Increased costs dent Telecom Egypt’s EBITDA in 1Q13

15 May 2013

Despite registering a 1.4% year-on-year increase in turnover in the first three months of 2013, fixed line incumbent Telecom Egypt (TE) posted a more than 32% drop in EBITDA as costs increased. In the quarter ended 31 March 2013 the operator generated a total turnover of EGP2.717 billion (USD404.8 million), up from EGP2.679 million in the corresponding period of 2012. Retail revenues, however, declined by 2.1% against 1Q12 to EGP1.137 billion, with the telco noting that turnover from fixed voice services tumbled by 18.5% y-o-y to EGP312 million as fixed to mobile substitution continued. Wholesale revenue by comparison increased by 4.1% against 1Q12 to approximately EGP1.580 billion.

EBITDA in the quarter under review totalled EGP947 million, a decline of 32.1% against 1Q12, with TE attributing the drop to four main cost increases, those being: an 8% annual increase in salaries, which came into effect on 1 January 2013; the backdating of interconnection costs due an agreement with local cellco MobiNil; the renewal of Vodafone Egypt’s interconnection agreement; and an increase in promotional activities. Meanwhile, net profit for the first quarter of 2013 was EGP858 million, down from EGP914 million in the year-ago period.

In operational terms, at the end of March 2013 TE’s broadband subscriber base stood at 1.413 million, representing a 21.8% increase against the same date a year earlier. The company did not, however, publish a figure for the number of fixed voice accesses it had at that date.

Commenting on the results, TE’s managing director and CEO Mohamed Elnawawy noted: ‘High demand for connectivity, coupled with our sophisticated telecommunications network, has enabled TE to start the year by delivering a modest increase in revenues – despite a challenging economic backdrop in Egypt … Revenues remained stable compared with the same period last year, but the composition of these revenues has continued to evolve, as mobile and data usage increases.’

Egypt, Telecom Egypt