TE - Nine Month 2011 Consolidated Results

Cairo, 14 November 2011: Telecom Egypt (TE) (Ticker: ETEL.CA; TEEG.LN), today announced its reviewed consolidated financial results for the nine months ending 30 September 2011. Financial statements have been prepared in accordance with Egyptian Accounting Standards.

Highlights for the first nine months of 2011 include:

§ Total Consolidated Revenues were EGP 7,361 million down from EGP 7,734 million in 9M 2010.

§ EBITDA was EGP 3,544 million, delivering a margin of 48%.

§ Positive contribution of share of profits from Vodafone Egypt of EGP 676 million.

§ Net Profit After Tax was EGP 2,346 million, representing a net profit margin of 32%.

§ Earnings Per Share (EPS) for the period were EGP 1.37.

§ As at 30 September 2011, total fixed line subscribers stood at 8.6 million.

§ Retail ADSL market share of 63%, delivering record nine month revenues of EGP 760 million.

§ Capex related cash-flows for the period of EGP 497 million.

§ Net cash position of EGP 4,350 million, as at 30 September 2011.

Chairman's Statement

Commenting on the first nine month results of 2011,Akil Beshir, Chairman of Telecom Egypt (TE), said:

"As today's results show, while there has not yet been a return to normal operating conditions in Egypt, we have mitigated these effects to a greater extent than our competitors.

"The wider economic malaise is placing pressure on household incomes in Egypt and, as predicted last quarter, there has been an impact on TE's overall total number of active subscribers. We have adjusted active connections accordingly, which has temporarily reduced the number of subscribers we deem as active.

"Vodafone Egypt (VFE) is a local market leader and one of the most successful mobile operators in the region. It has continued to grow within the Egyptian market. With 1.4 million net customer additions in the quarter ending September 2011, VFE has reached a total of 35.5 million users overall. Similarly, TE Data, our wholly owned subsidiary, has been well positioned to absorb the increased demand for high quality internet services and has reached record revenues during the third quarter, contributing EGP 292 million.

"Economic uncertainty, depressed tourism levels and slower business activity have, however, created a drag on TE's short term financial performance. In spite of this backdrop, we are confident that the underlying integrity of our operations has been maintained. With year-to-date net profit of EGP 2,346 million, we are still delivering a net profit margin of almost 27% for the third quarter and 32% year-to-date in an operating environment where our peers have seen considerable margin contraction and a higher corporate tax rate is in effect.

"We will continue to manage the business on a medium term basis - looking beyond quarterly results - and I am confident that the full year picture will be brighter as confidence returns to Egypt and the remaining parts of our cable projects are completed in the final quarter of the year."

Financial Review

Revenues

Year-to-date, total consolidated revenues reached EGP 7,361 million, a decline of 4.8% when compared to the same period in 2010. Total consolidated operating revenues for the third quarter ended 30 September 2011 reached EGP 2,352 million versus EGP 2,624 million recorded in the second quarter of the year, as continued disruption to the wider business operating environment across Egypt and seasonal effects of Ramadan impacted retail revenues in particular. In wholesale revenues, the main difference in the quarterly comparison comes from the sizeable contribution recognized in the second quarter relating to some of our cable projects becoming operational. In the third quarter of 2011 no new projects came on stream.

Retail Services

Total retail revenues reached EGP 3,608 million for the first nine months of 2011. During the third quarter of 2011, retail revenues stood at EGP 1,159 million compared to EGP 1,194 million in the second quarter of 2011. The temporary decline in retail revenues during the quarter also reflects the impact of seasonality and the holy month of Ramadan.

Total access revenues, comprising of connections and subscriptions, stood at EGP 1,192 million for the nine month period versus EGP 1,360 million in 2010. In the third quarter total access revenues were EGP 374 million for the third quarter of 2011; a decline of 6.4% compared to Q2 2011. This decline is primarily attributable to the tightening of our credit policy and our action to temporarily disconnect lines as a result of non-payment.

Total voice revenues were EGP 1,324 million for the nine months to 30 September and EGP 416 million for the third quarter 2011. This represents a quarterly decline of 4.2% on the second quarter of 2011. Voice revenues have been impacted by three main factors: the seasonal effect of Ramadan falling within summer period, which impacts local and fixed to international calls in particular; the tightening of TE's credit policy on non-payment; and the continued dampening of business and tourism activity, which has still not returned to pre-revolution levels.

Having passed the milestone of one million subscribers in the previous quarter, TE Data also took action in the three months ended 30 September 2011 to remove inactive subscribers from its service. Gross customer additions were, therefore, comparable with the second quarter of 2011. However, net subscriber additions of more than 31 thousand reflect the impact of the inactive subscribers that were removed from TE Data's service. This action has not impacted TE Data's market share. TE Data's commitment to continuous performance improvements is critical as TE Data comprises a growing part of TE's total service related revenues. Revenues from internet and data reached record levels in the third quarter of EGP 292 million. For the nine month period this contribution stood at EGP 760 million versus EGP 593 million in the same period in 2010.

Wholesale Services

For the first nine months of the year total wholesale revenues stood at EGP 3,753 million versus EGP 3,695 million, a rise of 1.6%. Total wholesale revenues reached EGP 1,194 million during the three months ended 30 September 2011, accounting for 51% of TE's total revenues. TE's wholesale business is made up of revenue from domestic and international services to third parties who use TE's extensive digital infrastructure, principally for co-location and transmission services and infrastructure leasing. TE's network enables some 75 million fixed and mobile subscribers and over one million broadband users in Egypt.

Domestic wholesale revenues declined 12% on the previous quarter as business activity remained lower than historical norms.

During the period, the economic slowdown, reduced tourism and lower usage by business customers again continued to affect international call volumes. International wholesale revenues declined 18% when compared with the second quarter of the year, but it is important to note that in the comparative period a significant amount of revenues came on stream from our international capacity sales related to our cable business - EGP 257 million. This masks the stability our wholesale business has maintained in the third quarter 2011. We fully expect two new projects to be operational in the final quarter which will again provide a significant uplift to FY 2011 revenues.  We have always stated that revenues from our cable projects would be much more uneven on a quarterly basis and it should not detract from the attractiveness of this business line.

EBITDA/EBIT

EBITDA for the nine month period ended 30 September 2011 reached EGP 3,544 million versus EGP 3,936 million for the same period in 2010. For the nine months ended 30 September 2011, this delivers a 48% margin, which stands in the high end of management expectations.

EBITDA for the third quarter 2011 reached EGP 1,007 million, representing an EBITDA margin of 43%, in line with management expectations. Beyond the lower revenue contribution, the positive effects of TE's cost optimization program were offset by an increase in interconnection costs, as a result of higher mobile traffic; and increases in employee salaries, which were the most significant contributor.

EBIT for the nine month period ended 30 September 2011 reached EGP 2,497 million versus EGP 2,969 million for the same period in 2010, delivering a 34% margin year-to-date. EBIT for the Q3 2011 stood at EGP 666 million, delivering an EBIT margin of 28%.

Income from Investments

Total income from Telecom Egypt's investments for the third quarter was EGP 224 million, representing income from Vodafone Egypt(VFE).

As at 30 September 2011, VFE closing customers stood at 35.5 million. This represented net new additions of more than 1.4 thousand during the three month period. Total voice minutes exceeded 19 billion for the first time.

VFE generated revenues of EGP 3,158 million in the three month period ending 30 September 2011, a 6.3% increase on the previous quarter, as the business worked hard to mitigate the effects of continued lower than average tourist levels and an overall contraction in business usage of roaming and international calls. Net profit for the quarter ending September 2011 reached EGP 498 million, in spite of more challenging operating conditions.

(Note: Vodafone Egypt's financial year is from 1 April to 31 March).

Net Profit

TE's Consolidated Net profit for the nine month period ended 30 September 2011 reached EGP 2,346 million versus EGP 2,707 million in 2010. Notably, a higher corporate tax rate of 25% is in effect in 2011, versus 20% in 2010.

Net Profit for the third quarter of 2011 was EGP 622 million, representing a net profit margin of 27%. This translates into an EPS of EGP 0.36. The relative decline in net profit can be attributed to lower revenues, higher salary costs and a decline in investment income.

Investments in infrastructure

Capital expenditure in the nine months of 2011 reached EGP 497 million, versus EGP 718 million for the same period in 2010. Capital expenditure slowed in the third quarter of 2011 to reach EGP 146 million, versus EGP 309 million for the Q2 2011.

Debt

TE boasts an exceptionally healthy balance sheet and an enviable net cash position. By 30 September 2011, TE recorded a net cash position of EGP 4,350 million. This positions us strongly for 2012.

TE Financial Highlights

Vodafone Egypt Operational Highlights

Vodafone Egypt Financial Highlights

http://www.rns-pdf.londonstockexchange.com/rns/0150S_-2011-11-14.pdf

 http://www.rns-pdf.londonstockexchange.com/rns/0150S_1-2011-11-14.pdf

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Notes to Editors:

Within this statement, we may make forward-looking statements regarding future events or the future performance of the Company. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. When relying on forward-looking statements, you should carefully consider the political, economic, social and legal environment in which Telecom Egypt operates. Such forward-looking statements speak only as of the time of this release today. Accordingly, Telecom Egypt does not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise other than as required by applicable laws, the Listing Rules or Prospectus Rules of the United Kingdom Listing Authority, the Egyptian Financial Supervisory Authority or The Egyptian Exchange. The documents filed from time to time with these authorities may identify important factors that could cause actual results to differ materially from those contained in any forward-looking statements.

About Telecom Egypt

Telecom Egypt (TE), Egypt's incumbent telecommunications operator, started its operations in 1854 with the first telegraph line in Egypt. Then it was corporatized in 1998 to replace the former Arab Republic of Egypt National Telecommunication Organization (ARENTO). The Company is the largest provider of fixed-line services in the Middle East and Africa with 8.6 million subscribers as at 30 September 2011.

TE provides retail telecommunication services including access, local, long distance and international voice, Internet and data, and other services. The company also provides wholesale services including bandwidth capacity leasing to ISPs, and national and international interconnection services. Telecom Egypt's services also include the provision of narrowband and broadband internet access through its subsidiary TE Data. TE Data has active operations in Egypt and Jordan.

TE currently participates in the mobile segment in Egypt by providing mobile interconnectivity through its current, increased 44.95% holding in Vodafone Egypt, one of the three existing Egyptian mobile operators. TE's shares and GDRs (Ticker: ETEL.CA; TEEG.LN) are traded on the Egyptian Exchange and the London Stock Exchange.