Orascom Profile

mmC Group’s point of view on Orascom’s profile and it’s International Expansion Strategy Point of view June 2009

For further information please contact: Carlos Valdecantos (+34 696 940 221, [email protected]) Fran González (+34 616 285 092, [email protected])

mmC GROUP Strategy Consultants – Orascom Profile

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A dispersed geographic presence reflects where Orascom saw a green pasture and possibility for first-mover advantage. PEER PROFILES > ORASCOM > GEOGRAPHIC FOOTPRINT

2008 Highlights

Canada

mmC GROUP Strategy Consultants – Orascom Profile

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Markets

Subs

Revenues

EBITDA

11

78

5.3

2.4

Million

Billion $

Billion $

Currently Orascom holds position in only a handful of operations. Previous investments which did not deliver enough return were exited. PEER PROFILES > ORASCOM > SUMMARY OF INTERNATIONAL INVESTMENTS

Usually a controlling stake in each operation.

Leadership position in each of its markets.

Telecel Globe is a holding structure for a group of smal-market investments in Africa.

mmC GROUP Strategy Consultants – Orascom Profile

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Orascom knows how to build an operation from zero, but also knows how to trade companies – buying and selling is part of its strategy. PEER PROFILES > ORASCOM > EVOLUTION OF INTERNATIONAL EXPANSION

1999

1998

2000

2001

2002

2003

2004

2005

2006

2007

Mobinil (Egypt) Fastlink (Jordan) SabaFon (Yemen) Mobilink (Pakistan) Telecel (Benin) Telecel (Burkina Faso) Telecel (Zimbabwe) Telecel (Burundi) Telecel (CAR)

Exit Original Telecel Telecel Globe Not launched yet

1998

1999

2000

2008 change of strategy: Orascom decides to target not only large markets but smaller ones too. It reenters some countries now with the Telecel Globe brand.

2008 change of strategy: Orascom ventures in coutries outside of its traditional domain.

2001

mmC GROUP Strategy Consultants – Orascom Profile

2002

2003

2004

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2005

2006

2009

U-Com (Burundi) Telecel RCA (CAR) Cell 1 (Namibia)

Telecel (Cote d’Ivoire) Oasis (Telecel) (DR Congo) Telecel (Gabon) Telecel (Togo) Telecel (Uganda) Telecel (Zambia) Telecel Niger (Niger) Libertis (Congo) Tchad Mobile (Chad) Syriatel (Syria) Djezzy (Algeria) Tunisiana (Tunisia) Iraqna (Iraq) banglalink (Bangladesh)

Continuing operation

2008

2007

Koryolink (N Korea) Globalive (Canada)

2008

2009

Orascom delivers healthy revenue growth and stable EBITDA margin. Yet the net income from ordinary operations is stagnant . PEER PROFILES > ORASCOM > EVOLUTION OF MAIN FINANCIAL INDICATORS

USD M

Revenues CAGR: 28%

8,000 Revenues

7,000

EBITDA

Net Profit

60%

EBITDA %

49% 6,000 42%

4,727

5,000

40% Net income: extraordinary gains realized when shares in Hutchinson were sold.

3,906

4,000 3,226 3,000 2,000 1,000

50%

45% 5,327

44%

44%

1,966

1,704

1,363 958

2,0732,021

2,384

20%

10%

721

667

30%

431

295 0

0% 2004

2005

2006

1) Source: Orascom

mmC GROUP Strategy Consultants – Orascom Profile

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2007

2008

In 2008 the balance sheet becomes leaner (decrease in total assets) while the long term investments grow financed primarily by debt. PEER PROFILES > ORASCOM > SOURCES OF FUNDS

Evolution of consolidated assets and net debt

Sources of funds to finance expansion

11,344

USD (Mn)

Current assets

Non-current assets 9,920 8,675

+689

3,601

1,765 Total increase in assets +5,852

1,593

6,917 1,044 4,068

Non-current assets

Non-current liabilities Current liabilities

+145

ST loans

+4,209

LT loans

-344

7,082

5,873

+1,461

8,155

7,743

1,076

+5,163

+381

Current assets

2,992

2004

2005

2006

287

756

513

2007

2008

1,239

652

Increase assets 2004 – ‘08

-868 -1,381

+

Cash

-3,245

-2,958

-3,433 -4,189

Net debt

-

-3,980 -5,219

-5,084 -5,735

Debt

Source: Operator, mmC analysis. mmC GROUP Strategy Consultants – Orascom Profile

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Key Highlights

Decrease in equity 2004 – ‘08

Incrase in liabilities 2004 – ‘08

1. Orascom reorganized its financing in 2008. It decreased its equty by $2B, and restructured its debt. 2. Orascom is the most leveraged of all peers; this also makes it the operator with highest ROE 36%. The second best is STC at 26%.

Orascom’s North African operations maintain healthy EBITDA margins, especially considering they operate in competitive markets. PEER PROFILES > ORASCOM > PROFITABILITY OF INDIVIDUAL SUBSIDIARIES

Profitability per Subsidiary, 2008

% EBITDA 70%

The crown jewel

63%

60%

The regular performers

Need to catch up

Still warming up

5%

2%

Mobinil

banglalink

Telecel Globe

19%

6%

58% 48%

50%

41%

40% 30% 20% 10% 0% Djezzy

Share of group revenues

43%

Tunisiana

7%

Mobilink

25%

Source: Company reports mmC GROUP Strategy Consultants – Orascom Profile

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.5%

The combination of large base with low ARPU or small base with high ARPU ensures high revenue contribution. PEER PROFILES > ORASCOM > SUBSCRIBER BASE AND ARPU (PER MARKET)

Subscriber Base Profile per Subsidiary

Subs millions 50

Largest revenue contributors

ARPU US$ / month

Total Subscribers ARPU Blended (US$/month)

12.1

45

3.5

6.4

3.7

10 2.3

40

0

35 28.48

30

-10

25

20.12

20 15

-20

14.11 10.34

10

-30

4.26

5

0.70

0

-40 Djezzy

Mobilink

Mobinil

Tunisiana

1) Source: Orascom

mmC GROUP Strategy Consultants – Orascom Profile

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banglalink

Telecel Globe

Orascom’s strategy of “all or nothing” applies both to their investments, market selection and financing choices. PEER PROFILES > ORASCOM > INTERNATIONAL EXPANSION STRATEGY

1.  Orascom begins its trajectory of international investments in the year 2000. Since then its presence in foreign markets is part of the company’s business as usual. 2.  Orascom buys and sells its international investments depending on whether they can maintain a leadership position in their respective market. This is dictated by Orascom management’s belief that market leaders are “the only way to ensure sustainable growth”. As a result of this strategy: 1.  Orascom always tries to enter first in the market 2.  Orascom predominantly bids for licenses 3.  If Orascom acquires an existing operation, the acquired company must be a market leader or have a potential to be one. 3.  If an international asset does not perform Orascom sells its stake. If things go well Orascom consolidates its position by gradual equity increases (sometimes up to 6 separate consolidation transactions). 4.  Usually Orascom takes controlling stake, yet almost always it looks for shared risk with another partner. 5.  Geography does not play a primary role in Orascom’s market selection: the criteria is early entry, low penetration and potential for growth. 6.  Orascom takes a risk entering markets with volatile or non-transparent political regimes in the name of the first-mover advantage. An example is the recent agreement with the government of North Korea. 7.  Orascom is very aggresive in its financing choices – almost 75% of its increase in assets in the last 5 years have been financed through long-term (72%) and short-term (3%) debt. 8.  Orascom opened a second front of niche acquisitions – small markets with good potential, via the revived Telecel Globe, having its footprint mainly in West Africa.

mmC GROUP Strategy Consultants – Orascom Profile

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Orascom’s strategy generates return but is risky and cannot be maintained in the medium and long term. Orascom fixed this by starting Telecel Globe. PEER PROFILES > ORASCOM > INTERNATIONAL EXPANSION STRATEGY

PROs

CONs

1.  This strategy ensures continued leadership in the respective markets. 2.  This strategy guarantees high and stable return in the short and medium term. 3.  Buy disposing of “non-performing” investments Orascom can reuse the available funds for new acquisitions. 4.  Acquiring and operating a company is the best way to evaluate its potential and decide whether to keep it for the future. 5.  Unlike purely financial investment, Orascom can add value to the asset during the holding period and realise a gain on exit.

1.  When an asset is held and operated for a short period, this approach generates costs. 1.  Transactional costs 2.  New market entry costs 2.  Greenfield investments in may may give surprises. 3.  Difficult to extract synnergies. 4.  Difficult to establish and promote a brand. 5.  Geography is very dispersed, so operations and logistics are more difficult and costly. 6.  Limited growth in the long term: markets with firstmover opportunity are scarse, and those where Orascom has presence will sooner or later be saturated.

Options for the future: 1.  Maintain leadership in current markets. Introduce new products. Optimise costs. Extract cash. 2.  New markets: enter in smaller markets at second or third position.

mmC GROUP Strategy Consultants – Orascom Profile

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