Transcription for TELECOM EGYPT

August 14th, 2018

Corporate Participants Hassan Abdel Gelil CI Capital Ahmed El Beheiry Telecom Egypt – Managing Director and CEO Wael Hanafy Telecom Egypt – Director of Financial Affairs Sarah Shabayek Telecom Egypt – Investor Relations Senior Director

Conference Call Participants Ahmed Adel Beltone Financial Alexander Kazbegi Renaissance Capital Artem Yamshchikov Renaissance Capital Ehab Hassan Asas Capital Eric Renander PRINCIPIA INVESTMENT MANAGEMENT Ivana Verunchik KPM Asset Management Laila Shalaby CI Capital Mariam Wael Pharos Holding Mark Lee FactSet Mikhail Arbuzov Renaissance Capital Mohamed Sobol Shuaa Securities Egypt Muna Tudur HC Research Nate Choge SQM Frontier Nesma Elsebaay Cairo Financial Holding Egypt Omer Maher EFG Hermes Paul Farah Steyn Capital Management Peter Smy S&P Global Pridiviu Mishra Morgan Stanley Richard Letberg Investec Asset management Ruan Aoch Larium Capital Zakeer Khalifa Jarir Investment Company Ziad Itani Arqaam Capital

Presentation Operator Ladies and gentlemen, welcome to Telecom Egypt’s Second Quarter 2018 results conference call. I will now hand over to your host, Mr Hassan Abdel Gelil. Sir, please go ahead.

Hassan Abdel Gelil Good morning, good afternoon, and good evening everybody. This is Hassan Abdel Gelil from CI Capital and I am glad to be hosting Telecom Egypt’s Second Quarter 2018 results conference call. With us from Telecom Egypt, we have Mr Ahmed El Beheiry, Managing Director and CEO, Mr Wael Hanafy, Director of Financial Affairs, and Mrs Sarah Shabayek, Investor Relations Senior Director.

I would now like to hand over the call to Mrs Sarah Shabayek to begin the presentation, which will be followed by a Q&A session. Sarah, the floor is yours.

Sarah Shabayek Thank you, Hassan and thanks to CI Capital for hosting this quarter’s conference call. Good afternoon and welcome to our Q2 2018 earnings call. We will start the call with a briefing of the operational performance in the quarter presented by our CEO, Mr Ahmed El Beheiry, followed by the key financial performance trends presented by Mr Wael Hanafy, the Director of Financial Affairs. Kindly note that the presentation is available on our IR website under the quarterly results section of the financial information tab on ir.te.eg. Without further delay, I would like to draw your attention to our safe harbor statement. We may make some forward-looking statements in the course of this conference call. These statements will be based on the information available to us as of today and you should, therefore, not assume in the future that we continue to hold these views. We do not commit to notify you if our views change. We refer to our public filings for some factors that may cause forward-looking statements to differ from actual future events or results. I will now hand over the call to Mr Ahmed El Beheiry.

Ahmed El Beheiry Thank you, Sarah. Good morning and good afternoon everyone. Thank you for joining our call today. We are quite proud to announce that our results for Q2 continued to demonstrate an outstanding operational performance that has reflected on all our main financial and operational KPIs. I think this quarter is a clear manifestation of what I mentioned before in other calls, our growth story. Let us start our call by looking at the key highlights of the period. I hope all of you have the presentation on hand. Let’s start with slide 3 that summarizes H1 results. Consolidated revenues of H1 2018 crossed the EGP 10bn mark for the first time. More importantly, it showed a growth of 16% year-over-year, which is, again, a manifestation of our investment strategy that we embarked on in 2017. I will be walking you through the main pillars of this strategy in the upcoming slides. Data services continue to lead the growth in revenue across all services: fixed, mobile, consumer, and enterprise. The growth rate is quite strong at 46% year-over-year. Our customer base also expanded across all segments with an 11% growth in fixed voice subscribers, which is a continuation of the reversal of the trend supported by the growth of fixed broadband customers of 27%. Additionally, mobile net additions reached 1mn year-to-date. We closed the period with 7.4mn fixed voice customers, 4.6mn fixed broadband customers, and 3.3mn mobile customers. EBITDA came at 3.3bn, growing 19% year-over-year recording a margin of 32.5%. This has been stable year-over-year because we are able to efficiently manage our expenses through strong cost control including the management of employee and call costs. It is important to highlight here that, although our EBITDA performance is quite strong in H1, we maintain our full-year guidance given that H2 is usually seasonally lower. Operating profits grew 11% year-over-year despite the high level of CapEx reflected on the increased depreciation and cost of the license represented in the hike in amortization. Net profit declined 18% to reach 2.1bn, mainly due to the one-off decline in investment income from Vodafone in Q1 and the impact of higher financing expenses in line with our investment strategy as well as a direct impact of the high-interest environment in Egypt.

Moving on to slide 4, which shows an overview of Q2 results, the main highlights here show that this quarter’s operational growth offset all the adverse impact from the investment phase we are going through, whether in

terms of depreciation, amortization, or financial expenses. As a result, net profit grew 4% year-over-year and 66% quarter-over-quarter. I want to highlight an important point here: our strategy is to grow and grow aggressively. We are growing through aOur growth strategy that dictates that wefocuses on grow ining revenues, and EBITDA and we try as much as we can to absorb, through the such revenue growth, the decline that could be anticipated given the expected increase in depreciation expenses, amortization, and financing expensese loans. In some quarters, you see some good results that seem too good to be true in terms of growing revenues, growing EBITDA, growing profits, even when we have financial expenses, amortization over a license, and depreciation after the hike in CapEx last year amounting to 7bn. Total revenue this quarter came at 5.3bn, growing 16% year-over-year. We are also proud to disclose that our mobile revenue is already contributing a high single-digit to the retail revenue, demonstrating the management’s effort to monetize the successful customer acquisition. EBITDA grew by 24% year-over-year on the efficient management of call and employee costs, which offset higher advertising expenses and the low margin of start-up nature of the mobile segment. Please move on to slide 5 that covers our investment strategy and its 3 pillars. This slide is very important, in my point of view, because I think many investors showed interest in TE last year, as it was a mobile year. Mobile was definitely a very important part of what we did last year, however, it was just a part. Our strategy has always, since the first day, focused on 3 pillars:

1. The mobile launch 2. Overhauling Egypt’s Internet infrastructure 3. Expanding Egypt’s international network

Let me say that the mobile launch was mandatory to have a window to the future for Telecom Egypt. However, we knew that we will not be able to keep competing in Egypt, if we don't invest aggressively in the internet infrastructure for the Internet. So 50% of the CapEx of last year actually went to fiber investments and that is why we succeeded to launch the mobile network last September. In addition, There was a more complex and more costly infrastructure project happening undergroundtook place, which is laying fiber everywhere. That The first phase of which actually took us almost the entire year to finish just the first phase and that is why we were able to launch the WE Internet products: the five new speeds marketa portfolio of five new speeds that we put introduced for the first time toin the market for the first time, allowing some customers in Egypt to reach a speed of have up to 100 megabytes per secondMbps.

If you go through this slide, you will find that every pillar has its own strategy and its own part of the CapEx allocation. Don’t forget that what wWe started last year in our a plan of aggressive aggressively expansion expanding in theour infrastructure of the international network, . This is awhich is very strategic for us,project and not was not just a one-step expansion. It is, again, a manifestation of a strategy that we think will transform Egypt into a digital route between the East and the West and we think Egypt is ready for this. Here,This is why we embarked on the you will understand more about the acquisition of MENA Cable and you will understand more about some other things that were announced after that, like the Bharti deal . You will also understand the link between all of that and as well as the MoU with Econet (Liquid Telecom) that was signed in Abuja. We have a clear direction and a strategy that we are implementing to expand our international network, aiming for Egypt to be a digital route between the East and the West and between the South and the North. The connection to the Econet fiber network in Africa will allow data traffic to pass through Egypt from the South to the North and vice versa and our other submarine cables, like the MENA Cable that we just acquired, will allow for more and more data routing through Egypt between the West and the East and vice versa. Having said that, I would like to close my statement by saying that I think the outlook of our strategy that we verbally explained last year is now being portrayed in numbers. I am quite confident that, with each quarter passing, we will always have a clearer manifestation of our growth strategy. Thank you.

Wael Hanafy Good morning and good afternoon everyone. Let me proceed with highlighting the key financial trends of the quarter. Looking at slide 8, Revenue by Business Unit, the growth in the quarter is mainly attributable to retail services, which grew 32% year-over-year, contributing 86% to H1 2018 revenue growth driven by the outstanding performance of data revenue. Looking at Q2, the growth in Home and Consumer, amounting to 46% year-over-year, managed to absorb the 7% decline in enterprise solutions. The latter is related to the volatile nature of complementary access services within the enterprise business unit, which revenue recognition depends on the completion of projects with the New Urban Communities’ Authority.

For wholesale services, revenue grew by 4% year-over-year in H1 2018 boosted by a hike in domestic and IC&N revenue, which compensated for the decline in ICA revenue aligned with the global trend. Domestic revenue grew by 17% year-over-year, supported by a 31% year-over-year growth in Q2 2018, which is a result of increased IRU sales to domestic operators on top of the usual growth in transmission services. Moving on to slide 9, this summarizes the main P&L indicators of the quarter. Total revenue of Q2 2018 grew by 16%, exceeding our full-year guidance recording a total of EGP 5.3bn. Call costs to revenue declined to 20% in spite of an appearance of mobile costs (national roaming, and interconnections). This is a result of regulatory actions driven by the TE wholesale team in Q4 2017 to decrease illegal bypass, especially for outgoing international calls.

The increase in S&D is related to the absence of advertising costs in Q2 2017. Advertising still represents a minor 4% of revenue. EBITDA totaled EGP 1.8bn, growing 24% year-over-year as gross margin improved on call costs decline to revenue and revenue outpacing growth in salaries, which now, in Q2 2018, represent 22% of sales versus 25% last year. Amortization expenses increased because the start of mobile license amortization was in September 2017. Depreciation increased as a direct effect of higher CapEx spending as TE is actively engaged in modernizing its Internet infrastructure in Egypt and investing in its 4G mobile network.

Income from direct investments recovered from the one-off decline of the last quarter, reporting a year-over-year increase of 17% in Q2 2018. Net interest expense grew year-over-year as the interest expense resulting from the borrowing for paying the mobile license was capitalized prior to September 2017. On a quarter-over-quarter basis, interest expense declined due to the efficient conversion of debt from Egyptian pounds to U.S. dollars with the effective interest rate reaching 10% down from 12% in the first quarter.

Net profit grew 4% year-over-year and 66% quarter-over-quarter as operational growth offset increased expenditure below the EBITDA absent in the prior year, namely higher depreciation and amortization expenses and interest or finance costs as well. Slide 10 summarises H1 2018’s performance. We have already covered most of these indicators during this call and the last quarter’s call and I would rather skip it now and answer your questions at the end of the presentation, should any be related to this slide.

Moving onto slide 11, you may have noted a restatement of depreciation of Q1 2018. On that matter, I need to clarify a few points. We have revised the useful life of fixed assets to align the operational use of the assets with the P&L expenses incurred. This is not an accounting gimmick to improve our profitability. In fact, our balance sheet shows that 49% of our fixed assets, which is equivalent to EGP 23.2bn at the end of 2017, are fully depreciated and still in use. In order to rectify this, we had to investigate and reach out to our technical team to assess the useful life of all network elements in line with best practice and benchmark against other countries. The decisions that were made based on the recommendations of the technical team were as follows: Increasing the useful life of the equipment by an average of 3 years, which is a minor amendment, but it turned out that the main issue was that some infrastructure components need to be separated, as such infrastructure was separated into 2 parts: fiber cables with the useful life remaining 25 years as it is, and Civil works with a useful life increasing to 50 years from 25 years previously.

The impact of both decisions on the P&L resulted in saving 86mn in depreciation expenses in quarter 1 and 83mn in quarter 2. We estimate a total annual saving in depreciation expenses amounting to around EGP 350mn. Slide 12 shows the main drivers of the 26% growth in operating profit. Similarly, slide 13 shows the same variants analysis for H1 2018. The main takeaway of slide 14 is that our operating cash flow would have continued to grow if it wasn’t for the one-off settlement fee we paid to Etisalat. The normalized growth would have come at 21% year-over-year and the free cash flow to firm would have broken even organically, which is an important indicator given the investment phase we are in and especially given that in H1 2018, we spent 30% of sales on CapEx. Slide 15 shows that net debt grew to EGP 8.3bn by the end of H1 2018, representing a net debt to EBITDA of 1.3. This calculation is based on the annualized EBITDA, the same level as the end of 2017. We note, again, that our effective interest rate has declined to 10% and that in the quarter, we have spent a little less than our previous quarter in spite of the higher gross debt level. We have finalized a vendor financing agreement in order to be able to align CapEx related spending with our operating cash flow. Additionally, we are still working on a long-term USD 500mn facility to refinance existing short-term debt to ensure flexibility in repayment. To conclude, let's look at slide 16. Our results demonstrate the company’s remarkable performance in delivering our guidance across the 3 main KPIs:

1. Revenue growth 2. EBITDA margin 3. CapEx to sales

We maintain our guidance for the full year of 2018 across all KPIs. This concludes the financial highlights and I will now hand back the call to the operator to open the line for questions.

Question and Answer Session Operator Our first question comes from Ziad Itani, Arqaam Capital. Please go ahead.

Ziad Itani Just a couple of questions from my side, please. On the domestic wholesale, what would you say is the normal level of quarterly revenues we can expect, excluding these one-off IRU sales? The second question: I wonder why the EBITDA margin guidance hasn’t been revised, so can we expect margins to dip below 26% for the second half because it seems that the operating margin recovery is organic in nature? There are no substantial one-offs, so I am just wondering why do you expect margins to decline, or why isn't the margin guidance revised for the full year? Thank you.

Wael Hanafy For domestic wholesale, it represents around 22% of our top line and the normal is 20%, but I think for the IRU, it is non-recurring IRU, but for the full year IRU, it is repeated from quarter-to-quarter. If you wanted to expect yourforecast domestic wholesale revenue, I suggest you have to restrict itstick to 22%. For the EBITDA margin, as we said in the presentation, we will maintain our guidance that we presented last year.

Sarah Shabayek Ziad, let me clarify a few things here. Basically, the EBITDA margin is higher in H1 versus H2 because of seasonality. Usually, by the end of the year, you get some morethere are some increases in salaries, including bonuses by the end of the year. Q4 also usually takes into account bills that we haven’t been billed for, similar tolike utility bills and electricity bills. We also reconcile a lot when

it comes to our wholesale agreements traffic with the mobile operators in terms of the traffic here and there relation to the wholesale agreements. This is usually why Q4 and Q3 have lower margins, especially Q3 because ofincludes higher marketing expenses, traditionally, and traditionally a slowdown in the revenue as compared to Q2.

Ziad Itani Just one follow-up on the domestic wholesale. So basically, if I am looking at it from a nominal value, you have around 1.1bn in revenues, so is it safe to assume that the real figure or the normalized figure is around 900mn, 900-950mn?

Sarah Shabayek It is very close, but the thing is, it is not that this revenue is non-recurring in nature, so next year you will find another IRU sale. You cannot project the same IRUs every quarter because they are volatile in nature, so they might come in Q2 or Q4 or Q1; it depends on when they seal the deal with the mobile operators, so it might not come again in Q3 but you might see more IRUs in Q4. Again, you might miss it in Q1, so this is the kind of volatility that we see in IRU sales but, generally, IRU sales are recurring revenue on an annual basis, rather than a quarterly basis.

Operator We have no more questions at this time. Ladies and gentlemen, I would like to remind you if you have any further questions, please press 01 on your cell phone keypad, thank you for holding.

Hassan Abdel Gelil I think we can take Ziad’s question and apply it on to the international cables and network, specifically for the capacity sales and the cable projects. Do they follow the same order as Sarah just described? That they are recurring and you would see them every year? However, the difference here is when will it be recorded and when will it be realized?

Sarah Shabayek Yes, exactly. The same answer exactly.

Hassan Abdel Gelil

I know that you have answered this question other times for the EBITDA margin. What would the EBITDA margin be if not for these 2 revenue recognitions that happened on the domestic wholesale and capacity sale?

Wael Hanafy As Sarah said, there is no adjusted EBITDA margin.

Ahmed El Beheiry May I just explain this? This is part of the business, which is the IRUs and the capacity sales on the in the international gatewaywholesale unit, . It is a very organic type of business for an operator like Telecom Egypt. So besides being an operator, we are an infrastructure builder so it’s not like the retail business; it has its own merits, it has its own waysdynamics, so every year we have targets. It’s a yearly target and it’s definitely not an easy target for us. We check it quarter-by-quarter but there will never be a way to be sure, at the beginning of the year, of which quarter we will be able to fixrecognize the revenue. Many times, we realize ’ll fix it earlier than we expect, so but there is no way of knowing for sure. To answer your question directly, there is no way to have realize Telecom Egypt’s performing operational results, given without this type of business, because in that case, you would assume that the wholesale organization is doing nothing for the whole year. It’s organic. In fact, There is no way it’s not happening, so I would be more concerned with the retail yearquarter-over-year quarter than the wholesale quarter-over-quarteryear-over-year. I hope this makes things clear.

Operator Our next question comes from Alexander Kazbegi, Renaissance Capital. Please go ahead.

Alexander Kazbegi Just a quick one to understand the employee costs, which went down in Q2. What would you say is the outlook, in general, in terms of the headcount, the salary increases? What should be we anticipate? Also, with regards to the interconnect, you mentioned that the call cost decrease was due to regulatory action, which limited this illegal bypass. Is that all done or do you expect to see even better possibilities for some cost savings on this side? Thank you.

Sarah Shabayek

First, on employee costs, the usual increase every year is a 7-8% increase in basic salaries. This year, we've done 10% but 10% doesn't mean that the entire salary will increase by 10% because the this increase is on the basic salary only, it will just be which represents only a third of the gross salary. We’re projecting somewhere between 8-10% including bonuses at the end of the year and, obviously, it’s not because we’re decreasing our headcount that the employee cost is declining as a percentage of revenue. It’s because the revenue float growth is outpacing the growth in employee costs. On the other side, a lot of things have been done in terms of employee cost management and as a result of replacement. For instance, in our call centers, we will allocatehave replaced almost 1,000 agents with a calibercalibre that is more better trained, yet the overall cost of the call center hasn't increased, although we've seen people come and go. Also, the other thing we mentioned when it comes to employee costs is that the new caliber that is being hired is to manage the fixed-line business as well as the mobile business, not only mobile, and as such, the headcount isn't increasing. It's contributing to higher revenue as we grow. The overall headcount of Telecom Egypt is declining because of the attrition of people who are retiring and are associated withhave higher than average salariescosts. Approximately 1,300 people leave the company every year. On call costs, the illegal bypass situation that happened in Q4 – so just to give you a the background – our outgoing calls generate used to be charged for revenue in Egyptian pounds and we pay the costs in dollars. When the devaluation happened, Egypt became an attractive destination for illegal bypass. As such, because Telecom Egypt had a very high dollar cost for the illegal calls that were coming in. We complained to the regulator and some destinations under the work with the regulator helped us led to an increase in prices to destinations that we think believeare where the illegal calls are going to. The price increase, because of the elasticity of the illegal costscalls, led to lower calls in general and as such, our costs declined as well.

Alexander Kazbegi Just one clarification on the employee cost side. I think you have a change in the social contributions because of the health care reform, which was the social contribution paid by the employer and this should grow progressively, I think, over the next years. Do you factor that as well? Do you see that pushing overall compensation for employees a bit higher?

Sarah Shabayek No, not at all. Our medical scheme is sponsored by the company and has nothing to do with the public sector and, as such, we are in full control of the

medical scheme and our employees are being fully compensated for their medical issues. It’s a much higher scheme than the public sector schemes.

Alexander Kazbegi Okay, so it’s higher anyway. Okay.

Operator Our next question comes from Ehab Hassan, Asas Capital. Please go ahead.

Ehab Hassan I've got a couple of questions for Mr Ahmed. First of all, when it comes to the infrastructure, what sort of communication, from the company’s side, can you deliver to the investors, explaining to them the difference in the nature of business and how it should and could and would be valued going forward, given that it’s not a Q-on-Q type of business model versus the retail client facing business model? That’s it for my first question.

Ahmed El Beheiry Let me start by asking you to locate Egypt on a map and then you will find that it has been gifted throughout history. Its geographical location is chosen by everyone for the passage of goods, whether these goods are spices, petroleum, or data, and this is what we meantarget. So to do that, we need to build infrastructure that would allow Egypt to be an attraction and then more data will pass. Over a year ago, we looked at the situation and we realized that we needed to pursue 2 parallel tracks. The first track is overhauling the Internet infrastructure inside Egypt. That allows us to give new market propositions to the consumer market with higher speeds reaching up to 100 megabytes Mbps but the main strategy behind it was to have a secure mesh network all over Egypt, allowing data passage to be secured. The other part of the pillar strategy is to determine how we could expand our submarine cable – you know that Telecom Egypt is one of the biggest operators in the world in terms of submarine cables – so how could we increase our presence in the submarine area? We started looking at MENA last year and we concluded a deal. That type of deal allowed us to conclude something as big as Bharti, which is the Bharti deal that we announced a week ago. What is happening in Egypt allows for the Econet Group to be looking to

connect with Telecom Egypt for the passage of data from Sub-Saharan Africa up to the North and vice versa. Having said that, after the modification of some laws in Egypt like data privacy, Egypt will be the best place in the world for cloud computing and you could expect that, in the coming call or the one after, we will announce something along those lines. This is the strategy that we had in mind and it has started to be manifested realized and what I can say is that we expect that this area will not only be growing, but will start generating a new type of revenues, cloud revenues. This constitutes a big part of the revenues for infrastructure builders in Europe and everywhere in the world and we want to start it here and I think it will grow, and grow big. I hope I answered your question.

Ehab Hassan You have answered it very clearly, so if I could just recap briefly: over the coming 18 months to 2 years, we can conclude that the infrastructure part of Telecom Egypt, whether it's the cable business, which is dollar revenue based, or the fiber business locally, could be viewed and seen as an infrastructure play with its own multiples, eventually. Lastly, putting aside the infrastructure theme that you've clearly been focusing on in Telecom Egypt's plans – and I'm not talking about the quarter-to-quarter plans, but within the coming year or 18 months – are there any plans to start monetizing the customer acquisitions that you've been making for WE mobile and get a bigger share of the customers' wallets rather than just the voice and data to tie it into other services, for example, mobile payments? What is the role that we TE will be playing and will it be contributing to financial inclusion? For example, getting rid of cash subsidies and if it could be implemented through Telecom Egypt and under the business of the Ministry of Telecommunications?

Ahmed El Beheiry I have to thank you for this question because it will help me explain something that I think is rather important to everyone. Telecom Egypt is on the verge of being revamped so people saw us entering the market with WE as a mobile network, they didn’t see the real strategy, which is creating a retail in Egypt for WE and for Telecom Egypt as a retail brand for fixed, mobile, and Internet under the name WE. Completing that strategy will allow us to expand the brand outside of Egypt, so we created a retail brand in Egypt to separate it from the infrastructure part. We definitely plan to have a clear separation in terms of financial revenues, EBITDA, and net profit quite soon so that we could really know what type of business is doing what. At least this is our aim. Back to the monetization of WE customers, I’ll go again and mention the Econet MoU. Econet is not just 60,000 fiber links in Africa, but really it's a great thing; they are very specialized in cloud services in South Africa and we are

actually having very strategic discussions with them now that will allow us to share their experiences in cloud services for our upcoming expansion in that. Additionally, financial inclusion in Africa is key and we are very advanced, and I'm sure all of you know the details. While signing this, we have financial inclusion in mind. So in terms of financial inclusion, you need 2 things: you need people’s reach and you need a financial regime. I wouldn't say a change of laws, but you need to allow for what I can call a system that could expect some risk with giving people money and this is what happened in Africa. I think Egypt took lots of actions during the last 3 years, through the National…

Sarah Shabayek The National Council for Payments.

Ahmed El Beheiry The National Council for Payments was created, headed by our President, aiming to have everything digitized in a year and this is really very progressive. This is very important for Egypt. I'm sure that we will be able to push the agenda of having this financial regime or laws, allowing for more access of financial services to the consumer directly but things need to change in the financial systems to have it happen. Let’s say that I'm very optimistic about financial inclusion in Egypt and yes, financial inclusion is not only a focus for Egypt, but it is the main focus for Telecom Egypt. We think we will be able to deliver it in a way that is better than anyone else knowing that we don’t only specialize in mobile networks, but in other areas as well that serve in the bank holding of the financial inclusion. I hope I answered your question.

Ehab Hassan Last thing, and I don't want to take too much of everybody's time, it's clear that Telecom Egypt has been working, over the past year and going forward, towards separating the 2 different types of business brands because their spending habits, CapEx habits, OpEx habits, and the revenues and expectations of the payback period are quite different. So, when it comes to the retail side of the business and any new services that could be added to monetize current customers, will Telecom Egypt be willing to give up some of the EBITDA margins in favor of spending on OpEx? Maybe at that point, you could make more use of current headcounts in some client facing business ventures with upfront spending on OpEx and not on CapEx, which will actually quite change the EBITDA margins over the coming 2 years. Is that something that is in mind and are you willing to take that path?

Ahmed El Beheiry I actually didn’t get the question. I'm sorry.

Ehab Hassan We agreed that in one way or another, there is a separation of business units in terms of client facing, retail, and infrastructure, and the CapEx requirements for each and operational expenditures for each are quite different and so is the payback period. So, if and when Telecom Egypt starts venturing into some retail offerings that are not only mobile and voice, but also some value-added services such as mobile payments and the likes, that means that the spending would be more on OpEx and acquiring merchants and the customers rather than spending on infrastructure.

Ahmed El Beheiry So are you trying to say that the value-added service usually comes with a revenue share OpEx model?

Ehab Hassan Exactly, so that will start differentiating the 2 business models even further and I think at some point, shareholders, will start realizing this and might even start wondering if it’s best given the current challenges in the company. They may wonder if you have the talent going forward to enter into more sophisticated ventures, not only in infrastructure.

Ahmed El Beheiry Let me say that I understand the question and nothing that can be communicated directly through conference calls. 6 months ago, I wouldn’t have told you most of the things I said today, so yes, I agree with your statement and what I can say is that it lies with the logic of our strategy and in later conference calls, I could be making clearer statements and give an in-depth explanation of my plan.

[No further questions]

Sarah Shabayek Thank you, everyone. I think that the hour has passed already, so thank you everyone for attending today's call. If you have any further questions, contact us on investor.relations@te.eg.