coverage to 95% of populated areas. As for roaming, several
new operators were signed in 2003. Continuous expansion will occur as MobiNil builds
on its leadership position.
Social Responsibility
MobiNil has been and continues to be one of the most active and leading corporate
citizens in Egypt, with a firm belief that success is not merely measured in numbers,
but it is also measured by fulfilling significant responsibilities towards society. MobiNil
seeks to manage the environmental, ethical and social aspects of its business responsibly,
striving towards externally recognized standards.
MobiNil is an active player in the Egyptian community, lending support to a variety
of cultural, social and sports events in an ongoing effort to express gratitude to the
community in which it functions. MobiNil is paving the way in a number of areas,
including goodwill to the Egyptian economy, education, heritage, culture, the arts,
technology, community service, the environment, and national sports.
MobiNil is an environment friendly organization, and is accredited the ISO 14001
Certificate for the environment.
MobiNil at a Glance
(as of 31 December 2003)
Date of Launch
21 May, 1998
Ownership Structure
The Egyptian Company for Mobile Services (MobiNil)
- MobiNil Telecommunications:
51.0%
• Orange Group SA:
71.25%
• Orascom Telecom Holding SAE: 28.75%
- Orascom Telecom Holding SAE:
16.6%
- Free Float: 32.4%
[
Listing
Cairo and Alexandria Stock Exchanges
RIC: EMOB. CA
Total Number of Subscribers
2,991,214
Total Number of Prepaid Subscribers
2,324,518
Total Number of Postpaid Subscribers
666,696
Total Market Share
52.7% market share
Geographical Coverage
95% of populated area
Retail Base
3000+ Points of Sale nationwide
Products and Services
MobiNil Monthly Postpaid Subscription
MobiNil Prepaid ALO
MobiNil Business
MobiNil Life (GPRS)
VAS
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P A G E
Fixed Dialing Number
CLIP, CLIP +
Call Barring, Call Forwarding, Call Waiting / Call Hold
SMS, IS-SMS, SMS 2TV
E-Mail
Multimedia Messaging Service (MMS), MobiNil Chat
News Pull Service Description with Info2cell
Flight Information Service
SMS Ads Commercial, SMS Winning Stars Game, Win the
Ring Game
Voice Mail, Conference Calling, Voice Information Service
(Short Numbers), IVR Bill Advice, Cinema012 IVR
Fax Mail, Data Services, Fax Services, WAP
International Access, Easy Go Scratch Cards, Roaming, FREE
3 Minutes Roaming
Home Cash Collection, E-Bill, Direct Debit, Budget Master, Bill
Payment at POS, ATM Bill Payment
Twin Line, Fax & Data Only SIM cards, 1Line2SIM, 32K SIM
Card
MobiNil Visa Card, Portabank, SMS Mobile Banking, IVR
Banking Services
GPRS, Multimedia Messaging Services (MMS), WAP, WEB
(Internet and Intranet Browsing)
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Mobilink-PAKISTAN
Mobilink started its operation in 1994 and until early 2001, it had a market share of 40%. It was in April 2001 that Orascom
Telecom took over management control of the company when it acquired a stake of 89% and changed the overall market dynamics
through its aggressive marketing strategy and expertise. In less than three years, Mobilink grew by almost seven times, achieving
a market share of 61% by the end of 2003. Moreover, while both existing operators employed AMPS technology, Mobilink was
the first cellular service provider in Pakistan to operate a 100% GSM technology.
During 2003, Mobilink aggressively grew the market. It started the year with 952,174 subscribers and a market share of 53%.
With a successful mix of strong brand image and sound financial results, Mobilink ended 2003 with a cumulative subscriber base
of 2,015,647, representing a 61% market share.
Market Size
Pakistan had 3.3 million subscribers at the end of 2003 out of a total population of
144 million. This 2.3% market penetration clearly demonstrates the tremendous growth
potential in Pakistan.
Mobilink is the market leader with both its Postpaid product, Indigo, and its Prepaid
product, Jazz, dominating their respective segments. Indigo, with a cumulative subscriber
base of 142,499, enjoys over 70% of the total Postpaid market, while Jazz has
approximately 60% share to its credit in the Prepaid domain with 1,873,148 subscribers.
Like most emerging mobile markets, the Pakistani mobile industry is primarily driven
by Prepaid with an industry wide sales mix of more than 92% Prepaid.
In 2003, Mobilink set new standards and achieved many landmarks between the Postpaid
and Prepaid brands and offered innovative Value Added Services (VAS). VAS were
branded as ‘Power Tools’ and given extensive media support to enhance usage and
revenues. New and innovative SMS based products were introduced during the year.
Mobilink now offers international roaming with more than 170 operators, including
the Thuraya Satellite system.
Mobilink plans to introduce GPRS during 2004 and will be offering services like MMS
on this platform in order to strengthen its technology leadership.
Market Indicators
Mobilink provides umbrella branding to both of its major brands, Indigo and Jazz.
Mobilink has the highest Total Spontaneous Awareness in the industry, reaching 90%.
Mobilink reported strong operating profit growth as it continued to realize benefits
from the acquisition and retention of high value customers and the continuing focus
on cost efficiencies. This is reflected in a 88% increase in revenues, and a 98% increase
in EBITDA over 2002.
Blended ARPU for the twelve months ending 31 December 2003 reached US$ 13.9
compared to US$ 16.5 for the twelve months ending 31 December 2002.
Blended churn for the twelve months ending 31 December 2003 reached 5.6% down
from 7.4% compared to 2002. This was the result of the ever increasing effort of Mobilink
to increase its subscriber base and its increased effort in emphasizing the brand recognition
of Mobilink, while at the same time retaining its existing customer base.
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Mobile Operators
Mobilink started its operation in 1994 as a third entrant in a market where Paktel and Instaphone were already operating since
1991. Despite the re-launch of Ufone, the main GSM competitor, Mobilink has maintained its momentum of growth.
Network Coverage and Roaming
In 2003, more than US$ 200 million was invested in improving the network and services. Mobilink now has 7 switches, around
820 cell sites and new IN platforms for better coverage and connectivity. In addition, Mobilink upgraded its existing call centers
and introduced a new state-of-the-art call center in Karachi to better manage customer care.
Mobilink coverage stretches across 215 cities of the country through approximately 820 cell-sites. This wide network, that covers
more than 85% of the urban population, is supplemented by extensive international roaming with more than 170 operators
worldwide.
Sales Strategy
Mobilink is the first cellular operator to introduce the “franchise” concept in the cellular industry in Pakistan and it currently
operates the largest franchise network in the country with over 140 franchisee/national distributors (dealers operated service
centers). In order to extend its reach even further, Mobilink worked with its franchisees to develop a network of over 300 subdealers which operate as Points of Sale (POS) only and are branded “Mobilink Connect”. Each franchisee is adequately equipped
to process sales, collect bills and offer other customer services. All franchisees have trained sales and service staff, fully capable
of tackling sales challenges. Additionally, Jazz scratch cards are easily available across urban Pakistan through more than 10,000
retail outlets.
Mobilink has recently launched Electronic Voucher Distribution (EVD) process for the first time in Pakistan’s telecommunications
history. This launch has enabled Mobilink to once again prove to its customers that it is indeed the largest cellular company in
the country ready to pace ahead with new technology.
EVD is a brand new recharge option for Prepaid subscribers. It will enable Mobilink to take care of scratch cards out of stock
situations and provide customers more convenience so that they can enjoy the benefits that come from being part of the ever
flourishing Mobilink community.
Social Responsibility
Mobilink reinforced its commitment to being a good corporate citizen throughout 2003. In its continuous efforts towards the
growth of the social sector, special people and towards health care, Mobilink made a number of contributions throughout the
year including charities like the Shaukat Khanum Memorial Trust, Umeed–e–Noor, and blind cricket for special people in Pakistan.
Such programs will help Mobilink in associating with the consumer and build a long-term emotional relationship as a good
corporate citizen of Pakistan.
Mobilink at a Glance
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Date of Launch
1994
Ownership Structure
OT 88.69%
Rayshield Investment Ltd 11.31%
2,015,647
1,873,148
142,449
Total Market Share
61%
215 cities – more than 85% of the urban population
Retail Base
10,000
Postpaid
Prepaid
Service Centers
11
Connects/Sub Dealers
(branded + non branded)
1000+
Franchises/National Distributors
142
VAS
SMS
Web2SMS
SMS2Email
SMS2TV
Bill Payments through ATM
Info Services (Power Tools)
Ring-tones, Logos, Picture Messaging, Mobile
Greeting Cards, etc.
International Roaming
G-Mail
E-mail Notification
Data
Fax
Voice Mail
Call Waiting
Call Forwarding
Song Dedication Service
IVR Chat-line
Mobile Banking
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Djezzy-ALGERIA
The name Djezzy is inspired by the country name for Algeria, Djazair and from Djazâa, meaning a reward or gift. Djazâa is also
an adjective used to describe a beautiful woman. With this authentic name, OT entered the Algerian market after winning the
second GSM license in July 2001. The network was officially launched on the 15th of February 2002. Djezzy GSM commenced
its operation by launching Postpaid services for individual and business customers. The Prepaid Service known as “Djezzy Carte”
was introduced in August 2002.
Market Size
Djezzy has become the dominant market leader with 88.9 % market share in less than
a year. Djezzy ended the year 2003 with 1,267,561 subscribers, with 106,383 Postpaid
and 1,161,178 Prepaid subscribers.
Since the introduction of Prepaid in August 2002, new subscribers overwhelmingly favored
Prepaid connections. However, due to the lack of proper payment infrastructure in Algeria,
the company initiated an effort to improve its Postpaid subscriber base, aiming to reduce
costs associated with bill collection and credit control.
With deep understanding of the Algerian culture and market, Djezzy seized the market
through introducing unprecedented promotional campaigns in the Algerian mobile market
such as “Le Club Fondateur”, “Souk du Mobile”, “Happy Birthday Djezzy”, “One Millionth
Subscriber” and more.
Market Indicators
Revenues and EBITDA grew by 251% and 411% respectively. Blended ARPU for 2003 reached
US$ 29.6.
Mobile Operators
Algeria has two main players in the GSM market: Algeria Mobile Network (AMN), since
February 1999, and Orascom Telecom Algerie spa (Djezzy), which started its operation
in February 2002.
In 2003, Djezzy deployed a network of 680 radio base stations on air, totaling 890 BTS
by year end and covering 48 administrative districts (Wilayas). By year-end, civil works
and preparation of 57 additional sites were completed. Djezzy has signed roaming contracts
with 137 roaming partners, allowing Djezzy users to roam in 116 world countries.
Sales Strategy
The distribution network entails several owned Point of Sale and a retail network
comprising 7 exclusive distributors and about 2,760 retail outlets. To support its sales,
Djezzy launched an unprecedented advertising campaign in Algeria. Djezzy, the commercial
name of OTA, now enjoys one of the highest brand recognitions in the country, and
conveys an image of freedom, youth and choice.
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Djezzy at a Glance
Date of Launch
15 February 2002
Ownership Structure
Orascom Telecom Holding SAE
Oratel International Inc.
Cevital
MOGA Holding LTD (OTH)
AIG African Infrastructure Fund
1,267,561
1,161,178
106,383
Total Market Share
88.9%
48 Wilayas
Retail Base
2,760
Djezzy (Postpaid), launched 15 February 2002
Djezzy Carte (Prepaid), launched in August 2002
Service Centers
22
Exclusive Distributors
7
VAS
SMS
Info Services
Data & Fax
CLIP, CW & CF
Voice Mail
IVR
47.7 %
34.1 %
3.4%
9.0 %
5.8 %
Tunisiana-TUNISIA
In March 2002, Orascom Telecom won the award for the second GSM license in Tunisia for US$ 454 million, and entered into a
joint agreement with Wataniya Telecom of Kuwait in October of the same year. Tunisiana launched its network in December 2002,
with coverage in greater Tunis and has quickly expanded to cover over 65% of the population by the end of 2003.
The 15 year license has favorable terms; it grants Tunisiana the right to operate its own international gateway, starting from the
launch of its operation, while at the same time providing very favorable interconnect conditions. It also provides OT with thirty
months exclusivity period in offering GSM services, along with Tunisie Telecom, the incumbent.
Market Size
Tunisia provides good prospects for growth with a population of 10 million, relatively
high GDP per capita and over 5 million tourists annually.
Both Prepaid and Postpaid services were launched at the very first day of operation.
In the first year, Tunisiana had over half a million subscribers with a 27% market share
of this rapidly growing market.
Mobile Operators
State-owned Tunisie Telecom started the first GSM network in 1996. Faced with a
limited capacity and a long list of people awaiting services, Tunisiana has been able
to become a strong competitor.
The covered area represents more than 65% of the population, and more than 80% of
the economic power of the country. As for roaming, more than 65 agreements have
been signed covering nearly 50 countries.
Sales Strategy
Commercial distribution is made through direct and indirect sales forces. The direct
sales forces are based on a team of large account sales representatives and two service
centers, located in Tunis and the north suburb. Another service center was opened later
in Sfax in June 2003. The indirect sales forces are based on 7 distribution networks,
representing a total of more than 554 POS at year end 2003.
Commercial activities include direct and indirect channels. Direct channels comprise
a dedicated corporate sales force as well as customer centers in key metropolitan areas.
The indirect sales forces are based on 10 distribution networks, representing a total of
more than 554 Points of Sale at year 2003. Further expansion is planned in 2004.
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Tunisiana at a Glance
Date of Launch
27 December 2002
Ownership Structure
OTuH
35%
Wataniya
50%
Carthage Consortium 15%
497,774
65% of populated areas
Retail Base
554
Exclusive Distributors
9
VAS
SMS
Voice Mail
Call Forwarding
Call Waiting
CLIP
Data & Fax
Fax Mail
IVR
Iraqna-IRAQ
On the sixth of October 2003, the mobile network for Iraq’s Central Region was awarded to Orascom Telecom, affirming Orascom
Telecom’s position as the leading mobile network in the region. Such a position was attained due to Orascom Telecom’s ability to
provide technically sophisticated network and information, roaming and voice services at reasonable prices.
Orascom Telecom’s network in Iraq, under the commercial name Iraqna, operates under the same GSM operating systems of Orascom
Telecom’s operations in Egypt, Tunisia, Algeria, Pakistan and a large number of African countries.
Iraq’s Central Region includes Baghdad, the capital, and some of the neighboring
governorates, Diyala and Anbar. This area comprises 39.4% of Iraq’s roughly 26 million
population and contains some of Iraq’s wealthiest, most industrial, and most urbanized.
The terms of the License allow Orascom Telecom in Iraq to offer services to its customers
throughout Iraq through nationwide roaming. Orascom Telecom’s application for the
License was selected by the Coalition Provisional Authority (CPA) and the Iraqi government
based on OT’s high level of commitment to drive the proliferation of telecommunications
services in Iraq and its demonstrated strength in acquiring, developing and managing
fast growing GSM mobile services operations in the region.
It is expected that Orascom Telecom’s investment in the network will be over US$100
million for the basic equipment and services in order to provide mobile communication
services in Iraq during the two year license.
Turkey
Zakhu
Aqrah
Rayat
Syria
Sinjar
Iran
Qal’at Dizah
Ba’iji
Tikrit
Al Qa’im
Al Hadithah
Mandali
Ar Rutbah
Baghdad
Nukhayb
Sinjar
IRAQ
As Salman
Saudi Arabia
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Makhfar al
Busayyah
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Sub-Saharan Operations
Libertis Telecom-CONGO
In May 2000, Libertis Telecom started its operation in Congo Brazzaville as a third mobile operator. The company grew its market
share and became the second largest operator in the country with a 37% market share by the end of 2003.
Libertis Subscribers
Since inception, subscribers have grown by more than 13-fold with subscribers more than doubling in each of the first two years and
then growing steadily since. The subscriber base has increased by approximately 44%, from 76,544 subscribers in 2002, to reach 109,995
subscribers at the end of 2003.
Market Indicators
While ARPU has dropped since the start of operation, it has performed exceptionally well. Despite the aggressive growth, the blended
ARPU of US$ 28.8 in 2002 rose to a blended ARPU of US$ 30 in 2003.
Product Offering
Libertis Telecom is the first operator in Congo Brazzaville to introduce both Prepaid and Postpaid offers. Prepaid is an easy and affordable
solution to provide telephony to the mass market. A multi-tariff plan is used consisting of flat rates, peak-off peak rates or rates for
the high users (ALO CLASSIQUE, OPTIMA, GOLD and PREMIER). On the other side, Postpaid offers are targeting mostly the corporate
market segment and customized plans are proposed according to the customer needs.
Mobile Operators
Libertis started its operation in May 2000. Cyrus, a D-AMPS operator was already present since 1997. Celtel Congo SA, the second GSM
operator, started its operation in December 1999.
Network
With a network expansion based on satellite transmission for international and national links
as well as for remote rural areas connections, 43 BTSs are installed in an environment with poor
infrastructure, and more than 8 cities are covered.
Libertis Telecom operates a dual band network GSM 900/1800, providing population coverage
of about 64.8%, and the total investment reached US$ 27 million at the end of 2003.
Libertis has its own international gateway connected to two hubs in Europe, providing cheaper
international calling rates at a better quality of service.
Libertis at a Glance
A N N U A L
R E P O R T
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Date of Launch
May 2000
Ownership Structure
Orascom Telecom 65%
Baby Bell
35%
109,995
108,996
999
Total Market Share
37%
Population Coverage
64.8%
Prepaid (Alo Classique, Optima, Gold and Premier)
Postpaid (Libertis Premier, Libertis Premier Plus)
Retail Base (owned POS)
2 (Brazzaville, Pointe Noire)
VAS
SMS
Inbound and Outbound International Roaming
Data and Fax
CLI Presentation and Restriction
Call Waiting
Call Hold and Conference Call
Call Forwarding (all types)
Voice Mail
Closed User Group
Itemized Billing
PBX Connections
Call Control
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Tchad Mobile-CHAD
Tchad Mobile, a wholly owned subsidiary of OT, commenced its operation in September 2000.
Tchad Mobile
Tchad Mobile offers one service, ALO, for Prepaid customers.
Tchad Mobile Subscribers
Throughout 2003, Tchad Mobile has expanded its network in 3 cities outside the capital of N`djamena, reaching approximately
25,000 subscribers by the end of the year.
Market Indicators
The ARPU for the twelve months to 31 December 2003 reached US$ 25.2.
Mobile Operators
Tchad Mobile started its operation in September 2000 and came as the first entrant into the Chad GSM market, followed 15 days
later by CelTel Tchad SA.
Other Services
In order to get seamless coverage of the whole territory, Tchad Mobile has become the
authorized distributor of Thuraya satellite in Chad and will offer a combined Postpaid
service, allowing its subscribers to communicate outside its GSM coverage with the same
phone and number. Also, Tchad Mobile has the governmental approval to provide ISP
services in Chad.
Tchad Mobile at a Glance
A N N U A L
R E P O R T
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Date of Launch
September 2000
Ownership Structure
OT 100%
24,580
Total Market Share
38.4%
N’Djamena, Moundou, Kome, Abeche
Retail Base
1
Prepaid
Service Centers
1
VAS
Barring All Calls
Barring Incoming Calls
CLIP
CLIR
Call Forward - On Busy
Call Forward - On No Reply
Call Forward - On Not Reachable
Call Forward - Unconditional
Call Forward - Unrestricted
Call Hold
Call Waiting
Closed User Group (CUG)
DTMF Signaling
Multi Party Calling
Operator Controlled Barring
Operator Determined Barring
Voice Mail with Call-back
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Telecel International
Amidst extremely difficult conditions in the telecommunications and financial markets globally, Telecel International (TIL) emerged
in 2002 from a severe crisis and is now stable and well positioned to deliver future growth and value creation for OT. In January
of 2002, OT made the decision to exercise its right over full management of TIL and, consistent with OT’s overall strategy, to divest
small and medium sized operations in sub-Saharan Africa and financially restructure the company to become self-sufficient in
the immediate term.
Telecel International (TIL) continued its restructuring efforts throughout 2003. Throughout the year, consistent with OT’s overall
strategy, TIL executed the planned divestiture of several small and medium sized operations in sub-Saharan Africa. This included
completion of the sales of ten GSM assets (Telecel Gabon, Telecel Benin, Telecel Burkina Faso, Telecel Niger, Telecel Togo, Telecel
Zambia, Telecel Burundi, Telecel Uganda, Telecel Central African Republic and more recently Telecel Loteny). TIL also entered into
agreements with major lenders in order to financially restructure the company and is now well positioned to deliver future growth
and value creation for OT.
OT now has 100% ownership over TIL and at the end of 2003 assets included 51.7% of Loteny Telecom in Ivory Coast (which was
divested in April 2004) 100% of SAIT in the Democratic Republic of Congo (DRC), 60% of Telecel Zimbabwe and 100% of M-Link,
an international carrier based in Belgium.
SAIT Telecom (Oasis) & Telecel Zimbabwe
TIL’s two remaining GSM operations are the Democratic Republic of Congo (SAIT Telecom
under the brand name Oasis) and Telecel Zimbabwe. While these two operations
admittedly are operating in very difficult political and economic circumstances, they
represent a real source of future growth for OT with nearly 70 million in total population.
TIL is restructuring all aspects of these assets and is implementing a focused investment
plan to capture the maximum potential value of these operations.
Market Indicators
Taking into account the sale of the companies mentioned above in the 2003 accounts,
TIL had at the end of 2003 753,000 subscribers, an EBITDA Margin of 27.0%, and
US$ 82 million net debt (compared to US$ 198 million in debt at the end of 2002 and
US$ 290 million prior to the sale of assets). These figures reflect the deconsolidation
of Telecel Zimbabwe from OT’s results as a result of provisions under IAS due to foreign
currency restrictions. TIL will continue its restructuring and divestiture program
throughout 2004 while continuing to invest in its remaining assets to maximize
shareholder value.
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• LINKdotNET
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LINKdotNET
Since its formation, LINKdotNET’s services have grown to offer a full range of Internet-related services and technologies.
LINKdotNET’s core competencies lie in data communications, hosting, e-solutions, online advertising and online content.
LINKdotNET’s experience in these areas allows it to provide fully integrated technology solutions.
Full Range of Internet Services
LINKdotNET offers a wide range of turnkey services ranging from Internet access, hosting
and e-solutions, to online advertising and content. The company offers innovative
packages and services to the Internet community: businesses, governmental organizations,
mobile service providers, and the general public.
LINKdotNET is, in brief, the Arab World’s Internet powerhouse that provides, maintains,
develops and promotes Internet solutions and services.
LINKdotNET Quick Facts
•
•
•
•
•
•
•
1992: First ISP in Egypt (Infonet and other online services).
1995: Provides Internet dial-up access to the Egyptian market.
1996: Link Development emerged as a subsidiary.
1998: Launch of Dubai operations.
2000: Merger of Link Egypt and InTouch Communications to form LINKdotNET.
2000: First online advertising agency in Egypt.
2002: Acquisition of 8 Internet companies.
What’s New at LINKdotNET?
• 2003 saw the launch of a new high-speed network with DSL service capabilities. The
company’s investment, started at over EGP 60 million, took place in collaboration
with some of the leading companies worldwide in the field of network communications,
namely Juniper, Zhone and Siemens.
• LINKdotNET was the major player behind the development of Egypt’s E-Government
project. It designed and developed the Bawaba Gateway in cooperation with Microsoft,
under the auspices of the Ministry of Communications and Information Technology.
• LINKdotNET was acknowledged as an Infonet Certified Help Desk by Infonet Inc.
LINKdotNET 2003 Top Notches
2003 proved to be an extremely successful year for LINKdotNET, as the following
accomplishments illustrate:
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Products
• Over 150 million page views/month.
• 2.5 million unique visitors/month.
• Top ranking for sites (locally and regionally).
• MSN Arabia – Number One Arab Portal.
• Masrawy – Number One Egyptian Portal.
• CareerMidEast – The pioneer online recruitment and career development portal
in the region catering to job seekers, employers, recruiters and training centers
in the Middle East and North Africa.
∑• Yallakora – The first Arabic football enthusiast's website housing fantasy football
and prediction games.
∑• Otlob – Egypt’s leading online delivery service provider.
∑• Yallabina – The region’s premier online entertainment guide.
∑• ArabFinance – The leading financial portal in Egypt.
∑• E-Dar – A leading residential and commercial real-estate destination on the
Internet. It provides a total solution to home/office buyers and sellers in Egypt.
• Ongoing process of product integration, including the revamping and launch of
Link 07770777’s free portal – www.link0777.com.
Sales and Marketing – Consumer Business
• LINKdotNET’s free dial-up service (Link 07770777) doubled the numbers of users
since 2002.
• Leading market share of free dial up market.
Sales – Corporate Business
• Enterprise sales: Breakthrough in the Governmental Sector with the National Post
Authority (NPO) and MCIT Technology Clubs projects.
• SME’s sales division achieved highest CAGR in LINKdotNET.
• Connect Ads (online ads) sales expansion in Lebanon, Jordan, and Saudi Arabia.
• New Channel Program targeting resellers.
• Best sales year for LINKdotNET UAE in LINKdotNET history. Major deals: renewal of
Microsoft ME website for the 5th consecutive year, in addition to Dubai Municipality
project, as well as expansion from UAE office to cover LINKdotNET presence throughout
the Gulf, including Kuwait, Bahrain and Qatar markets.
• Established a LINKdotNET sales presence in Saudi Arabia.
Link Development
• LINKdotNET provided ‘MyTejari’ with a secure end-to-end solution based on Microsoft
technology. Tejari is the Middle East’s premier online business-to-business marketplace.
• Launched two exciting e-business products under its new ‘WebWize’ product family.
WebWizeShoP and WebWizeCataloG hit the regional business market with innovative,
flexible and customizable end-to-end solutions for companies.
• Approximately 50% of team certified on microsoft.net platform.
Infrastructure
• Migrated all new online properties to the LDN Data Center.
• Introduction of security platforms, specialist engineers and project managers.
• Highest Data Center traffic in Egypt.
• Operated one of the largest existing Public Data Networks in Egypt.
• Implemented and operated “Whole Port selling” allowing LDN to sell connectivity to
other ISPs.
Achievements
• In 2003, LINKdotNET was selected as the top provider of EAI in the ‘Eastern Europe,
Middle East, and Africa’ region in Microsoft’s Global 2003 Certified Partner Awards,
for ‘Integration Solution of the Year’. This was in recognition of LINKdotNET’s work
on Egypt’s E-government Bawaba Gateway.
• LINKdotNET won the E-Commerce Solution of the Year (2002/2003) award by Microsoft
Egypt for its work on www.speedsend.com. Chief Solutions Officer at LINKdotNET
was also awarded for Technical Excellence for her technical experience and foresight
on Microsoft technologies.
• Microsoft Certified Gold Partnership in 2002 and 2003: This certification is awarded
to companies “that focus on and have proven their commitment and expertise in
building or delivering e-Business solutions based on Microsoft technologies.”
LINKdotNET Offices
LINKdotNET is headquartered in Cairo, Egypt. The company has nine Points of Presence
in Cairo and Alexandria. In addition, LINKdotNET has a regional office in Dubai, UAE.
The company employs more than 400 consultants, web developers and support staff
in Egypt and UAE to deliver world class Internet and e-solutions to its users and clients.
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GSM OPERATIONS SUPPORT
• International Gateway
M-Link
• Handsets and Distribution
Ring
• Value Added Services
Arpu+
• Infrastructure and Services
OrasInvest
Contra
Pharaoh
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International Gateway
M-LINK
M-Link, a 100%-owned subsidiary of Orascom Telecom, operates an international and national satellite network for voice and
data communications services, as well as other related support services.
M-Link provides a unique satellite network covering Africa and the Middle East. It collects international traffic from several
countries and delivers it to international carriers through its teleport in Belgium. Located in the heart of Europe, M-Link is ideally
situated to provide interconnection to worldwide networks. Likewise, M-Link collects traffic from those international carriers and
directs it through satellites to its African correspondents. M-Link thus provides an optimum platform for supporting multiple
operators from this "hard to reach" region in an efficient manner that accommodates the diverse and rapidly changing requirements
of the international long distance business.
In 2003, M-link widened its coverage to include mobile networks in Algeria, Tunisia
and Iraq in addition to previous connections to and from several sub-Saharan African
countries including Zimbabwe, Gabon, Nigeria, Tanzania, Rwanda, Uganda, DRC, Togo,
Benin, Burundi, Central African Republic and Congo, connecting operators within the
OT group as well as other operators. This network serves both mobile and fixed line
subscribers, and supports multiple transmission technologies from traditional voice
communications to Voice over internet Protocol and data transmission. It also supports
Internet and intranet applications for public and corporate use, as well as C7 signaling
used in many GSM applications for roaming or conveyance of SMS messages.
In 2003, M-Link improved its networking capabilities by major investments in switching
and transmission capabilities. A Point of Presence has been opened in Paris to provide
better access to the operators.
By connecting this large and growing community of fixed and mobile users to world
class wholesale and retail operators, M-Link is in the position to offer a wide range of
the highest quality services in a fast moving environment.
Historically, M-Link has served the international voice and data needs of several subSaharan mobile and fixed network operators, consistent with OT's focus and evolving
opportunities throughout the Middle East and Africa. Resulting from the impending
introduction of competition in international long distance services, M-Link is being
positioned to capitalize on its core competence and strengths to serve these markets.
Continuous investments are made to cope with the increasing needs for traffic and
quality of traffic for M-Link's customers, not only from the Middle East and African
regions, but from the whole world through world class international operators.
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Handsets and Distribution
Ring
Since 1986, Orascom has always been a market leader in hi-tech consumer product distribution. With the increased focus within
Orascom Telecom on the GSM retail and distribution business, Ring was established as a fully owned Orascom Telecom affiliate that
focuses on GSM products distribution and related services. Now Ring is the leading NOKIA wholesaler in Egypt and North Africa.
Ring has established five major logistics centers in Jordan, Tunis, Algeria, Iraq and Dubai in order to provide network operators
with in-country logistic services, local distribution and prepaid solutions.
Ring is also developing franchise retail business with OT Operators to increase its market penetration across the region. In Egypt,
it plans to open eight shops with MobiNil to provide the end user with MobiNil services and a wide mix of handset bundles.
Distribution and Logistics Services
Ring distribution focuses on GSM products distribution and related services. The company provides its customers with outsourced
distribution logistics through its authorized dealer channels and retail outlets. Ring’s logistics centers also undertake several
services on behalf of network operators or handset manufacturers such as SIM locking, handset software upgrades, custom
branding and special bundle packaging. E-commerce and B2B applications developed in cooperation with ISP’s are also offered
to further ease the business with the dealer’s channel of the network operator.
Number One in Quality Service
Ring has built state-of-the-art service centers for NOKIA Mobile phone sets. Supported by
top technology equipment and software from Nokia and a highly trained team, Ring Service
centers are categorized as the most advanced in the Middle East. Introducing the concept
of visible service centers for the first time in Egypt, Ring provides its clients with the comfort
and confidence which places Ring at number one in quality service and customer satisfaction.
Modern Lifestyle Outlets
Ring shops are not merely places to sell or repair mobile phones, yet are also modern lifestyle
outlets providing customers with the delights of today’s hi-tech world.
Services Ring Provides
• Supply Chain Management
• Logistics Services
• In-Country Distribution
• Wireless Products Procurement
• Product Customization
• Prepaid Total Solutions
• Business2Business
• Customer Care and Service Centers
• Retail Franchise
Ring 2003 Performance Indicators
• Setup of Ring Iraq (100% owned affiliate) that provides its partners with in-country Prepaid
solutions, distribution and data management.
• Ongoing Contract of Ring – MobiNil Shop in Shop Agreement and the setup of shops across
Egypt.
Ring Offices
Ring’s headquarters are located in Cairo. The company also covers North African and Middle
Eastern markets through its subsidiaries in Algeria, Tunisia, Jordan, Dubai and Iraq.
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Value Added Services
Arpu+
ARPU+ is a joint venture between Orascom Telecom Holding and LINKdotNET to combine GSM market knowledge and application
development capabilities. It is positioned as a regional service provider with affiliates in both Dubai and France. ARPU+ offers
unified VAS solutions focusing on product development, content aggregation and management as well as platform solutions.
ARPU+ is the regional pioneer introducing Multi Media Services, being the first SP to implement the Multi Media solutions on
2.5G for "The Egyptian company for Mobile Services" known as MobiNil Life.
To offer these unified VAS Solutions, ARPU+ works with an extensive array of the region’s best strategic partners that
include:
Application Providers
Offering a wide range of ready-made mobile applications, as well as tailoring operator specific content and providing on demand support.
Technology Providers
Contributing full-fledged Multi Access Portal solutions, Gateways, Messaging Service Centers
and support for regional operators. Technology providers include Microsoft and Logica CMG.
Content Providers
Including various areas such as music, sports, entertainment and many others. ARPU+
aggregates a huge number of content providers in order to provide its clients with an integrated
portfolio.
ARPU+ aims to empower the consumer to have a better user experience through extending
different applications into the mobile channel. These applications must be innovative and
creative to entice usage behaviours and reliance on the service. They must also be built on a
solid and reliable service layer and coupled with premium content that is of interest to the
consumer and hence well adapted and repurposed for the mobile channel. Having the heritage
of both GSM & Internet worlds, ARPU+ is well positioned to be a leading regional Data Service
Provider due to the huge synergies between web & mobile, especially with the introduction
of 2.5G and Multi Media enablement.
Services have been packaged to avail on as many mobile access channels as possible. Hence
APRU+ aims to give a unified personalized access to services for the user, whereby the user
can use IVR, SMS, MMS or Web. The services are well adapted to each channel to meet the
user's preferences.
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Infrastructure and Services
OrasInvest
OrasInvest Holding was totally acquired by Orascom Telecom in 2003. Consequently, major developments took place in different segments
i.e. expansion in operating regions, workforce fortification & increase, service quality enhancement and business portfolios enrichments.
OrasInvest Holding subsidiaries are MobiServe, First Service, Collect, ESC, OrasInvest Management Services and OrasInvet Trading, which
are operating in the Middle East, North Africa and Asia. OrasInvest Management Service is the management company for all the subsidiaries
of OrasInvest Holding. It provides management consultancy services especially in the legal, financial, auditing, human resources, strategic
consultancy, and research & development fields. OrasInvest Trading provides its sister companies in the region with importing and
exporting services, especially GSM equipments and site materials.
MobiServe
Services:
MobiServe provides telecom installation, construction services and network operations. The general scope of work covers the site survey,
preparation, installation, commissioning and maintenance of various telecommunication systems. MobiServe operates in Egypt, Algeria,
Pakistan and Iraq.
Operational Highlights:
• As MobiServe is persistently growing and expanding its services and markets, two new companies were established to serve the GSM
sister-operators in Iraq and Pakistan.
• MobiServe Egypt acquired Comtel and consequently this will strengthen MobiServe’s position in the Microwave installation, commissioning
and maintenance market.
• MobiServe Algeria achieved a great increase in the production and revenue through 2003.
First Service
Services:
First Service offers a unique business portfolio. It provides full solutions for its integrated
services; printing (Highlight Color printing & Digital Full-Color printing), enveloping, delivery
& cash collection. It also offers a high quality scratch cards production and has a well-equipped
factory that was prepared with regulations meeting international security standards and
complying with the GSM norms. First Service uses state-of-the-art technologies in its printing
and scratch cards production, using Xerox printing machines, and in the enveloping activities,
by using Pitney Bowes equipments. It operates in Egypt, Algeria and Tunis.
• First Service was relocated to 6th of October City and the new building infrastructure was
developed using the highest technologies and the latest security systems. In addition, a wellequipped factory was prepared for the scratch cards production, meeting top security
standards and complying with the GSM norms.
• In 2003 First Service succeeded to contract with several government banks such as Banque
Misr & Banque du Caire, for the first time since obtaining the post delivery license.
• First Service managed to widen its customer base of the delivery service and include new
clients in the private banking sector such as NSGB.
• A successful launch of First Service scratch card production in year 2003, expected to
fruitfully continue.
• Servitec Algeria managed to increase its business portfolio and offer a new customized
delivery service to Djezzy in 2003.
Collect
Services:
Collect provides state-of-the-art solutions for bad debts collection with a wide geographical
coverage for the collection activity. It operates in Egypt and Algeria.
• Collect broke the record of collection figures in September, October and December 2003,
showing a consistent increase in collection.
• The collectors force was increased to expand the collection volume.
• In 2003, the monthly collections were doubled in the governorates outside Cairo and
Alexandria, which was always a request from clients.
• In addition to the banking sector Collect strengthened its position by winning the contract
of SADKO.
ESC
Services:
ESC, the Egyptian Space Communications company, provides design, installation, maintenance
and management of the satellite based communication services. It is a VSAT licensee and a hub
station owner. Its scope of work also covers the Inmarsat (R-BGAN) and the Internet via satellite
services.
• The most important breakthrough in 2003 is the Distribution Partnership with Inmarsat.
Consequently, ESC can sell directly and indirectly the R-BGAN IP satellite modem inside and
outside Egypt.
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Contra
Contra is a general contracting company, 80% owned by OT, offering specialized
construction services combining various disciplines of engineering, namely; civil,
architecture, communications, electrical & mechanical. Their activities are covered under
two main divisions: the first division specializes in the fast rollout of GSM infrastructures,
telecommunication support, broadcasting and electronic industries. The second division
specializes in turn-key construction and quality finishing projects. In both fields, products
and services conform with the highest international standards.
Contra has expanded its operations and is now working in five countries, namely; Egypt,
Algeria, Tunisia, Pakistan and Iraq. Short-term plans include the addition of new activities
to the present GSM operations, such as the installation and commissioning of radio
equipment, turnkey - construction of switches as well as preventive & corrective
maintenance.
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Pharaoh
Pharaoh Communication Network (PCN) is an Orascom Telecom company specialized in the
design, implementation, installation, and support of multi-services communication networks.
Founded late 1998, PCN was initiated to serve OT and its subsidiaries in their wide communication
needs and to help in the evolution of the technology in the markets where PCN exists. PCN
provides telecom & data network systems integration solutions as required for commercial
and civil works. The company also offers technical consulting for local, wide area, and
underground communication and control networking projects. End-user training and
maintenance services for all communications networks are provided. PCN’s strategy is to build
a direct business relationship with original manufacturers in order to get the most of their
support, then use PCN’s own staff to design, integrate and install the equipment.
Progress Outside Egypt
Pharaoh Algeria (PCA) was founded in 2002 and it specializes in GSM site construction,
fiber optics equipment supply and general telecom & data networks implementation
in Algeria. Targeting OTA and local government authorities, PCA’s goal is to be one of
the most reliable network integrator in Algeria and surrounding countries.
Activities
• GSM Site Construction
• Data LAN/WAN/MAN system integrator
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Highlights from 2003
ORASCOM TELECOM REACHED 7.6 MILLION
SUBSCRIBERS:
At the end of 2003, Orascom Telecom reached 7.6 million
subscribers. In September 2003, Djezzy reached one million
subscribers. Mobilink reached two million by the end of
the year. MobiNil almost reached its three million mark
towards the end of the year.
ORASCOM TELECOM AWARDED IRAQNA
LICENSE:
In October 2003, Orascom Telecom was awarded the mobile
network for Iraq’s Central Region, including, Baghdad
under the name Iraqna.
FINANCING OF DJEZZY:
OTH finalized the financing of the second payment of the
license fee and fully funded the network rollout.
DIVESTITURE OF NON-CORE SUBSIDIARIES:
OTH continued the divestiture of Telecel's subsidiaries,
Telecel Niger and Burkina Faso, which resulted in a net
gain of LE 12 million during the first quarter of 2003.
In July 2003, the settlement of dispute and disposal of Syriatel
was completed, generating a capital gain of LE 53 million.
During the fourth quarter of the year, Telecel finalized the
divestiture of Telcel Togo with a net gain of LE 63.7 million.
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2003
OTT
OTA
OTI
MobiNil
Telecel
Libertis
SAIT
J.P. Roeland
Hassan Kabbani
Allan Richardson
Osman Sultan
James Bailey
Nagi Abboud
Maan El Amin
Loteny
M-Link
Yerim Saw
Lionel Coussi
Investment &
Business Development Officer
Mike O’ Connor
Executive VP Business
Development
Alex Shalaby
Mr. Naguib Sawiris
Mr. Alaa M. Al Khawaja
Mr. Alex Shalaby
Mr. Khaled Bichara
Chairman
Board Member
Board Member
Board Member
Board Member
Board Member
Board Member
Investor Relations Director
Hatim El Gammal
Treasury Director
Reda Abdel Hamid
Budgeting & Planning
Director
Ahmed Halawa
Accounting Controller
Mohamed Naguib
Corporate Finance Director
Karim Nasr
Executive Officer
Finance
Aldo Mareuse
Dr. Khaled E. Ismail
Mr. Mohammed Rachid
Mr. Onsi Sawiris
GSM Services Director
Ossama Bessada
Chief Technology Officer
Paul Kearney
VP Strategic Planning
Khaled Sabaa
Executive Officer
Operations Control
Emad Farid
Internal Audit Director
Walid Bedair
PR & Communications Director
Dina Abou Zenada
OTH Board of Directors
TelZim
Anthony Carter
Wim Vanhelleputte Tchad
Mobilink
Zouhair A. Khaliq
Operations CEOs:
VP HR & Administration
Wafaa Lotaief
VP Legal Affairs
Amr El Bayoumi
Chairman and CEO
Naguib Sawiris
OTH Organizational Chart (As of end of 2003)
2003
Financial Review
Precision is our Priority
Management Report
Auditor’s Report
Consolidated Balance Sheet
Consolidated Income Statement
Consolidated Statement of Changes in Shareholders’ Equity
Consolidated Cash Flows
Notes to the Consolidated Financial Statement
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R E V I E W
Orascom Telecom Holding
Full Year 2003 Results
Cairo, March 14th 2004: Orascom Telecom Holding (OTH) (Ticker: ORTE.CA, ORTEq.L), announces its consolidated results for 2003.
Highlights
Total subscribers exceeded 7.6 million, an increase of 76% over 2002, and an 18% increase over the previous quarter.
Proportionate subscribers exceeded 4 million an increase of 87% over 2002, and 23% over the last quarter.
Revenues grew to LE 6,476 million (US$ 1,119 million1), an increase of 59% and 88% over 2002, on actual and
proforma basis2 respectively and 10% over the last quarter.
EBITDA reached LE 2,864 million (US$ 495 million1), an increase of 89% and 108% over 2002, on actual and proforma
basis2 respectively and 5% over the last quarter.
Group EBITDA margin rose to 44.2% a 6.8 % increase over 2002. EBITDA margins of the major subsidiaries are:
Djezzy 50.9%, MobiNil 53.6%, Mobilink 58.4%, Tunisiana 33.3% and Telecel 27%.
Net income for the period has reached LE 712 million (US$ 123 million1) in comparison to LE 1,047 million in 2002.
Proforma Net income3 reached LE 672 million for 2003 a 75% increase over proforma 2002. Earnings per Share
reached LE 6.51 vs. LE 9.55 in 2002. On a proforma basis EPS is LE 6.11 in 2003 vs. LE 3.49 in 2002.
Net debt was LE 4.6 billion as of 31st December 2003 reducing OTH leverage from Net Debt/EBITDA of 2.8 in 2002
to 1.6 in 2003.
1. Egyptian pound figures translated into US$ using the exchange rate 5.7875, being the average rate used over the year 2003.
2. Proforma figures include the four Telecel Subsidiaries that were deconsolidated: Niger, Burkina Faso, Zimbabwe and Togo.
3. Excluding exceptional items (capital gains, provisions and goodwill impairment).
Operational Performance
In 2003 OTH delivered strong operational growth across most of its subsidiaries, the total number of subscribers exceeded
7.6 million subscribers with net additions of over 3.3 million, a record number for OTH.
During 2003, OTH passed many major operational milestones:
Mobilink broke the one million subscriber mark in February, followed by the two million subscriber mark in December,
adding a total of 1,063,473 subscribers in one year.
Djezzy exceeded one million subscribers in September and added 952,521 subscribers in 2003.
MobiNil virtually reached the three million subscriber mark with 2,991,214 subscribers.
Tunisiana approached half a million subscribers in its first year of operations, adding 497,774 subscribers.
Table 1: Total Subscribers
Subsidiary
31 Dec
30 Sept
31 Dec
Inc/(dec)
2002
2003
2003
YE 2003 vs.
YE 2002
Djezzy (Algeria)
1
315,040
1,027,567
1,267,5611
1,267,56
302%
2,282,000
2,784,000
2,991,2
2,99
1,214
14
31%
Mobilink (Pakistan)
952,174
1,468,628
2,015,647
2,0
15,647
112%
Telecel (Africa)2
693,890
730,574
753,452
9%
-
380,746
497,774
na
MobiNil (Egypt)
Tunisiana (Tunisia)
Libertis (Congo Brazzaville)
76,544
103,467
109,995
44%
Tchad Mobile (Chad)
23,621
23,204
24,580
4%
4,343,269
6,518,186
7,660,223
76%
Grand Total
1. MobiNil uses the three month rule to calculate its subscriber base.
2. Subscribers of the Telecel operations are as follows: Loteny Telecom at 599,244, Zimbabwe at 116,941, and Oasis Telecom 37,267.
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R E V I E W
OTH added 1,893,391 proportionate subscribers in 2003, an 87% increase. This increase was slightly higher than total
subscribers because OTH increased its stake in OTA from 53.6% to 58.4% and in Tchad Mobile from 49% to 100%.
Table 2: Total Proportionate Subscribers
Subsidiary
31 Dec
30 Sept
31 Dec
Inc/(dec)
2002
2003
2003
YE 2003 vs.
YE 2002
Djezzy (Algeria)
168,861
550,776
740,256
338%
MobiNil (Egypt)
713,353
870,278
935,053
31%
Mobilink (Pakistan)
844,483
1,302,526
1,787,677
112%
Telecel (Africa)
395,736
411,685
417,241
5%
77,139
100,849
na
49,754
67,254
71,497
44%
Tchad Mobile (Chad)
11,574
23,204
24,580
112%
2,183,762
3,302,862
4,077,153
87%
-
Tunisiana (Tunisia)
Grand Total
During 2003 ARPU continued to decline as strong growth led to acquisition of subscribers in market segments with lower
mobile spending habits. However, ARPUs have stabilized in comparison to last quarter.
Djezzy’s ARPU has declined significantly as mobile penetration in Algeria roughly tripled from 1.5% to 4.4% and Djezzy
captured most of the subscriber growth.
Although MobiNil’s ARPU has declined in US$, it has increased in Egyptian Pounds from LE 100 to LE 104, as MobiNil focused
its strategy on managing ARPU.
ARPU levels at Mobilink, have declined slightly over the last quarter despite the tremendous growth of over 500,000 net
additions as Mobilink improved the capacity and quality of its network.
Table 3: Average Revenue Per User (ARPU)
Subsidiary
31 Dec 2002
30 Sept 2003
31 Dec 2003
Inc/(dec)
US$
US$
US$
YE 2003 vs.
YE 2002
Djezzy (Algeria)
44.0
29.9
29.6
(32.7%)
MobiNil (Egypt)
19.0
18.8
16.8
(11.5%)
Mobilink (Pakistan)
16.5
14.1
13.9
(15.8%)
Tunisiana (Tunisia)
-
25.9
26.6
na
28.8
27.1
30.0
4.2%
Tchad Mobile (Chad)
35.4
32.5
25.2
(28.8%)
Table 4: Market Share & Competition
Brand name
Country
Market
Number of
Names of additional
Share
additional network
network operations
operations
Algeria
Djezzy
88.9%
1
Egypt
MobiNil
52.7%
1
Vodafone
Pakistan
Mobilink
61.0%
3
U-Fone, Instaphone, Paktel
Tunisia
Tunisiana
27.0%
1
Tunisie Telecom
Congo Brazzaville
Libertis
36.9%
1
Celtel
1
2
Wataniya, MTC1
38.0%
1
Celtel
Iraq
Iraqna
Chad
Tchad Mobile
100.0%
AMN
1. At present Iraqna is exclusively licensed to provide GSM services in Iraq’s central region. The two other operators are exclusively licensed in
two other regions. Exclusivity is expected to be lifted in 2004.
Total CAPEX for the OTH subsidiaries was US$ 682 million in 2003, with heavy focus on startup operations with significant
subscriber growth: Algeria, Pakistan, and Tunisia.
Table 5: Capital Expenditure of OTH Subsidiaries
2003
Service name
Country
US$ million
223
Algeria
Djezzy
Egypt
MobiNil
89
Pakistan
Mobilink
211
Africa
Telecel / Libertis / Chad
Tunisia
Tunisiana
A N N U A L
R E P O R T
2 0 0 3
42
117
P A G E
P A G E
6 1
R E V I E W
Main Financial Events
The major developments that have taken place in 2003 are:
Divestitures & Deconsolidation
Sale of Syriatel
On July 16th OTH announced the settlement of all legal disputes with its partner in Syriatel, DREX Technologies, and the
sale of its 25% stake in Syriatel generating a capital gain of LE 53 million.
Telecel
During the First Half of 2003 OTH continued the divestitures of Telecel’s subsidiaries, Telecel Niger & Burkina Faso. These
divestitures resulted in a net gain of LE 12 million.
Due to economic conditions and restrictions imposed by the Zimbabwean Authorities in the repatriation of profits, OTH
decided to deconsolidate Telecel Zimbabwe, in agreement with article number 27 section (b), under IAS. This deconsolidation
has generated a profit of LE 118 million. Telecel Zimbabwe will still remain as a subsidiary of Telecel and will be treated as
an Equity investment in Telecel’s accounts. A provision charge of LE 40.7 million was taken against the cost of investment
in Zimbabwe.
Telecel finalized the divestiture of Telecel Togo in the fourth quarter of 2003, with a net gain of LE 63.7 million.
Consolidation
In the First Quarter of 2003, OTH fully consolidated Tchad Mobile after increasing its equity stake to 100%.
In the Fourth Quarter of 2003, OTH began to proportionally consolidate Tunisiana at 20.26%, to fully consolidate OTI, OTH’s
new GSM operation in Iraq (Iraqna), and OrasInvest, OTH’s GSM service operation.
Financing
Final License Payment for Djezzy
In the Fourth Quarter of 2003, Djezzy finalised Euro 545 million in debt and equity financing. The financing was used to
fully fund network rollout and to pay the second portion of the license fee.
Loan Restructuring
OTH restructured its short term debt facilities into long term loans with Banque Misr and National Societe Generale Bank
(NSGB) for an amount of over LE 350 million.
Orascom Telecom applies both the Egyptian & International Accounting Standards in the consolidation of its Financial
statements.
Table 6: Ownership Structure & Consolidation Methods
Ownership December 31
Consolidation Method December 31
2002
2003
2002
2003
28.75%
28.75%
Proportionate Consolidation
Subsidiaries
GSM Operations
MobiNil (Egypt)1
16.60%
100.00%
100.00%
Full Consolidation
Full Consolidation
53.60%
58.35%
Full Consolidation
Full Consolidation
Full Consolidation
Egyptian Co. for Mobile Services 16.60%
IWCPL (Pakistan)2
Orascom Telecom
Algeria3
Full Consolidation
100.00%
100.00%
Orascom Telecom Tunisia4
-
20.26%
65.00%
65.00%
Full Consolidation
Full Consolidation
Tchad Mobile (Chad)
49.00%
100.00%
Equity Method
Full Consolidation
SyriaTel (Syria)
25.00%
-
Equity Method
-
63.00%
75.00%
75.00%
Full Consolidation
Full Consolidation
Telecel (Africa)
OTI (Iraq)
-
Full Consolidation
-
Internet Service
Intouch
Non GSM Operations
100.00%
100.00%
Full Consolidation
Full Consolidation
Ring
99.00%
99.00%
Full Consolidation
Full Consolidation
OrasInvest
50.00%
97.50%
Full Consolidation
Full Consolidation
Pharoah
55.00%
55.00%
Full Consolidation
Full Consolidation
Cortex
95.00%
95.00%
Full Consolidation
Full Consolidation
Pioneers
Egyptian Satellite Company
51.00%
51.00%
Full Consolidation
Full Consolidation
Comtel
94.00%
94.00%
Full Consolidation
Full Consolidation
OT ESOP
Full Consolidation
Full Consolidation
100.00%
100.00%
Contra Egypt
-
80.00%
-
Full Consolidation
Contra Tunisia
-
80.00%
-
Full Consolidation
Arpu +
-
51%
-
Full Consolidation
Intelligent Village
10.25%
10.25%
Cost Method
Menatel Communications
10.00%
-
Cost Method
Cost Method
-
1. MobiNil is a holding company which controls 51% of ECMS, the Mobile operator. MobiNil is the brand used by ECMS.
2. IWCPL owns 88.69% of Mobilink.
3. Direct & Indirect stake through Moga Holding Ltd. and Oratel.
4. Orascom Telecom Tunisiana is proportionately consolidated through OTuH and Carthage Consortium.
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
6 3
R E V I E W
Financial Review
Revenues
Revenues increased by 60% for the 12 months to 31 December 2003. The increase in revenues was driven by strong growth
in the subscriber base.
Approximately 66% of OTH’s revenues are in foreign currency. Contributors to revenue were Djezzy with 29.9% of total
revenues, MobiNil with 23.9%, Mobilink with 16.4%, Telecel with 14.9%, and Tunisiana with 2.1%.
Table 7: Consolidated Revenues
Q3 - 2003
Q4 - 2003
(12 months)
(3 months)
(3 months)
LE (000)
LE (000)
LE (000)
251%
582,970
658,431
13%
33%
446,573
419,315
(6%)
1,070,167
88%
323,820
292,9811
(10%)
135,599
na
-
135,599
na
31 Dec 2002
31 Dec 2003
(12 months)
LE (000)
Djezzy (Algeria)
553,937
1,942,931
MobiNil (Egypt)
1,168,119
1,558,107
570,111
Subsidiary
Mobilink (Pakistan)
Tunisiana (Tunisia)
Iraqna (Iraq)
Telecel (Africa)
Tchad Mobile (Chad)
Total GSM
-
Inc/(dec)
-
Inc/(dec)
225
na
225
na
1,243,702
968,434
(22%)
236,400
288,772
22%
103,658
161,900
56%
50,650
36,466
(28%)
3,639,526
27,217
na
4,541
6,741
48%
5,864,580
61%
1,644,954
1,838,530
12%
Total Internet Services
40,317
71,337
77%
17,689
22,982
30%
Total Telecom Services
384,224
540,054
41%
165,348
149,222
(10%)
-
-
OT Holding
-
-
na
na
Total Consolidated
4,064,067
6,475,971
59%
1,827,991
2,010,734
10%
Total Proforma2
3,396,125
6,386,202
88%
1,806,965
2,009,140
11%
1. The impact of changing the exchange rate against the US$ from PR 55 to PR 59 resulted in decrease in revenues of US$ 4.4 million during the period.
2. The following subsidiaries have been omitted for comparative purposes: Telecel Zimbabwe, Telecel Burkina Faso, Telecel Togo.
Costs & Expenses
Direct costs represented 25% of revenues in 2003 in comparison to 28% in 2002, while operating expenses represented
26% of revenues in 2003 in comparison to 29% in 2002. The decrease in cost and expenses as a percentage of revenues
has come as a result of OTH’s management drive to control costs, and the divestiture of the Telecel assets.
EBITDA
EBITDA reached LE 2,864 million a 89% increase over Year End results 2002. EBITDA Margin reached 44%, a 6.8% increase
over 2002. This improvement was driven by the strong operating performance of Djezzy, MobiNil, and Mobilink, and the
divestures of Telecel’s subsidiaries which had lower EBITDA margins.
Table 8: Consolidated EBITDA
Q3-2003
Q4-2003
(12 months)
(3 months)
(3 months)
LE (000)
LE (000)
LE (000)
411%
297,592
367,879
24%
31%
241,217
226,101
(6%)
739,897
98%
213,910
194,7384
(9%)
-
45,131
na
-
45,131
na
-
(14,594)
na
-
(14,594)
na
31 Dec 2002
31 Dec 2003
(12 months)
LE (000)
Djezzy (Algeria)
193,469
989,586
MobiNil (Egypt)
634,767
834,616
Mobilink (Pakistan)
374,503
Tunisiana (Tunisia)
Iraqna (Iraq)
Subsidiary
Telecel (Africa)
Total GSM
Inc/(dec)
355,944
261,960
(26%)
18,8861
104,664
454%
32,735
55,620
70%
16,611
16,808
1%
(5,643)
na
(2,606)
(7,487)
na
-
Tchad Mobile (Chad)
Inc/(dec)
1,591,418
2,906,575
83%
785,611
933,240
19%
780
15,327
1,864%
5,859
3,428
(41%)
34,687
109,390
215%
81,668
16,991
(79%)
Pioneers, Moga & OTuH2
(17,432)
(37,994)
na
(895)
909
na
OT Holding
(90,382)
(129,418)
na
(45,296)
(82,620)
na
1,519,071
2,863,880
89%
826,947
871,949
5%
1,364,861
2,843,929
108%
817,120
869,987
6%
Total Consolidated
Total
Proforma3
1. EBITDA for Telecel was reduced in the 3rd quarter because of a provision of LE 40.7 million taken for the deconsolidation of Telecel Zimbabwe.
2. Pioneers is a holding company that owned 91.6% of Fastlink until this stake was sold in December 2002. Pioneers has become a non operating
company.
3. The following subsidiaries have been omitted for comparative purposes: Telecel Zimbabwe, Telecel Burkina Faso, Telecel Togo & Telecel Niger.
4. See note 1 in Table 7.
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
6 5
R E V I E W
Table 9: Consolidated EBITDA Margin
31 Dec 2002
31 Dec 2003
Q3-2003
Q4-2003
(12 months)
(12 months)
Change (3 months)
(3 months)
LE (000)
LE (000)
LE (000)
LE (000)
Djezzy (Algeria)
34.9%
50.9%
16.0%
51.0%
55.9%
4.9%
MobiNil (Egypt)
54.3%
53.6%
(0.8%)
54.0%
53.9%
(0.1%)
Mobilink (Pakistan)1
60.0%
58.4%
(1.6%)
54.9%
Tunisiana (Tunisia)
-
33.3%
na
Telecel (Africa)
28.6%
27.0%
31.6%
34.4%
Subsidiary
Change
51.7%
(3.2%)
-
33.3%
na
(1.6%)
8.0%
36.2%
28.2%
2.8%
32.8%
46.1%
13.3%
(20.7%)
na
(57.4%)
(111.1%)
na
43.7%
49.6%
5.9%
47.8%
50.8%
3.0%
1.9%
21.5%
19.6%
33.1%
14.9%
(18.2%)
9.0%
20.3%
11.3%
49.4%
11.4%
(38.0%)
EBITDA Margin
37.4%
44.0%
6.8%
45.2%
43.4%
(1.8%)
Proforma EBITDA Margin
40.2%
44.5%
4.3%
45.2%
43.3%
(1.9%)
Tchad Mobile (Chad)
Total GSM
-
1. Margins as per local accounting policy in Pakistan are 65.7% in Year End 2002 and 69.1% in Year End 2003 commissions are excluded from
revenues.
Table 10: Foreign Exchange Rates used in the Income Statement
Currency
December 2002
September 2003
December 2003
US Dollar / Egyptian Pound
4.6450
5.7870
5.7875
FCFA / Egyptian Pound
0.0062
0.0079
0.0079
Algerian Dinar / Egyptian Pound
0.0600
0.0735
0.0735
4.5260
5.1250
Tunisian Dinar / Egyptian Pound
Source: Egyptian banks
-
Net Income
Net Income for the period reached LE 712 million in comparison to a gain of LE 1,047 million for 2002. Proforma net income
for 2003, after excluding exceptional items, (capital gain, provisions and goodwill impairment) reached LE 672 million
compared to LE 384 million in 2002.
Following the payment of the second portion of the Algerian license, a foreign exchange gain of LE 158 million was made
where the outstanding license cost was booked on Djezzy’s accounts at the exchange rate of the 78.5 Algerian Dinar to
the US dollar, however, at the date of settlement of the license payment the Algerian Dinar had appreciated by 10% against
the US dollar and reached 70.5. During 2003, gain from the sale of investments reached LE 487 million including LE 197
million from the divestiture and deconsolidation of Telecel assets, LE 170 million from the transfer of Oratel shares to
Pioneers, LE 61 million from the sale of Oratel shares, and LE 53 million from the disposal of Syriatel.
Table 11: Income Statement
31-Dec 2002 31-Dec 2003 Inc/ (dec)
EBITDA
Depreciation & Amortization
Impairment of Investment
(12 months)
(12 months)
LE (000)
LE (000)
1,519,071
2,863,880
(1,049,448)
(188,000)
826,947
871,949
(1,373,886)
(335,137)
(417,729)
(97,290)
(97,290)
114
394,406
454,334
(133,633)
(187,450)
146,567
114,490
(40,437)
486,989
176,698
131,426
182,628
14,679
161,985
(179,006)
43,752
(31,333)
281,623
1,392,704
(521,850)
(568,800)
278,072
1,108,859
Foreign Exchange Gain (Loss)
Differences from loans valuation
Others
Earnings Before Taxes
89%
(114)
Earnings Before Interest & Tax
Gain from the sale of Investment
(3 months) (3 months)
LE (000)
-
Interest Income & other Revenues
-
(96,720)
-
Q4-2003 Inc/(dec)
LE (000)
Others
Interest Expense
Q3-2003
395%
155,680
(14,485)
(2,847)
(3,997)
1,205,664
1,446,596
607,545
484,528
Income Tax Provision
(119,603)
(293,535)
(84,963)
(96,806)
Net Income (Loss) before Minority Interest
1,086,061
1,153,061
522,582
387,722
(38,577)
(441,211)
(105,546)
(230,000)
1,047,484
711,848
(32%)
417,036
157,722
383,544
671,565
75%
Earnings Per Share
9.55
6.51
Proforma Earnings Per Share
3.49
6.11
Minority Share
Net Income
Proforma Net Income1
5%
15%
(62%)
1. Proforma Net Income excludes exceptional items (capital gains, provisions and goodwill impairment). Provisions were LE 256 million in 2002
and LE 355 million in 2003.
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
6 7
R E V I E W
Balance Sheet
OTH dramatically restructured its Balance Sheet in 2003. First, it reduced its leverage, Net Debt/EBITDA from 2.8 in 2002
to 1.6 in 2003. Second, it restructured short term liabilities into long term agreements and reduced short term financial
liabilities (short term debt + license debt) from LE 4,490 million to LE 1,508 million.
Table 12: Balance Sheet
31-Dec 2002
31-Dec 2003
LE (000)
LE (000)
Assets
586,409
1,136,696
2,582,772
758,736
Other Current Assets
1,409,825
1,571,760
Total Current Assets
4,579,006
3,467,192
Net Fixed Assets & Assets Under Construction
3,957,637
6,811,175
701,450
533,871
Cash
Accounts Receivables
Goodwill (Net)
Other Long Term Assets
5,185,715
6,622,923
Total Long Term Assets
9,844,802
13,967,969
14,423,808
17,435,161
Bank over Draft & Short Term Debt
2,622,844
1,508,463
License Related Debt
1,866,919
-
Total Assets
Liabilities
730,660
1,016,082
Other Current Liabilities
2,764,597
3,546,439
Total Current Liabilities
7,985,020
6,070,983
1,871,903
4,227,558
Accounts Payable
Long Term Debt
Other Long Term Liabilities
162,573
528,566
Total Long Term Liabilities
2,034,476
4,756,124
3,150,741
4,515,885
Total Liabilities
Total Shareholder's Equity
Minority Share
Total Liabilities & Shareholder's Equity
Net Debt1
Net Debt/EBITDA
1,253,571
2,092,169
14,423,808
17,435,161
4,210,000
4,599,325
2.8
1.6
1. Net Debt is calculated as a sum of Short Term Debt, License related debt, Long Term Debt in addition to Shareholders Loans less Cash. In
2002, LE 1,956 million of receivables from Pioneers was included in the calculation of cash.
Main Operational Events
MobiNil's agreement with the Telecommunication Regulatory Authority for the 1800 MHZ bandwidth.
MobiNil launches MobiNil Life.
Mobilink has significantly increased the quality and capacity of its network.
Launch of postpaid service in Iraq.
Both Djezzy and Tunisiana launched the international gateway. M-Link, a 100% subsidiary, was selected to carry
the international traffic of these subsidiaries in addition to Telecel & Iraqna.
Country Highlights
Egypt
Despite the depressed state of the Egyptian economy in 2003, MobiNil managed to improve its operational
and financial figures and it reported strong profit growth for the year. MobiNil’s subscriber base reached
2,991,214, an increase of 31% over 2002. The strong operating results reflect MobiNil's focus on continued targeting of
the more lucrative postpaid subscriber base, which increased to 22.3% of total subscribers by end-2003, from 20% at end2002. MobiNil managed to increase its blended ARPU for 2003 to LE 104, from LE 99 in 2002, and to maintain its market
leadership of 52.6%. Capex for 2003 reached US$ 89 million with 1,836 BTS.
Data Revenue represented 4% of revenues and, cashing in on strong tourism, roaming represented 8% of revenues.
During 2003, MobiNil managed to change the tariff structure by increasing tariffs on postpaid subscribers by LE 0.05 and
decreasing the tariffs for prepaid by LE 0.25, while also decreasing the billing time from one minute to 30 seconds, thereby
giving the prepaid subscriber more value and more airtime.
Moreover, in November, MobiNil signed an agreement with Telecom Egypt and Vodafone Egypt, whereby the two mobile
operators committed themselves to make a total payment of LE 1,240 million each over four years in installments through
the National Telecommunication Regulatory Authority. Telecom Egypt, through this agreement, would surrender its licence
to the regulator and the mobile operators would be granted access through the 1800 Mhz spectrum, 7.5 Mhz each.
MobiNil also launched MobiNil Life, a new service based on GPRS technology expected to generate further growth in nonvoice service revenues through ringtones and game downloads. The launch of this service took place in conjunction with
ARPU+, OTH’s Value Added Services provider subsidiary.
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
6 9
R E V I E W
Algeria
The results in Djezzy demonstrated a consistently strong operational performance and it continued to consolidate
its position as the leading operator in Algeria, with a market share of 88.9%, along with eight exclusive distributors
by end of 2003. Djezzy’s customer base stood at 1,267,561 subscribers, with net additions for the year reaching 952,521. Djezzy
has made the Algerian customer its priority having more than 2,900 points of sale, managing the largest call centre in Algeria
and making the Djezzy brand one of the most recognizable names in Algeria.
Djezzy has 91.6% of its total subscriber base as prepaid subscribers. ARPU levels continued to decline because of the rapid increase
in prepaid subscribers, however, still a very healthy ARPU reaching US$ 29.6.
In 2003 the main competitor was AMN (Mobillis), had a total subscriber base of 150,000 subscribers. In December, Wataniya
Telecom was awarded the third license for GSM in Algeria. However, the Algerian market is still under-penetrated, with a large
potential for growth. The Capex for 2003 was US$ 223 million and covering a 72% of the population and 48 wilayas with 889
BTS and 5 MSCs.
Pakistan
During the first half of 2003, Mobilink was in the process of upgrading its networks, and improving voice quality
issues and congestion problems. In the second half of the year, Mobilink aggressively targeted the Pakistani
market and added approximately one million subscribers in six months, achieving net adds of 1,063,473. In that period, Mobilink
also managed to stabilize ARPU levels at US$ 13.9 and to achieve a low churn rate of 5.6%.
At the end of 2003, Mobilink's subscriber base reached 2,015,647, with a market share of 61%. Mobilink has two brands, Jazz,
the prepaid brand where the number of prepaid subscribers reached 92.9%, and Mobilink postpaid, where the number of subscribers
reached 7.1% of total subscribers.
In 2004, the competitive environment in the mobile market in Pakistan will start changing. Paktel, one of the current D-AMPS
operators, will convert to GSM in the first quarter of 2004. In the second half, the Pakistan Telecoms Regulator will auction two
more GSM licenses, making the number of operators in the Pakistani market reach six mobile operators. Mobilink is also in the
process of finalizing the license renewal which would end in 2007. In 2003, Mobilink has significantly expanded the capacity
and the quality of its network, Capex in 2003 was US$ 211 million with 817 BTS sites covering 87% of the urban population.
Tunisia
Tunisiana reported significant subscriber growth during the first year of its operation to reach 497,774 subscribers,
since it started its operational launch in December 27, 2002.
Tunisiana managed to capture 27% of the market share, with 490,057 prepaid subscribers, and achieved approximately 70%
coverage during this period with 285 BTS. Capex for the year was US$ 117 million.
Tunisiana has leveraged ideas from other products and services launched within OTH, namely the Al Tashil product, previously
Taksit in MobiNil, which is a prepaid product with a connection fee paid over a five month installment.
Iraq
Immediately after the award of the Mobile license in Central Iraq, and before the signing of the license, OTH, in
an unprecedented move started deploying its network rollout to cover the Baghdad area. On December 22nd,
and during the signing ceremony of the award, OTH launched on a limited scale its postpaid service. Full commercial launch
commenced on February 2004, together with distribution networks, points of sales.
Sub-Saharan Africa
The Ivory Coast operations Loteny Telecom, reached 599,244 number of subscribers (97% prepaid) with a market
share of 48%. OTH announced that it is selling Loteny with a closing of the transaction anticipated in May 2004.
In Congo Brazzaville, where the subscriber base increased by 44% over last year to reach 109,995, Libertis has managed to maintain
its foothold with 37% against its main competitor Celtel.
The Democratic Republic of Congo operation, Oasis Telecom, maintains a small market share of 4.5%. Since April 2003, OTH has
started the restructuring of this operation and managed to increase its subscriber base by 18% to 37,267 subscribers.
Managing the Zimbabwe operations has been extremely challenging, with hyperinflation, major devaluations. OTH deconsolidated
Zimbabwe in the third quarter of 2003 under the IAS guidelines, article 27, section (b), however, OTH managed to increase the
subscriber base to 116,941, a 30% increase. Telecel Zimbabwe has a 32% market share. TchadMobile, still remains the smallest
operation in OTH’s subsidiaries, with 24,580 subscribers. Tchad mobile has a market share of 38% and all subscribers are prepaid.
Outlook for 2004
During 2004 OTH intends to continue its current strategy to:
Focus on Core Assets with particular emphasis on maintaining strong leadership position in each of the markets and
accelerating the rollout of the networks to expand capacity and quality.
OTH management believes that the core of its existing operations will continue to generate substantial subscriber
growth exceeding 50% in 2004.
Continue the divestiture of non core Sub-Saharan operations.
A N N U A L
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Auditor’s Report
To The Shareholders’ of Orascom Telecom Holding (S.A.E)
We have audited the accompanying Consolidated Balance Sheet of Orascom Telecom Holding "Egyptian Joint Stock
Company" as of December 31, 2003 and the related Consolidated Statements of Income, Changes in Shareholders’ Equity
and Cash Flows for the year then ended. These consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
Except for the matter discussed in (*) below , we conducted our audit in accordance with Egyptian Standards on Auditing
and in the light of provisions of applicable Egyptian laws and regulations. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes, examining on test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management as well
as evaluating the overall financial statements presentation. We have obtained the information and explanations, which
we deemed necessary for our audit. We believe that our audit provides a reasonable basis for our opinion.
* A number of subsidiary companies have been audited by other accounting firms. The assets and revenues of
the subsidiary companies not audited by us represent 46.43% & 34.63% respectively of the relevant total
figures for the assets and revenues in the consolidated financial statements.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary if
the above scope limitations were absent, the Consolidated Financial Statements referred to above together with the
notes attached thereto present fairly, in all material respect, the consolidated financial position of the Company as of
December 31, 2003 and the results of its consolidated operations and its consolidated cash flows for the financial year
then ended, in accordance with Egyptian Accounting Standards in compliance with applicable Egyptian laws and
regulations.
Without considering the following additional qualifications:
1- As explained in note (12) the Company amended the terms relating to the method of calculation of the
repayment amounts of one of the loans granted to the company assuming that one dollar of the loan equals
to one GDR. This has resulted in a charge to the income statement for the financial year ending
December 31, 2003 amounting to LE 179 006 073 after it has been reduced by the following :
During September 2003, Orascom Telecom Holding settled US$ 7 500 000 of the loan principal. This was
affected by instructing Telecel International BVI (a wholly owned subsidiary) to transfer 7.5 million of the
company’s GDRs owned by Telecel, at a price of US$ 1 per GDR, to PCSC with a total value of US$ 7.5 million.
This resulted in a reduction of approximately LE 82 million in the charge to income statement relating to
that loan.
On December 31, 2003,Orascom Telecom Holding agreed with PCSC on a new settlement formula by which
the outstanding loan balance as of December 30, 2003 amounting to US$ 23 888 636 equivalent to
LE 146 915 111 was remeasured. This remeasurement resulted in a reduction in the outstanding loan balance
by an amount of US$ 5 013 463 equivalent to LE 30 832 797.
2 - We draw attention to note (19), there is a dispute between the Sales Tax Authority and the Egyptian Company
for Mobile Services on whether the interconnection charges between the Egyptian Company for Mobile Services
network and the other licensed telecommunication networks in Egypt is subject to sales tax . The Egyptian
Company for Mobile Services advisors believe that subjecting the interconnection charges to sales tax is not
legal, as the total cost of the call has already been taxed and that the interconnected charges is just a portion
of the calls. Based on the above, management is of the opinion that the above claim does not represent any
real liability on the company.
KPMG Hazem Hassan
Cairo, March 11, 2004
A N N U A L
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Orascom Telecom Holding S.A.E
(Egyptian Joint Stock Company)
Consolidated Balance Sheet As of December 31, 2003
Note No.
31/12/2003
LE
31/12/2002
LE
1 136 696 278
1 406 562 567
72 084 116
758 735 513
93 113 027
3 467 191 501
586 409 602
1 299 647 707
41 518 502
1 959 317 884
623 454 033
68 658 290
4 579 006 018
25 294 460
20 962 290
1 739 740 023
5 071 434 557
6 576 667 161
533 870 557
13 967 969 048
17 435 160 549
317 676 227
54 197 268
432 660 910
3 524 975 647
4 813 842 550
701 449 828
9 844 802 430
14 423 808 448
116 620 310
786 907 703
1 016 081 582
1 200 000
1 053 867 470
1 704 463 977
1 391 843 080
6 070 984 122
153 057 437
1 945 807 255
730 659 969
430 626 763
565 509 791
1 689 571 244
2 469 787 257
7 985 019 716
528 566 117
4 227 557 521
4 756 123 638
162 572 693
1 871 903 215
2 034 475 908
2 092 168 353
1 253 570 500
1 100 000 000
(14 523 677 )
16 689 239
1 210 524 366
383 073 911
1 108 271 603
3 804 035 442
711 848 994
4 515 884 436
17 435 160 549
1 100 000 000
(21 666 398 )
569 264 169
383 073 911
72 586 696
2 103 258 378
1 047 483 946
3 150 742 324
14 423 808 448
Current Assets
Cash at banks & on hand
Other debit balances (net)
Prepaid expenses
Receivables from selling subsidiary company
Accounts receivable (net)
Inventory (net)
Total Current Assets
(9)
(8)
Long-Term Assets
Due from subsidiaries & related parties
Investments
Assets under construction
Fixed assets (net)
Deferred expenses (net)
Goodwill (net)
Total long-term assets
Total Assets
(2-6/4)
(3)
(2-4/6)
(2-5/7)
(2-1-b/5)
Current Liabilities
Banks current accounts-credit and overdraft
Creditors short-term
Accounts payable
Investment payable
Accrued expenses
Other credit balances
Short-term loans
Total Current Liabilities
(10)
(13)
(11)
(12)
Long Term Liabilities
(14)
(12)
Creditors long-term
Long-term loans
Total Long-Term Laibilities
Minority Interest
Shareholders' Equity
(15)
(16)
(16)
(2-3)
Issued capital
Treasury stock
Other reserves
Cumulative translation adjustments
Legal reserve
Retained earnings
Total Shareholders' Equity
Net profit for the year
Total Shareholders' Equity including net profit for the year
Total Liabilities and Shareholders' Equity
The accompanying notes form an integral part of these financial statements and are to be read therewith.
Executive Officer Finance
Chairman
Auditor’s Report “attached”
(KPMG Hazem Hassan)
Consolidated Income Statement
For the financial year from January 1, 2003 to December 31,2003
Note
No.
Cellular operations revenue
Financial year
ended
31/12//2003
LE
Financial year
ended
31/12//2002
LE
5 862 751 365
3 639 526 164
71 336 511
40 317 394
Total revenues
541 882 625
6 475 970 501
384 223 728
4 064 067 286
Cellular operations cost of services
(1 185 305 934)
(804 214 754)
( 47 708 052)
( 369 950 597)
(36 937 202)
(282 826 006)
(1 602 964 583)
4 873 005 918
(1 123 977 962)
2 940 089 324
18 689 986
( 537 952 352)
29 246 066
( 299 188 294)
(1 154 980 079)
( 334 883 757)
( 895 440 607)
( 255 635 647)
Internet service revenue
Telecommunication service revenue
Internet service cost
Telecommunications service cost
Total operating cost
Gross profit
Other revenues
Other operating expenses
Selling, general & administrative expenses
Provisions
Earnings before interest, tax, depreciation & amortization
Depreciation & amortization
Impairment in goodwill value
Earnings before interest, tax
2 863 879 716
1 519 070 842
(1 373 886 024)
(97 290 128)
(1 049 447 743)
(188 000 000)
1 392 703 564
281 623 099
(568 800 071)
(179 006 073)
146 566 833
486 988 679
182 628 175
45 530
( 14 530 867)
(521 849 783)
278 072 286
1 108 858 643
(96 720 418)
156 963 659
(1 283 596)
1 446 595 770
1 205 663 890
(293 535 299)
1 153 060 471
(441 211 477)
(119 603 036)
1 086 060 854
(38 576 908)
711 848 994
1 047 483 946
Other Income (expenses)
Interest expense
Adjustment relating to loan balance
Interest income & other revenues
Gains from sale & deconsolidation of investments
Foreign currency Gain (losses)
Equity share in subsidiaries income
Capital (losses)
Earnings Before Tax
Income tax
Net profit before minority interest
Minority interest
Earning per share
(12)
(2-1-c/24)
6.51
(17)
9.55
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
7 5
R E V I E W
(16)
1 100 000 000
-
1 100 000 000
( 14 523 677 )
4 406 967
(9 889 781)
12 625 535
-
(21 666 398)
(8 185 920)
(6 337 757)
(7 142 721)
-
LE
LE
1 100 000 000
-
Treasury stock
Capital
-
-
-
361 968 653
(361 968 653)
-
Special reseve
(Paid in capital
in excess of par)
LE
16 689 239
16 689 239
-
-
-
LE
Other
reserve
LE
Legal
reserve
1 210 524 366
(4 406 967)
645 667 164
-
569 264 169
383 073 911
-
383 073 911
320 976 437 550 000 000
(166 926 089)
337 757
247 949 975
-
Cummulative
translation
adjustment
LE
* Calculation differences mainly in Pioneer resulting from sale of pella shares and change in the ownership percentage in Algeria during the year 2003.
Balance as of 31/12/2003
Sale of treasury stock
* Adjustment on retained earnings
Treasury stock
Employees' profit distribution (subsidiaries)
Cumulative translation adjustment
Transfer to retained earnings
Adjustment on treasury stock
Employees' profit distribution (subsidiaries)
Adjustment on retained earnings
Treasury stock
Transfer to retained earnings
Transfer from reserves
Adjustment on treasury stock
Cumulative translation adjustments
Note No.
72 586 696
40 893 290
(435 322 049)
528 894 742
6 000 000
(12 108 774)
(55 770 513)
-
LE
Retained
earnings
1 047 483 946
(435 322 049)
435 322 049
1 047 483 946
LE
Net profit for
the year
1 108 271 603
711 848 994
1 047 483 946 (1 047 483 946)
(36 123 407)
24 324 368
711 848 994
Consolidated Statement of Changes in Shareholders' Equity
For the financial year from January 1, 2003 to December 31,2003
4 515 884 436
645 667 164
(36 123 407)
24 324 368
(9 889 781)
29 314 774
711 848 994
3 150 742 324
1 930 330 411
247 949 975
(12 108 774)
(55 770 513)
(7 142 721)
1 047 483 946
LE
Total
Consolidated Cash Flows
For the financial year from January 1, 2003 to December 31, 2003
Financial year
ended
31/12/2003
LE
Note
No.
Financial year
ended
31/12/2002
LE
Cash flows from operating activities
711 848 994
1 047 483 946
1 373 886 024
97 290 128
1 049 447 743
Adjustment to reconcile net profit (Loss) to cash
flows from operating activities
Depreciation & amortization
Impairment in investment value
Loan remeasurement differences
Income tax provision
88 608 221
293 535 299
334 883 757
Other provisions
Adjustments on retained earnings
Gain from sale & deconsolidation of investments
24 324 368
(486 988 679)
871 832 831
70 289 143
Changes in minority interest
Increase (decrease) in goodwill
Capital losses
Increase in cummulative translation adjustment
Net cash provided by operating activities
255 635 647
(55 770 513)
(1 265 822 302)
664 574 886
14 530 867
582 441 434
3 976 482 387
(62 455 772)
1 283 596
830 891 018
2 772 871 285
(4 834 924)
(1 213 488 354)
2 758 159 109
(1 233 058 027)
1 158 563 325
2 698 376 583
(3 299 155 769)
(1 880 542 878)
( 429 426 763)
301 561 759
1 959 317 884
(1 130 618 265)
( 505 308 400)
366 253 532
91 340 581
(3 348 245 767)
(1 178 332 552)
1 152 664 781
23 831 960
(36 123 407)
(2 909 209)
(771 268 651)
(580 892 670)
(7 142 721)
(12 108 774)
1 140 373 334
550 286 676
586 409 602
1 136 696 278
(1 374 322 025)
145 722 006
440 687 596
586 409 602
Net profit before change in current assets and current liabilities
Changes in current assets
Changes in current liabilities
188 000 000
119 603 036
Cash flows from investing activities
Payments for fixed assets & assets under construction
Payments for deferred expenses
Payments for long term investments
Proceeds from sale of fixed assets
Proceeds from sale of investments
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from (Payments for) loans & overdraft banks
(Payments for) in investment payable
(Payments for) in long term creditors
(Proceeds from (payments for) treasury stock
(Payments for) employees' profit distribution (Subsidiaries)
Net cash provided by (used in) financing activities
Net cash movement
Cash & cash equivalents as at January 1st
Cash & cash equivalents as at December 31st
(2-8/9)
A N N U A L
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Notes To The Consolidated Financial Statements
For The Financial Year Ended December 31, 2003
1- General
A- Legal status
Orascom Telecom Holding S.A.E (“the Company” or “ Orascom Telecom”) is an Egyptian Joint Stock Company established
in accordance with the provisions of law No. 159 of 1981 and its executive regulations and in accordance with the law
No. 95 and its executive regulations issued in 1992. The Company was registered in the Commercial register on July
29, 1997 under no. 114812.
The Company extraordinary general assembly in its meeting held on February 9,2000 approved the change of the
governing law from the Companies’ Law No. 159 for 1981 to Law No. 95 for 1992. Also, by virtue of a resolution of
the extraordinary general assembly meeting held on June 13, 2000, the Company’s name was changed from Orascom
Telecom to Orascom Telecom Holding. The Capital Market Authority’s approval for these changes had been obtained
on July 12, 2000. These changes were registered in the Commercial Registry under no. 134934.
B- Purpose of the company
The Company’s purpose is to participate in companies issuing securities or to increase its share capital of these companies.
The Company may have interest or participate in any way whatsoever in companies and other enterprises practicing
works similar to those of the Company. It may also merge into those companies and enterprises, purchase them or
affiliate them, pursuant to the provisions of law at its executive regulations.
C- Subsidiary companies
As of December 31, 2003 Orascom Telecom Holding, hereafter called the “Parent“ owns subsidiary companies, that have
been consolidated in the consolidated financial statements, as follows:
1) Fully consolidated subsidiaries:
% of share
Pioneers Investment Company
Country
100%
Jordan
InTouch Company
75%
Egypt
Cortex service Ltd. Company (BVI)
95%
(B.V.I)
Telecel International Ltd. Company
100%
(B.V.I)
100%
Mauritius
International Wireless Communication
Pakistan Ltd (IWCPL).
Libertis Telecom Company
65%
Congo –Brazzaville
Egyptian Satellite Company (ESC)
51%
Egypt
Pharaoh Telecommunication Company
* OrasInvest Holding Inc. Company
Ring Distribution Company
55%
Egypt
97.5%
(B.V.I)
99%
Egypt
* Orascom Telecom Algeria Company
58.3%
Algeria
Orascom Telecom ESOP Company
100%
(B.V.I)
Comtel Network Solution Company
94%
Egypt
Contra for development project Company
80%
Egypt
Contra for development project Co. (Tunisia)
Tchad Mobile Company
* Arpu for Communication services
80%
Tunisia
100%
Tchad
87.75%
Egypt
Moga Holding Limited company
100%
Mauritius
Orascom Iraq Holding company
100%
(B.V.I)
* Includes direct and indirect ownership stake.
A N N U A L
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2) Proportionally consolidated companies:
The consolidated financial statements also include the Parent’s prorata interest in the assets, liabilities, revenues and
expenses of joint ventures through proportionate consolidation of these items in the Parent’s similar accounts item by
item in the financial statements.
Indicated hereunder are the joint ventures, the Parent’s prorata interest and the period for which the financial statements
have been prepared as a basis for proportionate consolidation in the Parent’s consolidated financial statements.
Country
Prorata Interest as of
The period for which
Dec. 31, 2003
financial statements were prepared
28.75%
1/1/2003- 31/12/2003
Egyptian Company for Mobile Services
16.6%
1/1/2003- 31/12/2003
Egypt
Orascom Tunisia Holding Ltd Co.
55.95%
2/6/2002- 31/12/2003
(B.V.I)
Carthage Consortium Co.
4.65%
2/6/2002- 31/12/2003
(B.V.I)
Name of the Joint Venture
MobiNil for Telecommunications
Egypt
- An agreement concluded between the company and the other shareholders in the joint ventures provide that all the
parties have joint control over these companies.
2- Significant accounting policies
The significant accounting policies adopted in the preparation of these consolidated financial statements are set out
below:
2-1 Basis of preparing the consolidated financial statements
The consolidated financial statements are prepared according to the Egyptian Accounting Standards, which are not
materially different from the International Accounting Standards as they pertain to the company.
The consolidated financial statements include all subsidiaries that are controlled by the parent company and which
management intends to continue to control (Note 1-C). The basis of the consolidation are as follows:
- All material inter-group balances and transactions are eliminated.
- Minority interest, in the equity and results of the entities that are controlled by the parent company, is shown as a
separate item in the consolidated financial statements and calculated as the minority’s proportion of the pre-acquisition
carrying amounts of the assets and liabilities of the subsidiary.
The cost of acquisition is allocated as follows:
a-The fair value of the assets and liabilities acquired as of the date of the acquisition to the extent of the parent’s
interest obtained in the acquisition.
b- The excess of the cost of acquisition over the parent’s interest in the fair value of the identifiable assets and liabilities
acquired as of the date of acquisition is recognized as goodwill and amortized over a period of 15 years, or the
remaining duration of the license granted to the operator which ever is less as the case may be.
c- Deconsolidation:
A subsidiary excluded from the consolidated financial statement when:
- Parent control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to
its subsequent disposal in the near future.
- The subsidiary operated under severe long-term restrictions, which significantly impair its ability to transfer funds
to the parent.
Such deconsolidated subsidiaries accounted for in accordance with EAS No. 17 concerning investment.
2-2 Translation of the foreign currencies transactions
Some of Orascom Telecom Holding’s subsidiaries maintain their books of accounts in Egyptian Pounds. Transactions
denominated in foreign currencies are recorded at the prevailing exchange rate at the date of transactions. Monetary
assets and liabilities denominated in a foreign currency at the balance sheet date are retranslated at the prevailing
exchange rates, at that date. The exchange differences resulting from the settlement of transactions and the retranslation
at the balance sheet date are taken to income statement.
2-3 Translation of the foreign subsidiaries’ financials
As of the Balance sheet date the assets and liabilities of these companies are translated to Egyptian Pounds at the
prevailing rate as of the year end, and the shareholders’ equity accounts are translated at historical rates, where as
the income and expenses accounts are translated at the average exchange rate prevailing during the period of the
consolidated financial statements. Currency translation differences are recorded in the shareholders equity section of
the balance sheet as cumulative translation adjustment.
A N N U A L
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2-4 Fixed assets
Fixed assets are recorded at historical cost and presented in the balance sheet net of accumulated depreciation. Depreciable
assets are depreciated over the estimated useful- life of each asset by using the straight-line method. The following are
the estimated useful lives, for each class of assets, used for depreciation calculation purposes:
Assets
Depreciation period
Buildings
50 years
Cell sites
8 years
Equipment & Tools
Computers equipments
Furniture & Fixtures
5-10 years
3-5 years
5-10 years
Vehicles
3-6 years
Leasehold improvements
3-5 years
2-5 Deferred expenses
- Organization costs and pre-operating expenses are amortized over one year - five years, using the straight-line method,
immediately upon the commencement of the companies operation. Most companies had fully amortized the organization
and pre-operating expenses in 2000.
- License fees to be amortized over the license life.
2-6 Investments
Investments in associated companies are stated at equity method. At each balance sheet date, management assesses the
value of these investments and in case that the recoverable value from the investment is below the carrying value; the
carrying value of the investment is reduced by the value of the impairment. The value of the impairment is charged to the
income statement.
2-7 Taxation
- A tax provision is formed to meet tax obligations based on a detailed schedule for each claim.
- Due to the nature of the Egyptian tax laws and legislation, applying the principles of the deferred taxes according to the
International Accounting Standard “taxes on income” will not usually result in material deferred tax liabilities. Further,
if the application results in deferred tax assets, it will be recognized in the financial statements whenever there is sufficient
assurance that these assets will be realized in the foreseeable future.
2-8 Cash and cash equivalents
For the purpose of preparing the statement of cash flows, the Company considers all cash on hands, bank current accounts, letters
of guarantee and time deposits with banks as cash and cash equivalents. The cash flow statement prepared according to the
indirect method.
2-9 Capitalization of borrowing cost
- The Egyptian Company for Mobile Services capitalizes the borrowing costs related to the acquisition or establishment
of an asset, this is in accordance to paragraph 11 of Egyptian Accounting Standard No.14.
Accordingly, the company capitalized LE 22 415 574 in fixed assets and LE 13 343 451 in assets under construction.
(LE 21 595 485, LE 16 343 705 respectively during 2002).
The average borrowing rate for the Egyptian Company for Mobile Services which was used to capitalize interest on
the assets is 9.173 % for 2003 (9.46 % for 2002).
- Orascom Telecom Algeria capitalized some of the borrowing costs related to the acquisition of the GSM license.
Accordingly the company capitalized US$ 6 million during 2003 (US$ 16.6 million during 2002).
3- Assets under construction
31/12/2003
31/12/2002
LE
LE
54 503 894
MobiNil for Telecommunication Company
85 837 541
49 561 850
31 470 074
Telecel International Company
65 724 816
56 809 544
2 239 367
2 949 613
334 242 654
112 375 643
* Orascom Telecom Holding Company
33 111 679
19 703 110
InTouch Company
15 537 945
232 554
2 267 949
1 700
992 856 000
154 595 720
Orascom Telecom Algeria Company
Ring for Distribution Company
International Wireless Communication Pakistan
Ltd (IWCPL).
Orascom Iraq Holding
Orascom Telecom Tunisia Holding
Carthage Consortium
Other companies
2 544 439
-
110 776 026
-
43 469 192
-
1 518 342
-
52 223
19 058
1 739 740 023
432 660 910
* The assets under construction balance as at December 31, 2003 amounting to LE 33 111 679 , represents that value
of the new administrative premises purchased from Nile City Investments Company (an affiliated company) by virtue
of an agreement signed on 17/8/2000 as well as the value of additional related work.
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4- Investments
31/12/2003
31/12/2002
LE
LE
4.74%
-
27 869 752
-
-
5 000
10.25%
7 687 500
-
-
301 051
-
2 940 817
13 274 790
17 955 648
20 962 290
54 197 268
Percentage of Ownership
Oratel International Co.
(4-1)
Mena Telecommunication Co.
(Menatel)
Intelligent village (ECDMIV)
Syriatel Mobile Telecom Co.
(4-2)
Other investments (in subsidiaries)
(4-3)
2%
5 125 000
4-1 On June 30, 2003 the Company has increased its investment in Oratel International Ltd. By LE 180.9 million
equivalent to US$ 30 million, represented in 40 million share. The Company’s investment, following the aforementioned
increase, reached 27.96 % of Oratel International Ltd’s share capital. During December 2003, Orascom Telecom Holding
sold 38,200,000 share of Oratel International Ltd and realized a gain of LE 61 560 303, reported in the income statement
for the financial year ended December 31, 2003 within gains from sale of investments caption. Following this sale, the
Company’s investments in Oratel Interantional Ltd reached 4.74 % of the investee share capital.
4-2 Orascom Telecom Holding acquired an additional 51 % of the share capital of Tchad Mobile Company from Sotel
Company to become a fully owned subsidiary by Orascom Telecom Holding.
4-3 On July 16, 2003 Orascom Telecom Holding , Cylotel and Drex Technologies signed an agreement to settle all
legal disputes and litigations in the international and Syrian jurisdictions and cancelled the sale of Syriatel shares to
Cylotel. Based on this agreement Orascom Telecom Holding no longer owns any shares in Syriatel, Orascom Telecom
Holding received cash considerations to compensate the cost of its initial investment, loan made to Syriatel and other
expenses incurred. This settlement has resulted in a gain of LE 55 265 575, reported in the income statement for the
financial year ended December 31, 2003 within gains on sale of investment caption.
5- Goodwill (net)
Positive goodwill represents the excess cost of the acquisition of the joint ventures and other investments over their
fair value at the date of acquisition. While the negative goodwill represents the excess of fair value at date of acquisition
over the cost of acquisition. As for Egyptian Company for Mobile Services goodwill and Telecel International goodwill
they relate to the mobile licenses owned by them and are amortized over the period of the licenses. As for the goodwill
of MobiNil for Telecommunication it’s amortized over the remaining period of the license.
As for the negative goodwill of International Wireless Communication Pakistan Ltd (IWCPL) (Mauritius), it is amortized
over the remaining period of the license. As for the positive goodwill of Pakistan Mobile Ltd (Pakistan), it’s amortized
over the remaining period of International Wireless Communication Pakistan Ltd (IWCPL) license.
Goodwill at the parent
company’s level
Goodwill at
Amortization
Net
date of acquisition
as of 31/12/2003
as of 31/12/2003
LE
LE
LE
MobiNil for Telecommunication
332 321 441
76 058 340
256 263 101
178 746 470
58 989 332
119 757 138
*International Wireless Communication
(130 092 123)
(51 914 876)
(78 177 247)
Pakistan Ltd (IWCPL)
** Pakistan Mobile Ltd.
111 183 049
51 314 254
59 868 795
***Telecel International Limited
682 676 807
116 801 395
565 875 412
Pioneers Investment Co.
142 347 261
45 057 133
97 290 128
9 686 993
2 583 198
7 103 795
46 000
15 333
30 667
28 934
17 360
11 574
398 829
48 807
350 022
InTouch Company
Egyptian Satellite Co. (ESC)
Pharaoh Telecommunication Company
(45 897)
(6 111)
(39 786)
Contra Egypt Co.
3 814 000
759 486
3 054 514
Tchad Mobile Co.
6 322 178
541 521
5 780 657
Comtel network solutions (Egypt)
Goodwill at the subsidiaries’ level
MobiNil for Telecommunication in the Egyptian
Company for Mobile Services
1 077 322
260 292
817 030
InTouch Goodwill in Link
7 609 466
1 521 894
6 087 572
459 132
244 870
214 262
4 004 706
1 568 008
2 436 698
OrasInvest in ESC.
Telecel in X-Com
Moga Holding Company in Orascom Telecom
Algeria
(10 444 866)
(206 149)
(10 238 717)
Cortex Company in OrasInvest Company
(14 656 195)
(1 465 619)
(13 190 576)
1 325 483 507
302 188 468
1 023 295 039
Total
Telecel goodwill impairment
(392 134 354)
***** Pioneer goodwill impairment
(97 290 128)
Net
836 059 025
****
A N N U A L
R E P O R T
2 0 0 3
P A G E
-
(392 134 354)
-
(97 290 128)
533 870 557
302 188 468
P A G E
8 5
R E V I E W
* International Wireless Communication Pakistan Ltd (IWCPL) negative goodwill was increased with an amount of
LE 102 632 741 due to the Orascom Telecom Holding acquisition of 34.08 % of International Wireless Communication
Pakistan Ltd (IWCPL) shares, that took place during 2001.
During 2002, International Wireless Communication Pakistan Ltd (IWCPL) reclassified an amount of US$ 3 million previously
paid by Orascom Telecom Holding to a current account due to Orascom Telecom Holding, the negative goodwill was increased
with an amount of LE 10 350 000.
** Pakistan Mobile Ltd reclassified an amount of US$ 1.8 million previously paid by Orascom Telecom Holding to a current
account due to Orascom Telecom Holding accordingly the goodwill was increased during 2002 with an amount of
LE 7 188 034.
- During the third quarter of year 2003, the company has sold its direct investments in Pakistan Mobile limited which
represent 30% of the shares to the International Wireless Communications Pakistan Ltd (IWCPL), a wholly owned subsidiary
to Orascom Telecom Holding, and as it is an intercompany transactions the effect has been eliminated from the consolidated
financial statements.
*** In December 2002 the sale agreement signed by Telecel of its operations in Zambia, Uganda, South Africa, Burundi, and
Centrafrique became binding; therefore Orascom Telecom received the remaining 20% of Telecel shares it did not own.
Accordingly Telecel goodwill was increased with an amount of LE 62 455 772 in 2002.
**** In 2001, and based on a valuation study prepared by an Investment Bank of Telecel International limited,
LE 204 134 354 was considered as an impairment of the investment value. That led to a decrease in the goodwill value by
the same amount. In 2002 the value of Telecel International was additionally reduced by LE 188 million, which was considered
as an impairment of the investment value based on a valuation study prepared by an Investment Bank. Accordingly the
value of impairment of Telecel International investment amounted to LE 392 134 354. Knowing that the difference between
the cost of the acquisition of Telecel International Ltd. (B.V.I) and Orascom Telecom Holding share in the net assets of Telecel
is amortized over fifteen years starting on January 2000.
***** During the third quarter of year 2003 the company has accelerated the amortization for the remaining carrying amount
of the goodwill in Pioneer investment company in Jordan, the accelerated portion from the goodwill amounted to
LE 97 290 128.
6- Fixed Assets (Net)
Land
Buildings
Cell Sites
Equipment
Computer
Furniture &
& Tools
Equipment
Fixtures
LE
LE
Vehicles
Leasehold
Total
improvments
LE
LE
LE
LE
LE
2 164 948
49 577 759
5 067 418 325
170 136 518
212 601 715
84 827 699
36 360 022
58 771 450
5 681 858 436
Additions
59 393
4 753 950
1 894 419 738
153 897 143
108 868 677
26 116 720
20 563 136
19 035 031
2 227 713 788
Disposals
-
(1 956 650 )
(568 191 028 )
( 415 809 )
( 750 911 )
( 655 842 )
(3 163 423 )
( 412 633 )
(575 546 296 )
2 224 341
52 375 059
6 393 647 035
323 617 852
320 719 481
110 288 577
53 759 735
77 393 848
7 334 025 928
Accumulated depreciation 1/1/2003
-
14 521 775
1 384 770 678
63 342 066
72 649 545
32 461 352
15 504 856
27 825 076
1 611 075 348
Depreciation for the year
-
6 453 534
771 145 191
38 171 450
54 887 505
13 545 322
8 885 729
17 880 962
910 969 693
Accumulated depreciation of disposals
-
(1 442 453 )
(254 644 269 )
( 250 249 )
( 608 907 )
( 287 355 )
(2 065 514 )
( 154 923 )
(259 453 670 )
Accumulated depreciation 31/12/2003
-
19 532 856
1 901 271 600
101 263 267
126 928 143
45 719 319
22 325 071
45 551 115
2 262 591 371
Net book value 31/12/2003
2 224 341
32 842 203
4 492 375 435
222 354 585
193 791 338
64 569 258
31 434 664
31 842 733
5 071 434 557
Net book value 31/12/2002
2 164 951
30 060 083
3 204 474 564
76 999 060
121 994 174
45 275 789
17 749 772
26 257 254
3 524 975 647
LE
LE
Cost
Balance 1/1/2003
Balance 31/12/2003
Accumulated Depreciation
Orascom Telecom Algeria fixed assets amounted to D.A 18 470 820 019 equivalent to LE 1 611 797 002 was pledged against loans and credit
facilities obtained from Moga Holding Ltd to group of banks and International Financial Organization.
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
8 7
R E V I E W
7- Deferred expenses (net)
Organization costs (net)
Deferred expenses (net)
Licenses fees (net)
31/12/2003
31/12/2002
LE
LE
406 310 853
22 049 850
44 695 159
6 170 356 308
4 747 097 541
6 576 667 161
4 813 842 550
31/12/2003
31/12/2002
LE
LE
8- Other debit balances (net)
Advance payments to suppliers
235 705 732
130 621 659
Accrued revenue
352 736 083
158 386 667
Deposit with others
Due from affiliated companies
Taxes
SWAP agreement receivables
Other debit balances (net)
6 324 270
-
13 722 479
350 737 417
49 504 342
10 037 335
264 591 973
473 773 647
497 700 167
162 368 503
1 406 562 567
1 299 647 707
31/12/2003
31/12/2002
LE
LE
9- Cash at banks and on hand
Cash on hand
Banks- current accounts & checks under collection
Banks- Letters of Guarantee
Banks- Time deposits*
12 180 335
3 231 804
928 595 469
337 990 629
9 424 622
11 194 359
186 495 852
233 992 810
1 136 696 278
586 409 602
* Time deposits as of December 31, 2003 include an amount of LE 138 137 722 blocked as a collateral for loans and letters
of guarantee and letters of credit.
10- Creditors short-term
*Orascom Telecom Algeria
31/12/2003
31/12/2002
LE
LE
1 830 267 885
-
(Algerian government-license fees )
** Due to Tunisian government–License fees
345 198 063
Sundry creditors
441 709 640
115 539 370
786 907 703
1 945 807 255
-
* The Company has obtained the 2nd license to operate a GSM network in Algeria through investment in its subsidiary
" Orascom Telecom Algeria " for an amount of US$ 737 million for a period of 15 years starting from August 2001 and
can be extended for another 3 years without paying any extra fees. Orascom Telecom Algeria has paid the first 50%
of the license fees in August 2001 and the remaining 50% which is equivalent to US$ 368.5 million was paid on
December 27, 2003 in addition to an annual interest rate of 5.5 %.
** On May 11, 2002 the Company has obtained the 2nd license to operate GSM network in Tunisia through investment
in its subsidiary "Orascom Telecom Tunisia” for an amount of US$ 454 million for a period of 15 years starting from
December 2002 to be paid on two equal installments equivalent to US$ 227 million each. The company has paid the
first installment on May 21, 2002 where as the second and final installment in addition to an annual interest rate of
six month Libor + 2% is due on September 30, 2004. The amount represent Orascom Telecom Holding proportionate
share in Orascom Telecom Tunisia Holding Ltd. and Carthage Consortium Ltd. Company with an amount of
LE 333 547 533 and LE 11 650 530 respectively.
11- Other credit balances
31/12/2003
31/12/2002
LE
LE
Taxes & Provisions
549 037 467
274 566 062
Deferred revenues
292 841 570
94 886 657
Deposit to others
17 384 004
17 255 545
Income tax provision
21 578 709
7 533 036
144 781 000
221 683 505
95 793 216
53 462 582
Due to affiliated companies
Contingent liabilities
SWAP agreement payables
269 342 089
421 945 233
Other credit balances
313 705 922
598 238 624
1 704 463 977
1 689 571 244
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
8 9
R E V I E W
Group of banks & financial organization
Group of banks
5- Orascom Telecom Algeria
6- IWCPL
Loans of credit facilities
Group of banks
Group of banks
Group of banks
9- Orascom Iraq Holding Company
10- Orascom Telecom Tunisia Holding
11- Carthage Consortium Company
12- Orascom Telecom Holding
Libor +2%
14%
According to contract
8%
Libor +3%
13.50%
Libor +2.65%
14.00%
3%+ Euribor
3%+ Libor
Group of banks & financial organization 4.25%+ Euribor
4.25%+ Euribor
4.25%+ Euribor
4.25%+ Euribor
4.25%+ Euribor
4.25%+ Euribor
5%+ Euribor + EPC + 5%
Treasury Bill rate + 1%-6%
8- Moga Holding Company
7- Libertis Telecom Company
Group of banks
4- Telecel International Ltd.
3- OrasInvest Co.
1.6% - 0.9% (over libor)
The average time deposit
rates + a margin of 0.5%
12.25%
Group of banks
2- MobiNil for Telecommunications Co.
Interest Rate
1.6% - 0.9% (over libor)
The average time deposit
rates + a margin of 0.5%
12.25%
Lending Institution
1- The Egyptian Company Mobile Services Group of banks
Borrower
12- LOANS
1 391 843 080
4 227 557 521
*A pledge of the shares owned in ECMS,
*A pledge of the shares owned in MobiNil Telecommunication .
*A pledge of the shares owned in ECMS.
*PCSC (BVI) loan
*PCSC (BVI) loan
*A pledge of the shares owned in ECMS
5 619 400 601
US$
L.E
L.E
US$
US$
L.E
US$
L.E
458 571 631
371 250 000
829 821 631
10,000,000
250,000,000
107,000,000
35,000,000
20,000,000
50,000,000
10,000,000
100,000,000
*A pledge of Orascom Telecom Tunisia license and fixed assets .
4 147 395
118 737 358
4 114 538
*pledge of Orascom Telecom Iraq assets including the license & bank accounts that includes cash inflows
* Corporate gurantee from Orascom Telecom Holding
32 857
US$
US$
*Pledge of 102 080 279 shares of IWCPL owned by Orascom Telecom Holding.
*Pledge of 1 395 572 shares of Orascom Telecom Algeria owned by Orascom Telecom Holding.
*Pledge of 50 000 001 shares of Moga Holding Ltd owned by Orascom Telecom Holding.
*Pledge of 342 500 shares of Orascom Telecom Algeria owned by Moga Holding Ltd.
*Pledge of 995 984 shares of Orascom Telecom Algeria owned by Oratel International .
* Secured by Motorola corporate gurantee
* Secured by Motorola corporate gurantee
*A pledge of Orascom Telecom Tunisia license and fixed assets .
10,325,000
19,631,456
-
184 232 204
US$
US$
US$
US$
US$
* Pledge over Orascom Telecom Algeria business undertaking .
* Pledge over Orascom Telecom Algeria bank accounts.
* Personal, joint, several and indivisible guarantee from Orascom Telecom Holding to secure
Orascom Telecom Algeria obligations.
* Pledge over IWCPL shares held by Orascom Telecom Holding to secure
Orascom Telecom Algeria obligations.
* Pledge over Orascom Telecom Algeria shares held by Orascom Telecom Holding,
Oratel, Moga Holding and AIG to secure Orascom Telecom Algeria obligations.
* Promissory notes to secure the principle amount of the loans to the lenders.
* Moga Holding was granted the option to convert the outstanding amount of its loan
into Orascom Telecom Algeria ordinary shares (by nominal value) under certain conditions.
* All aformaintioned are for export credit facilities agreement .
117 796 692
21,500,000
4,300,000
20,000,000
45,000,000
30,000,000
15,000,000
17,500,000
-
3,497,690
6,310,000
18,118,995
20,225,855
20,225,855
262 180 748
129 463 650
555 886 200
189,676,322
92,000,000
30 098 010
110 529 068
1 148 103 827
921 686 933
84 470 768
*A pledge of 53% from Loteny Telecom shares
*A pledge of M- Link buildings with an amount of US$ 1.5 million
*Revenues from International operator
*A pledge of 51% from ECMS shares owned by MobiNil Telecommunications Company.
*A pledge of ECMS bank accounts where all revenues and any other cash inflows are deposits.
*A first priority commercial lien on ECMS assets to the present and future brorowers
*An assignment of insurance contracts related to the network and other insurance contract which exceeds US$ 5 million.
*Assignment of any shareholders subordinated loans when made.
US$
LE
LE
220,000,000
1,190,000,000
340,000,000
Bonds
142 139 661
506 120
*A pledge of 51% from ECMS shares owned by MobiNil Telecommunications Company.
*A pledge of ECMS bank accounts where all revenues and any other cash inflows are deposited.
*A first priority commercial lien on ECMS assets to the present and future brorowers
*An assignment of insurance contracts related to the network and other insurance contract which exceeds US$ 5 million.
*Assignment of any shareholders subordinated loans when made.
US$
LE
LE
* The facility is secured by:
Collateral Given
220,000,000
1,190,000,000
340,000,000
Bonds
Currency Debt
82 070 204
Short Term
Portion
31/12/2003
LE
380 747 422
-
402 296 754
232 282 648
Long Term
Portion
31/12/2003
LE
940 666
184 232 204
1 183 867 681
30 098 010
685 349 850
1 258 632 895
465 218 190
506 120
544 436 415
314 352 852
Outstanding
amount
31/12/2003
LE
- In 2002 the company received several loans from PCSC. In the financial period ending June 30, 2003 the method of
repayment and the interest rate relating to one of these Loans amounting to US$ 20 million were amended. By virtue
of this amendment the loan principal is reduced by the repayment as adjusted in accordance with a formula whereby
the repayment is divided by the market price of Orascom Telecom GDR at the repayment date. This formula assumes
that one dollar of the loan is equal to one GDR.
During September 2003 the company settled US$ 7 500 000 of the loan principal. This was effected by instructing Telecel
International BVI (a wholly owned subsidiary) to transfer 7.5 million of the company’s GDRs owned by Telecel, at a price
of US$ 1 per GDR, to PCSC with a total value of US$ 7.5 million. This resulted in a gain to Orascom Telecom of
approximately LE 82 million reduced from adjustment relating to loan balance in the income statement.
On December 31, 2003, Orascom Telecom Holding and PCSC agreed to settle the outstanding loan balance as of December
30, 2003 which amounted to US$ 23 888 636 which is equivalent to LE 146 915 111 ignoring the formula mentioned
above, this settlement reduced the adjustment relating to a loan balance reflected in the income statement with an
amount of US$ 5 013 463 which is equivalent to LE 30 832 797. Accordingly the balance due to PCSC as of December
31, 2003 amounted to US$ 7 120 066 which is equivalent to LE 43 788 406.
Based on the above, the total amount paid & settled from the principle loan as of December 31,2003 was
US$ 39 022 816 which is equivalent to LE 239 990 318, and as for adjustment relating to a loan balance reflected in
the income statement as of December 31,2003 an amount of LE 179 006 073.
Subsequent to the financial statement date , the company fully paid the due balance to PCSC which is amounted to
US$ 7 120 066 and equivalent to LE 43 788 406.
- Banque du Caire loan is guaranteed by a pledge on 915,000 share of the Egyptian Company for Mobile Services (Interest
rate 14%).
- The Arab Investment Company loan is guaranteed by a pledge on 1,907,000 share of the Egyptian Company for Mobile
Services shares (interest rate Libor + 2%).
- Misr Iran Loan is guaranteed by a pledge on 2,041,000 share of Egyptian Company for Mobile Services (Interest rate
13.5%).
- On August 26, 2003 an agreement was signed between Orascom Telecom Holding and Misr Bank, whereby the Company
will settle its short-term facilities due to the bank and obtain a long-term loan amounting to LE 250 million payable
over five years, after one year grace period during which only interest will be paid, while the principle will be paid in
eight equal, semi-annual installments during the following four years. The loan is guaranteed by a pledge on
6,900 shares of MobiNil Telecommunications Company (Interest rate 14%) .
- On September 30, 2003 Orascom Telecom Holding restructured the National Societe Generale Bank Loan into a longterm loan payable in eight equal, semi-annual installments the last of the which is to be settled on October 31, 2007,
the loan is guaranteed by a pledge on 5,652,000 shares of the Egyptian Company for Mobile Services.
- The Arab Investment Company Loan is guaranteed by a pledge on 1,897,000 shares of Egyptian Company for Mobile
Services Company (Interest rate Libor + 2.65%) .
- Moga Holding Company (SPV) obtained credit facilities amounted to 153.3 million from several Banks and International
Financial Institution to Orascom Telecom Algeria, those credit facilities assist Orascom Telecom Algeria to finance its
projects (roll out of a GSM cellular mobile telephone services network in Algeria) .
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
9 1
R E V I E W
13- Investment payable Company
Motorola
Amounts due to the shareholders’ of Contra for
31/12/2003
31/12/2002
LE
LE
-
430 626 763
1 200 000
-
1 200 000
430 626 763
31/12/2003
31/12/2002
development projects-Egypt
14- Creditors long-term
LE
LE
* Due to shareholders’
Sundry creditors
181 415 970
135 845 695
347 150 147
26 726 998
528 566 117
162 572 693
* Due to shareholders’ is as follows:
Mr. Naguib Sawiris
49 190 970
23 185 695
Mr. Nassef Sawiris
132 225 000
112 660 000
181 415 970
135 845 695
The Company concluded some transactions with some shareholders, the shareholder provided funds to the company to
finance the acquisition of 20 million share at a par value of US$ 1 each in Oratel International Ltd. as well as other related
acquisition costs. The total value of funds provided is US$ 21.5 million.
15- Share capital
The Company’s authorized capital is fixed at LE 2.5 Billion represented in 250 million shares of a nominal value of LE 10
each. The issued and paid up share capital is LE 1.1 Billion represented in 110 million shares of a nominal value LE 10 each
(1 Share = 2 GDRs).
16- Treasury stock
No of shares
Employees Stock Option Plan – Treasury Stock
178,709
LE
14 523 677
Orascom Telecom Holding sold 1,000,000 of its treasury stocks which had a cost of LE 12 625 535 for an amount of
LE 29 314 774, the difference between the selling price and the acquisition price was credited to other reserves.
17- Earning per share
Earning per share is calculated using the weighted average number of shares outstanding through out the year.
Number of shares
Year
109 337 261
1/1/2003-31/12/2003
Therefore the weighted average number of shares through out the year are 109,337,261 shares.
Financial year ended
Financial year ended
31/12/2003
31/12/2002
Net profit for the year LE
711 848 994
1 047 483 946
Weighted average of shares through the year
109,337,261
109,733,874
Earning per share LE
6.51
9.55
18- SWAP transactions
The group concluded SWAP transactions during the financial year ended December 31, 2003 in order to hedge foreign currency
exposure relating to commitments dominated in foreign currencies. Unsettled transactions as at December 31, 2003 was as follows:
Amount
Future
Duration
US$
conversion price
10 000 000
10 000 000
5 000 000
5 000 000
10 000 000
10 000 000
5 000 000
20 000 000
5 000 000
6 000 000
4 000 000
6.3958
6.3098
6.4272
6.4008
6.481
6.3804
6.4683
6.4684
6.4714
6.7055
6.7055
8 months
9 months
8 months
6 months
6 months
6 months
6 months
8 months
8 months
12 months
12 months
Amount
Future
Duration
US$
conversion price
2 000 000
6.1856
20 days
These transactions are recorded at fair value under “other debit balances & other credit balances” according to International
Accounting Standard No. (39).
A N N U A L
R E P O R T
2 0 0 3
P A G E
P A G E
9 3
R E V I E W
19- Contingent liabilities
The contingent liabilities as at December 31,2003 are represented in the followings:
- On December 23, 2002 Pioneers, a Jordanian subsidiary Company (“the seller”), sold its share in Pella a Jordanian
company. The execution of the contract was subject to fulfillment of certain conditions, which included but not limited
to procuring the approval of the Regulatory Authorities in Jordan. In January 2003 the said approval was obtained
and the contract became effective. Pursuant to this contract, Orascom Telecom Holding guaranteed the implementation
of the seller’s obligations at a maximum amount of US$ 50 million up till the date of issuing the financial statements
of Pella Company for the financial year ending as of December 31, 2003 considering that the seller has fulfilled his
obligations. However, the purchaser shall have the right to make recourse to the sellers up till December 31, 2007 in
case sellers representations in respect of the tax position of Pella Company are proved inaccurate and incorrect
without maximum limit for damages.
- X-Com Company (subsidiary of Telecel International Company – B.V.I) obtained a loan amounting to
24.4 million
equivalent to LE 188.75 million from Fortis Bank guaranteed by Orascom Telecom Holding.
- On October 19, 2003 Orascom Telecom Holding signed a Corporate guarantee to guarantee Orascom Telecom Iraq
liabilities towards the suppliers (Motorola & Alcatel) of cellular equipment for the GSM Network in Iraq without any
limitation on these liabilities.
Subsequent to the financial statements date the Company signed a corporate guarantee to guarantee Orascom Telecom
Iraq settlement of its obligations under the credit facilities agreement signed with Motorola (US$ 40 million) and
Alcatel ( 15 million).
- On December 5, 2003 Orascom Telecom Holding has signed as a guarantor for Orascom Telecom Algeria and Moga
Holding Ltd to guarantee their obligations under loans & credit facilities obtained from a few suppliers and International
financial organizations for a total amount of
461 million. To secure these loans Orascom Telecom Holding has
pledged its investments in IWCPL, Moga Holding Ltd and Orascom Telecom Algeria to the suppliers and the International
financial organizations until November 15, 2010 (the date on which these credit facilities & loans will be fully settled).
Orascom Telecom Holding maximum liabilities under these pledge agreements is up to
470 million, in addition to
any interest or costs may occur incase of default of payment.
- Orascom Telecom Holding signed a corporate guarantee in favour of LLC Italia for the amount of
12.5 million to
secure Orascom Telecom Algeria obligation toward LLC Italia in connection with purchase of equipment and the
construction of facility sites.
- Orascom Telecom Holding signed a corporate gurantee in favour of Sumitomo Corporation to secure Orascom Telecom
Algeria obligations toward Sumitomo in respect of a purchase order amounting to US$ 2.4 million.
- Societe General Bank-France has filed a lawsuit against Orascom Telecom Holding alleging that US$ 900 000 success
fees in connection with its efforts in securing investor participation in financing the cost of Algeria license. The
Company’s management is in opinion, that the company legal status is strong since Societe General Bank did not exert
any efforts to secure such investment participation in financing the license.
- Orascom Telecom Holding signed a corporate guarantee in favour of Siemens to secure the settlement by Atlantic
Company for Telecommunications for its obligations to Siemens in respect to the sale of West Africa countries group,
this corporate guarantee is effective until August 31, 2004.
- On February 12, 2004 Orascom Telecom Holding signed a corporate guarantee, whereby it became jointly and severally
obliged together with Telecel International (wholly owned subsidiary) to reimburse the down payment received for
selling its share in Loteny Telecommunication capital amounting to
9.5 million in case Telecel fails to finalize the
Sale/Purchase Agreement signed with Atlantic Telecommunications.
- The Company’s proportionate share in the Egyptian Company for Mobile Services contingent liabilities is
LE 3 941 761 which represents the uncovered portion of the letters of guarantee.
- Egyptian Satellite Company contingent liabilities amounted to LE 344 112 represent uncovered portion of letters of
guarantee.
- In Touch Company contingent liabilities amounted LE 39 600 represent the uncovered portion of the letters of guarantee.
- Ring Egypt for distribution and subsidiaries contingent liabilities amounts to :
• Letters of guarantee to other amounted to US$ 2 500 000 equivalent to LE 15 375 000 against blocked deposits
with the same amount (Egypt).
• Letters of guarantee to others amounted to JD 100 000 Jordanian Dinar equivalent to LE 868 644 (Jordan).
• Letters of credit with an amount of JD 1 166 076 Jordanian Dinar equivalent to LE 10 129 919 (Jordan).
- International Wireless Communications Pakistan Ltd (IWCPL) subsidiary has certain cases are pending in different
courts of law. The management of the company is confident that these cases will be decided in favor of the company
and no provisions have been made in the account.
- Pharaoh Communication Networks Company has a legal dispute with United Bank of Egypt – Cairo branch with respect
to computing the interest rate over foreign currency financing a matter that led to file litigation by the company
against the bank in October 2003. Accordingly the company has not received any statement of account from the bank
starting from that date, based on that the company couldn’t record any expenses and interests as well as the foreign
currency reevaluation related to that account, supported by the legal consuls opinion the company’s management is
in opinion, that the company legal status is strong therefore the company didn’t establish any provisions.
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- On January 21, 2003 the Egyptian Company for Mobile Services received a claim from Telecom Egypt stating that it has
retroactively changed the method of calculating international call minutes resulting in a charge for international calls
due for them amounting to approximately LE 64 million for the years from 1998 to 2002 inclusive. The differences resulting
from the change in the calculation for the period from January 1, 2003 to August 31, 2003 amounted to LE 14.2 million
according to the last claims received.
The Egyptian Company for Mobile Services management has responded by a letter to Telecom Egypt rejecting this method
of treatment based on the following grounds:
1- The interconnect agreement signed between the two companies clearly states the method of calculating the minutes
in which Telecom Egypt has already issued its invoices for these periods in accordance with the signed contract.
2- The management of the Egyptian Company for Mobile Services has obtained a legal opinion from its legal advisor
confirming that in accordance with the signed contract it is applying the calculation correctly and that Telecom Egypt
does not have the right to change the method of calculation.
Based on the above, management is of the opinion that the above claim is without any basis and does not represent any
liability on the Egyptian Company for Mobile Services. The dispute is still outstanding.
- The sales tax authority has sent a letter to the Egyptian Company for Mobile Services dated May 10, 2003 notifying the
Company that the interconnection charges between the company’s network and the other licensed telecommunication
networks in Egypt is subject to sales tax based on the assumption that this charge is work performed on behalf of others
(Rental and use of equipment). The tax on this revenue, as included in the letter, amounted to approximately LE 115 million
for the period from inception to December 31, 2001 excluding additional sales tax. The tax on this revenue for 2002 is
LE 44.8 million excluding additional sales tax. Based on the same basis of calculation for 2003, the sales tax due would
amount to LE 44.5 million.
The Egyptian Company for Mobile Services advisors believe that subjecting the interconnect charge to tax is not legal, as
the total cost of the call has already been taxed and that the interconnect charges are just a portion of the call.
Based on the above, management is of the opinion that the above claim does not represent any real liability on the Egyptian
Company for Mobile Services. The Egyptian Company for Mobile Services has filed a legal case on December 6,2003 objecting
the changes that Sales Tax Authority made.
20- Capital commitments
- The Company’s proportionate share in the Egyptian Company for Mobile Services capital expenditure commitments is
LE 130 483 883 which represents contracts to purchase plants and equipments were not yet completed as of the consolidated
financial statement date.
- InTouch Company capital expenditures commitments amounted to LE 4 613 000 which represents the unpaid capital of
the company’s long-term investment.
- Telecel has entered into a contract to purchase plants and equipments for
24.4 million equivalent to LE 188.75 million
was not yet completed as of the consolidated financial statements date.
- International Wireless Communication Pakistan Ltd (IWCPL) has commitments in respect of capital and other expenditure
amounted to US$ 28 821 338 equivalent to LE 177 251 229.
- Orascom Telecom Algeria capital expenditure commitment amounted to approximately D.A 21 billion, which equivalent to
LE 1 832.5 million represented in fixed assets contracted and ordered but not received.
- Orascom Iraq Holding capital commitments amounted to US$ 13 920 000 which represent the unpaid capital of Orascom
Telecom Iraq Corporation (subsidiary).
- A memorandum of understanding was signed between the Egyptian Company for Mobile Services, Vodafone Egypt (the
operators) and Telecom Egypt. The Egyptian Company for Mobile Services and Vodafone Egypt are obligated to pay
LE 1 240 million each to the National Telecommunication Regulatory Authority on installments, the maturity dates have
not yet been determined.
The operators shall be able to use 7.5 MHZ from the 1800 MHZ spectrum from Telecom Egypt against the irrevocable
cancellation of Telecom Egypt license to use this spectrum.
Additionally, the two operators and Telecom Egypt agreed to amend some of the commercial agreement, between them with
the aim to develop the telecommunication Mobile sector in Egypt.
21- Employee stock option plan
- The Company has approved a plan to grant some of its employees’ stock options in the Company’s shares through Orascom
Telecom Esop Ltd., (a wholly owned subsidiary). According to this plan the employees will have the right to receive the
appreciation between the stock option price and the exercise price of the shares when the option vests. Orascom Telecom
Holding shares held by Orascom Telecom Esop Ltd., are presented as treasury stock in the consolidated financial statements.
- During 2001,Orascom Telecom Holding provided funds amounting to US$ 3 752 888 to purchase 357,418 GDRs.
On June 10, 2003 the board of directors approved the allotment of 825,000 shares to senior management at a price 20%
less than the average share price during 30 days prior to the allotment date.
22- Tax status of the parent
22-1 Corporate tax and movable capital tax
Years from 1997 till 1999:
The Company submitted its tax returns for these years, and received form No. 18 taxes in the name of Orascom Technology
concerning tax assessment for these years. However, the Company’s management filed an appeal, against the assessment
included in this form, on 16/1/2003.
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Years from 2000 till 2002:
The Company submitted its returns for these years, and the Company’s records for these years have not yet been inspected
by the tax authority.
- As per the tax return, there is no corporate tax due on the current year net income. Management has applied, when
preparing the tax return, article # 111 of the Income Tax Law No. 157 for 1981. According to the aforementioned article
net profit derived from activities that are being undertaken abroad by independed entity is not subject to tax in Egypt.
22-2 Stamp duty & state resources development duty
Stamp duty and state resources development duty were settled up to the financial year ended December 31, 2001.
22-3 Salary tax
The salary tax was settled up to the financial year ended December 31, 1999. With respect to 2000 and 2001, the tax authority
has carried out an inspection and an assessment for LE 2 946 694 was received by the Company. However, management
filed an appeal against this assessment and an internal committee at the tax authority shall consider the matter.
23- Sale of subsidiaries
On December 31, 2002, pursuant to the agreements and plans of de-Merger (the de-Merger Agreements) dated July 2002
and October 2002, the company completed the major legal and contractual requirements to finalize the sale agreements for:
A) The South & East African Subsidiaries (CAR, Burundi, Uganda, Zambia and PTY).
Under the terms of this agreement the Company acquired 7.5 million GDR’s of Orascom Telecom Holding’s outstanding
shares for US$ 1 per GDR. Also the company received the remaining 26.5% of it’s own capital for a value of approximately
US$ 24 million along with receiving a debt forgiveness of a US$ 27 million loan due to the buyer. From its part the
company paid the buyer US$ 9.5 million in cash along with giving a loan forgiveness on approximately US$ 77 million
representing the balances due on the sold subsidiaries.
In compliance with (EAS 17), the results of the disposed subsidiaries are included in the consolidated income statement
until December 31, 2002 (the date of disposal).
B) West Africa Deal: The Central and West African Subsidiaries (Benin, Gabon, Burkina- Faso, Togo).
The company has completed the sale of Benin , Gabon in 2002 and Niger, Burkina – Faso and Togo in 2003.
24- Gains from sale & deconsolidation of investment
As a result of severe hyper inflation that is effecting the Zimbabwe economy accompanied by the restricted foreign currency
laws which impairs Telecel Zimbabwe ability to transfer funds, Telecel management has elected to apply the accounting treatment
stated in EAS 17, paragraph (11-b) which is equivalent to IAS 27, paragraph (13-b) and therefore deconsolidated Telecel Zimbabwe.
The standard allowed Telecel management to exclude Zimbabwe financials from the consolidated financial statements and
account for it using the equity method. The deconsolidation of Telecel Zimbabwe has resulted in a net gain of US$ 20.4
million that is reported in gain from sale and deconsolidation of investment in the consolidated income statement for the
period ended September 30, 2003 it should be noted that Telecel Zimbabwe losses which are recorded in the comparative
figures for the year ended December 31, 2002 amounted to US$ 11.6 million.
25- Subsequent events
- On February 26, 2004, OrasInvest Holding Inc. reversed the selling agreement with Cortex Service Ltd dated July 10, 2003,
which state the selling of 29,250 shares from Mobiserve, 47,500 share from First service and 47,500 share from Egyptian
company for Collection (Collect).
- On January 30, 2004, Telecel signed a term sheet “ Protocol d’accord “ with Atlantic Telecom to sell its equity stake in
Loteny Telecom (subsidiary to Telecel in Ivory Coast) for US$ 45 million . Telecel is currently in process to obtain the legal
and formal consents to finalize the deal. Once Telecel transfer the shares title to the buyer, Loteny Telecom will be
deconsolidated from Telecel consolidated financial statements.
26- Financial instruments & related risk management
The financial instruments are represented in cash on hand & at banks, accounts receivables, debit balances, investments,
due to/from subsidiary and affiliated companies, loans, bank overdrafts and suppliers. The carrying value of these financial
instruments represent a reasonable estimate to their fair values with exception of loans whose present value represent a
reasonable estimate of their fair values.
27- Management of financial risk
27-1 Exchange rate risk
As some transactions are executed in foreign currencies, the company may be subject to risk of exchange rate fluctuations.
28- Comparative figures
Some of the comparative figures have been reclassified to be consistent with existing classification of the consolidated
financial statements.
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www.orascomtelecom.com

MobiNil at a Glance (as of 31 December 2003)

Transcription

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