Telecom Egypt

Company Note 14 July 2025

FIG.1a: Stock Performance

Reuters Code Bloomberg Code
Buy ETEL.CA ETEL.EY
ETEL Volume ETEL Rebased EGX30 Rebased

30%
Price Target, Dec 25 Market Capitalization
25%

EGP 68.90 EGP 66bn 20%

Current Price 52 Weeks Low/High 15%

EGP 38.70 EGP 30.65 – 39.75 10%

5%
Upside Potential 3mo. Avg. Daily Turnover
0%
78% EGP 18.9mn
-5%
Sector/Industry Shares Outstanding Jul 24 Sep 24 Nov 24 Jan 25 Mar 25 May 25 Jul 25

Telecom 1,707mn *Source: LSEG Workspace

*Share Price as of 10 July 2025

Valuation Brief
Investment Summary
Based on our analysis of the company’s financial
Telecom Egypt (ETEL) faced headwinds in FY24, with net profit
outlook, our DCF valuation model indicates a 12-
contracting 14% YoY, driven by surging finance costs (+303% to
month price target of EGP68.90/share, with an
EGP15.8bn, including EGP4.9bn in non-recurring FX losses).
upside potential of 78%. Accordingly, we issue a Buy
However, 1Q25 signaled a turnaround, with margins
recommendation.
rebounding sharply and net profit up +20% YoY and +217%
QoQ. Normalizing for one-offs, FY24’s underlying net profit Financial Indicators FY23a FY24a FY25e FY26e FY27e
would have reached EGP14.3bn, making FY25’s forecasted
Revenues (EGPbn) 56.7 82.0 103.9 119.0 135.5
EGP15.4bn achievable, especially with December 2024’s
mobile and broadband price hikes expected to flow through. Gross Profit (EGPbn) 22.4 30.8 41.3 48.0 55.1

As Egypt’s sole fixed-line and submarine cable monopolist, EBITDA (EGPbn) 22.6 32.9 40.8 47.8 55.3
ETEL holds irreplaceable infrastructure assets. While leverage
remains a near-term risk, its pricing power, asset-heavy moat, Net Profit (EGPbn) 11.7 10.1 15.4 25.0 32.7

and cyclical recovery position it as a compelling value play for Gross Profit Margin 40% 38% 40% 40% 41%
investors seeking telecom exposure with diversification
Net Profit Margin 21% 12% 15% 21% 24%
benefits.
Return on Asset 9% 6% 7% 11% 12%
Key Catalysts
Return on Equity 24% 21% 30% 38% 38%
• 5G Rollout: Securing Egypt’s first 5G license and partnering
Dividend Yield 3% 4% 4% 6% 9%
with Nokia to deploy 5G technology will enhance Average
Revenue Per User (ARPU) through faster, more efficient Current Ratio 54% 48% 45% 49% 52%

mobile data services that capitalize on increasing demand EPS (EGP) 5.85 4.79 7.85 13.26 17.50
for advanced mobile connectivity.
• Broadband & Fiber Expansion: ETEL’s ongoing investments
in fiber-optic networks (FTTH/FTTC) are key to supporting Table of Contents
long-term broadband growth amid a 48% YoY surge in data
1) Investment Summary
demand. These investments include greenfield deployments
in high-density areas and infrastructure rollouts in the New 2) Company Overview
Administrative Capital, positioning fiber as the future 3) Debt Burden
backbone of broadband connectivity. 4) Vodafone Egypt Stake:
• Infrastructure Leasing: ETEL continues to generate stable Strategic Value & Monetization Potential
revenue by leasing infrastructure to other Mobile Network 5) Diversified Revenue Strategy
Operators (MNOs). This allows ETEL to profit indirectly from 6) Financial Performance in FY24
competitors' subscribers while maintaining its network 7) Financial Insights
advantage.
8) Valuation & Recommendation
9) Financial Summary

Company Note www.sigma-capital.com 1

Telecom Egypt
Company Note 14 July 2025

Key Risks
• High Debt & Interest Expenses: ETEL faces a significant near-term
risk from an aggressive debt profile fueled by substantial new FIG.1b: Business Risks
borrowings and rising interest rates, compounded by heavy
exposure to foreign currency debt. This dynamic environment of High Debt &
Interest Expenses
escalating finance costs and exposure to FX risk strains its capital
structure and erodes profitability, despite stable operating Business Cybersecurity
Risks Risk
performance.
Technological
• Cybersecurity Risk: As the company expands its digital and data Obsolescence
center infrastructure (like RDH2) and rolls out advanced
technologies, it becomes more exposed to cyber threats and data
breaches. This could lead to service disruptions and operational
distortions, threatening business continuity and customer trust.
FIG.2: Telecom Egypt's Comprehensive Services
• Technological Obsolescence: The rapidly evolving telecom industry
presents a constant risk that current investments might become Wholesale Fixed-Line
Solutions Services
outdated sooner than anticipated. To ensure continued operational
relevance and service efficiency, ETEL must remain technologically
agile and commit to ongoing investments in new technologies.

Data
Company Overview Services Mobile
Services
Serving Egypt’s Communications Since 1854: ETEL established in
1854, is Egypt’s oldest and largest telecommunications company,
playing a pivotal role in the country’s digital transformation. As the Internet
Services
primary provider of fixed-line services, ETEL has evolved into a fully
integrated telecom operator, offering a comprehensive range of
services, including mobile, internet, data, and wholesale solutions. FIG.3a: Characteristics of Debt
ETEL not only serves as a leading service provider but also as a key
Characteristic FY23 FY24
infrastructure enabler, managing the most expansive and advanced
fiber-optic networks in the region. Total Debt EGP49bn EGP81bn

Debt Burden Foreign Debt EGP33bn EGP49bn

Rising Finance Costs & Growth Limitations Local Debt EGP17bn EGP32bn

Composition of Debt: As of FY24, ETEL’s total debt surged to Interest

EGP4bn EGP11bn
Expenses
EGP81bn, with roughly 60%—EGP49bn—denominated in foreign
currency and EGP32bn in local currency. This aggressive debt Net Finance
EGP4bn EGP16bn
Costs
structure has not only elevated overall liabilities but also triggered a
dramatic surge in finance costs, far exceeding initial expectations and FX Losses 0 EGP5bn
underscoring the heavy burden of its borrowing strategy.
Factors Contributing to Rising Finance Costs: In FY23, ETEL’s net
finance costs were EGP3.9bn, but in FY24, they skyrocketed to
FIG.3b: Finance Costs
EGP15.8bn, a staggering 303% increase. This drastic rise can be
EGPbn
attributed to two main factors:
5.3x
16 5.0x
Higher Credit Facilities: The surge in credit facilities during the year
15.8
added EGP7bn in new borrowings. Additionally, the interest rate
12
increased by 8% compared to the previous year. As a result, interest
2.5x
expenses jumped from EGP4.4bn in FY23 to EGP10.9bn in FY24, more 8
than doubling in just one year.
1.0x
Net Translation Loss of Foreign Currencies Balances: Given ETEL’s 4
high exposure to foreign currency debt, the company incurred 0.9 3.9
1.6
EGP4.9bn in FX translation losses due to currency devaluation. This 0
2021 2022 2023 2024
further amplified the financial strain, increasing overall debt servicing
costs. Finance Costs Interest Coverage Ratio

*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 2

Telecom Egypt
Company Note 14 July 2025

The Impact on Growth FIG.3c: Net Debt & EBITDA

Financial Pressures Delay Expansion Capacity: With such a high

EGPbn
debt burden and soaring finance costs, ETEL is facing serious 80 2.2x
limitations on its ability to invest in future growth. Liquidity
constraints, rising interest obligations, and currency volatility are 60
1.7x

restricting expansion efforts and putting pressure on profitability. 1.4x

Capital Structure Challenges: While the company continues to 40 0.9x

generate strong revenues, the escalating debt costs pose a significant
challenge to its long-term financial health and valuation. Managing 20

24.0
and optimizing the capital structure will be critical in navigating

72.4
38.4
13.3
these headwinds, ensuring the company maintains its financial 0
stability and sustains its essential role in Egypt’s telecommunications 2021 2022 2023 2024

infrastructure. Net Debt Net Debt / EBITDA

Rising Debt Ratios Reflect Escalating Financial Strain: ETEL’s

leverage has risen sharply in recent years, reflecting growing financial
FIG.3d: D/E & D/A
risk. The debt-to-assets ratio climbed from 18% in FY21 to 41% in FY24,
indicating that almost half of the company’s assets are now financed
41%
by debt. Meanwhile, the debt-to-equity ratio deteriorated even more
176%
dramatically, soaring from 37% to 176% over the same period, as debt 33%
ballooned to EGP80.7bn against a shrinking equity base of
EGP45.9bn in 2024. This aggressive leverage, with debt now 1.76x 26%

equity, highlights severe balance sheet strain, limiting financial 97%

18%
flexibility and amplifying vulnerability to further currency or interest 67%
rate shocks.
37%
The Leverage Effect - The Impact of Rising Debt: Between FY19 and
FY24, Telecom Egypt experienced a notable shift in its capital
structure and financial leverage. The Debt/EBITDA ratio dropped from
2021 2022 2023 2024 2021 2022 2023 2024
2.9x in 2019 to 1.1x in 2021, reflecting strong EBITDA growth and stable
debt levels. From 2022 onward, however, this ratio climbed to 2.4x, FIG.3e: EBITDA Multiples
driven by the steep rise in borrowing, outpacing EBITDA gains. 5.6x
EV/EBITDA Ratio Swings: This ratio dropped from 5.6x in 2019 to 3.0x
4.6x
in 2021, signifying enhanced valuation efficiency as earnings growth
3.9x 4.0x
outpaced enterprise value growth. This trajectory underscores 3.5x
3.0x
strengthening investor confidence, likely underpinned by improved
profitability and a relatively restrained debt position. From 2022 to
2023, however, the ratio ascended once more, reaching a peak of
4.6x—driven by a surge in enterprise value as the stock price hit 2.9x
2.2x 2.4x
EGP37.65, lifting market capitalization to EGP64bn. The ratio then 1.8x 1.8x
1.1x
moderated slightly to 4.0x in 2024, when the stock price closed at
EGP33.1, reducing market cap to EGP57bn. 2019 2020 2021 2022 2023 2024
Rising EV/EBITDA: This upward shift in EV/EBITDA corresponds with a
Debt/EBITDA EV/EBITDA
substantial increase in enterprise value, primarily fueled by
appreciating market capitalization, a clear indication of renewed
investor optimism. Concurrently, the pronounced rise in net debt
FIG.3f: Stock Performance Overview
during this interval suggests that capital markets maintained a
Metrics FY22 FY23 FY24
favorable outlook on the company’s expansionary initiatives,
exhibiting a tolerance for elevated leverage. Conversely, in the Stock Price 25.10 37.65 33.10
absence of investor confidence, a depressed market capitalization
would be expected, thereby reducing enterprise value and exerting Market Cap EGP43bn EGP64bn EGP57bn

downward pressure on the EV/EBITDA multiple. The post-2021 uptick

EBITDA EGP17bn EGP22bn EGP32bn
in this ratio thus reflects a nuanced equilibrium between rising
indebtedness and sustained market confidence in Telecom Egypt’s EV/EBITDA 3.9x 4.6x 4.0x
long-term strategic trajectory.

*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 3

Telecom Egypt
Company Note 14 July 2025

Vodafone Egypt Stake:

Strategic Value & Monetization Potential
Vodacom’s Acquisition Sparks ETEL’s Investment Reevaluation: In FIG.4a: VFE Metrics
recent years, ETEL has undertaken a comprehensive assessment of
VFE Metrics FY22 FY24
its 45% stake in Vodafone Egypt (VFE), a key player in the
telecommunications sector. A significant milestone occurred in 2022 Revenue EGP37bn EGP68bn
when Vodacom, a subsidiary of Vodafone Group in South Africa,
acquired the remaining 55% stake in VFE for approximately EBITDA EGP16bn EGP32bn

USD2.7bn. While the deal did not alter Vodafone Group’s overall
Net Profit EGP6bn EGP17bn
control, it ignited speculation regarding the future of ETEL’s stake.
Recognizing the potential value of its investment, analysts have
explored “what-if” scenarios regarding a potential sale. Under such a
scenario, the transaction could yield substantial cash inflows that
FIG.4b: VFE Contribution
would enable the company to reduce its debt burden, finance
EGPbn
ongoing capital expenditures, and bolster its overall liquidity position. 12
Impressive Financial Growth: At the time of the Vodacom
acquisition, VFE's financial performance was already noteworthy. In 5.2
2022, VFE reported service revenues of EGP37bn, an EBITDA of 8 2.7
EGP16bn, and a net profit of EGP6bn. Fast forward to 2024, and VFE's 3.3
financials reflect remarkable growth: service revenue has escalated to 8.6

EGP68bn, an EBITDA of EGP32bn, and net profit has reached 4 2.2

6.5 6.5
EGP17bn. These results indicate an 83% increase in revenue, a 109% 5.1
rise in EBITDA, and an impressive 179% growth in net profit. 2.7
1.5
ETEL’s Dependence on Income from VFE: ETEL’s reliance on VFE’s 0
2020 2021 2022 2023 2024
income has fluctuated markedly over the years, mirroring shifts in its
broader income structure. In FY20, VFE’s contributions represented ETEL Net Income excl. VFE Income from VFE

45% of ETEL’s net income, tapering to 40% in 2021 and 29% in FY22. By
FY23, income from VFE rebounded to 45%. As ETEL’s core earnings FIG.4c: VFE Share of Profits vs
weakened in FY24 VFE’s payouts shielded the company from deeper EGPbn ETEL’s Interest Expenses
18
losses, ultimately surging to 85% of net income, underscoring an
intensifying dependence on VFE’s performance. While a divestiture of
VFE will yield a significant liquidity infusion, potentially alleviating
12
ETEL’s debt burden and bolstering its valuation, it would entail
surrendering one of ETEL’s most vital assets.
16.3
Contributing to Mobile Market Share: VFE leads Egypt's mobile
6
market with a 38% share, followed by Etisalat and Orange. Though 8.6
ETEL (through its WE brand) ranks fourth, its 45% stake in VFE grants 5.2 4.6
3.3
indirect dominance, delivering financial returns and strategic 1.5
2.7 1.8
0
influence over the market leader. This positions ETEL as a key power 2021 2022 2023 2024
player beyond its direct subscriber base.
VFE share of profits to ETEL Interest Expense
Valuation of ETEL's 45% Stake in VFE: ETEL's 45% stake in VFE
derives its baseline valuation from Vodacom’s FY22 acquisition of a
FIG.4d: Mobile Market Shares
55% interest for USD2.7bn, implying a total equity value of
EGP108.4bn for VFE (at an exchange rate of EGP 24.65/USD). On a ETEL Indirect
ETEL
pro-rata basis, ETEL's pre-discount stake would be valued at Direct Share (via VFE)
Share 17%
EGP48.7bn. After applying a 15% minority discount to account for
10%
ETEL's non-controlling position, the stake's value adjusts to
EGP41.4bn. This valuation uses the FY22 exchange rate of 24.65
EGP/USD and doesn't reflect the currency's depreciation to 50.05
FY24
EGP/USD (+103%). While serving as a conservative floor, VFE's
operational improvements (revenue growth, margin expansion) and
FX adjustment create significant upside potential. A strategic
divestiture could substantially strengthen ETEL's balance sheet, with
Other Operators
earnings-based valuations likely commanding a premium. 73%
*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 4

Telecom Egypt
Company Note 14 July 2025

Diversified Revenue Strategy

Strong Infrastructure Drives Earnings
FIG.5a: Revenue Breakdown
Unique Leader in the Telecommunications Sector: ETEL has
established itself as the market leader through a strategically Home &
diversified revenue model, enhancing financial resilience and Personal Enterprise
solidifying its role in both domestic and international markets. By 43.9% Solutions
10.3%
leveraging expertise across multiple segments, ETEL delivers
consistent growth and robust performance. Notably, revenues from
the Home and Personal Communications segment and the Domestic
Wholesale
Enterprise Solutions segment represent the company’s retail-facing 11.3%
business, while revenues from Domestic Wholesale, International
Carriers Affairs, and International Cables and Networks comprise its International International
wholesale operations. Cables & Carriers Affairs
Networks 17.3%
Wholesale Streams; FX Hedge & Global Reach: A standout feature of 17.2%
ETEL’s strategy is its ability to mitigate foreign currency volatility risks,
supported by significant contributions from International Carriers
Affairs and International Cables and Networks segments. These
wholesale streams not only provide a hedge against economic FIG.5b: Fixed Assets
EGPbn
fluctuations but also reinforce ETEL’s global infrastructure presence. 120 114
Balanced Diversification for Resilience: This diversified approach— 104
100
balanced between retail and wholesale, local and international, and
coupled with a focus on innovation and market expansion—positions 80
78

ETEL as a resilient industry leader, well-equipped to capitalize on 60

80 104
emerging opportunities and deliver sustained value to stakeholders. 60
49
60
Accelerated Infrastructure Expansion: ETEL's infrastructure 38
40
49
expansion is reflected in its escalating fixed asset base, which grew 38
20 30
from EGP29.7bn in 2020 to EGP104bn by 2024, fueled by cumulative 24
10 11 18
Capex exceeding EGP82bn over this period. The FY24 Capex peak of 9 10
-
EGP24.4bn represents a strategic acceleration in network 2020 2021 2022 2023 2024 2025e

modernization, particularly in fiber-optic and submarine cable. Beg. Fixed Assets CAPEX
Total Fixed Assets
Transition to Capex Optimization: While this expansion has
increased the fixed asset balance by 372% since 2020, the projected
63% in-service Capex reduction to EGP11bn in FY25 suggests a
transition from intensive capital deployment to optimization of FIG.5c: ROA vs. Total Assets
existing assets. Note that in-service capex, which is the portion EGPbn
300
allocated to assets already in operation, is targeted by management
10%
to be 20% of forecasted revenue. This highlights a focus on sustaining 250 9% 9%
operational efficiency alongside growth. This inflection point in the
200
investment cycle demonstrates ETEL's disciplined approach to
6% 6%
balancing growth expenditure with future capital productivity 150
5% 5% 5%
requirements.
100
Why Bigger Assets Don’t Always Mean Bigger Returns: The impact
of ETEL’s infrastructure investment is reflected in its ROA trajectory, 50
90

249

279
84

198
150

219

which briefly peaked at 10% in 2021, driven by a 73% surge in net

119

0
income against a modest 6% increase in total assets. This anomaly
2020 2022 2024 2026e
preceded the true expansion phase, which commenced in 2021 and
significantly grew the asset base to EGP198bn by 2024. Despite Total Assets ROA

ongoing investments, ROA stabilized at 5–6%, aligning with industry

norms and highlighting the growing importance of asset utilization
efficiency. With total assets projected to reach EGP279bn by 2027, the
consistency in ROA suggests ETEL is successfully scaling operations
and transitioning from infrastructure-heavy spending to sustainable
cash generation, without relying on further major capital injections.
*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 5

Telecom Egypt
Company Note 14 July 2025

FIG.5d: Home & Personal Revenue

Retail Segment EGPbn

Home & Personal (H&P) Communications: ETEL’s core revenue 60

49% 48% 0.4 9

driver, the Home & Personal Communications segment, contributed

46%
45% of total revenue in FY24, solidifying its position as the company’s
0.4 7

primary revenue engine. The segment’s 26% CAGR (2020–2024), with 40 44% 44% 0.4 5

revenue surging from EGP14bn to EGP36bn, reflects resilient growth 0.4 3

driven by subscriber accretion, ARPU (Average Revenue Per User) 0.4 1

expansion, and strategic infrastructure investments. The 45% YoY 20

surge in 2024 highlights accelerating momentum, attributable to:
0.3 9

1.iPrices Adjustments: Two sequential price increases were

0.3 7

22 25 36 50 55
implemented in January and December of FY24, which raised 0 0.3 5

2022 2023 2024 2025e 2026e

average service prices by approximately 20% and 25%, respectively.
These adjustments contributed meaningfully to revenue growth, Home & Personal H&P % of Total Revenue

however no further hikes are anticipated in the near term, signaling a

FIG.5d: H&P Revenue / ARPU
stabilization in pricing strategy. EGPbn
14 350 .00

2. Broadband Upselling: This is fueled by migration to higher-tier data 294

12
plans and FTTH (Fiber To The Home) adoption driving an ARPU uplift.
300 .00

231 241
230
213 250 .00

Fixed Broadband Dominance & Wholesale Upside: ETEL holds an 81% 10

share of Egypt’s fixed broadband market according to management.

200 .00

8
This is a dominant position that, while difficult to grow further, offers 150 .00

6
stability. Crucially, the remaining 19% held by other operators still 100 .00

contributes indirectly to ETEL’s revenue via its bitstream services as 4 50.0 0

an infrastructure provider, reinforcing the company’s wholesale 2 -

advantage. This dual exposure allows ETEL to benefit from both retail 8 9 9 10 12
0 (5 0.00)

dominance and wholesale volume. 1Q24 2Q24 3Q24 4Q24 1Q25

Forecast: Revenue is projected to grow 38% YoY in 2025, moderating H&P Average Revenue Per User (ADSL)
to 11% in 2026, before stabilizing at 9-10% annually through 2029. This
FIG.5e: Enterprise Solutions
is contingent upon successful 5G monetization (FWA, IoT) and fiber Revenue
EGPbn
passings reaching 6-7mn homes by 2026, with EBITDA margins 12 13% 14%

expected to stabilize at ~40-45%.

10 11%
Enterprise Solutions: ETEL’s Enterprise segment, which serves both
12%

10%
large accounts and SMEs, provides a comprehensive suite of services 8 9% 10%

9%
including fixed and mobile voice, data, internet, cloud computing,
and managed services. In FY23, managed services contributed 41% of 6 8%

the business unit growth, driven by expanding digital transformation

4 6%

initiatives, particularly through public sector contracts.

2
Outlook & Dynamics: Despite these capabilities, the segment’s near-
4%

6 6 8 9 10
term revenue growth is anticipated to remain largely flat. This muted 0 2%

outlook is attributable to enterprise expansion being concentrated in 2022 2023 2024 2025e 2026e

nascent zones, such as the New Administrative Capital, which are not Enterprise Solutions ES % of total revenue
yet fully operational or inhabited. Although ETEL has proactively
FIG.5f: Domestic Wholesale
deployed much of the necessary infrastructure to support enterprise
EGPbn Revenue
connectivity in these regions, full revenue realization will be gradual, 14 16%

occurring as these projects mature and become commercially active. 14% 14%
12
Notably, a dedicated business unit has been established to support
14%

11%
SMEs, aiming to tailor services to their evolving needs. However, until 10 11% 12%

10%
broader enterprise activity accelerates, growth contributions from 8 10%

this segment are likely to remain subdued.

6 8%

Wholesale Segment 4 6%

Domestic Wholesale: ETEL provides critical infrastructure to other 2 4%

6 8 9 11 13
operators, generating revenue through fiber-optic leasing, 0 2%

transmission services, and backbone connectivity. 2022 2023 2024 2025e 2026e

Domestic Wholesale DW % of total revenue

Company Note www.sigma-capital.com 6

Telecom Egypt
Company Note 14 July 2025

FIG.5g: International Carriers Affairs Revenue FIG.5g: ICA Revenue Streams

EGPbn EGPbn
40 0.25
25

20%
19%
17% 18% 20 2.0
17% 17%
0.20

30
1.5
13% 0.15
15
20 11%
14.4
34 10
29
0.10

12.1
25 10.1
10 21
17 5 6.0
14
0.05

3.4 4.4
5 7 3.7
1.4 1.7 3.0
0 -
0
2022 2023 2024 2025e 2026e 2027e 2028e 2029e 2022 2023 2024 2025e 2026e

International Carriers Affairs ICA % of Total Revenue Transit Incoming International Calls Outgoing International Calls

International Carriers Affairs: ETEL’s International Carriers Affairs (ICA) segment continues to deliver exceptional
foreign-currency revenue growth, underscored by a 64% YoY surge to EGP4.5bn in 1Q25 (up from EGP2.7bn in 1Q24).
This high-margin segment operates through three core streams—transit, incoming international calls, and outgoing
international calls—with incoming calls dominating at EGP10.1bn in FY24 (up 193% from FY22) and projected to reach
EGP14.4bn by FY26. The explosive growth is driven by strategic partnerships with global mobile operators (MNOs),
offering discounted calling packages to Egypt’s diaspora, which have transformed ICA into a near-pure profit engine.
Crucially, the segment requires no material incremental infrastructure spend, as it leverages existing interconnect
assets, allowing revenue gains to flow directly to EBITDA. However, the rise of OTT apps (WhatsApp, Zoom) poses a
structural threat to traditional voice margins. Despite this, ICA’s dollar-linked revenues and scalable model make it a
cornerstone of ETEL’s financial resilience, providing both currency hedging and liquidity support amid
macroeconomic volatility.

FIG.5i: IC&N Revenue Streams

EGPbn FIG.5h: International Cables & Networks Revenue EGPbn
20
35 18% 18%
0.20
Cable Projects
17% 17% 17% 17% Capacity Sales & Data Center 2.9
16%
0.18

30 International Customer Support

16
0.16

Ancillary Services (O&M) 2.2 3.6

25 13%
1.9 3.1
0.14

0.12
12
20 2.7
0.10
7.7
32 1.3
15 8 6.1
27 0.08

1.7 4.7
24
10 20 2.6
0.06

17 1.3 5.9
14 4 5.4
4.8
0.04

5 10 1.3
4.0
6
0.02

2.4
0 -
0
2022 2023 2024 2025e 2026e 2027e 2028e 2029e 2022 2023 2024 2025e 2026e

IC&N IC&N %

International Cables & Networks (IC&N) Revenue: Telecom Egypt’s International Cables & Networks (IC&N) segment
is a cornerstone of its global connectivity strategy, leveraging Egypt’s strategic geographic position to facilitate over
90% of internet traffic between Asia, Africa, and Europe. With investments in 13+ submarine cable systems (expanding
to 18 by 2025), the segment serves as a partner of choice for 170+ global operators, hyperscalers, and enterprises. It
offers diversified revenue streams, including international bandwidth sales, data center services, and cloud solutions,
supported by Egypt’s first Internet Exchange Point (IXP) for regional traffic routing. This infrastructure generates
stable, foreign currency denominated cash flows, reinforcing ETEL’s role as a central digital hub. However, escalating
regional conflicts and geopolitical tensions pose near-term risks, potentially stalling new projects, weakening demand
for infrastructure investments, and pressuring segment performance. While these challenges may slow revenue
growth, IC&N’s long-term value proposition remains intact, anchored by irreplaceable assets and rising global data
consumption. The segment’s capital-intensive nature underscores the need for prudent risk management amid
volatility, but its critical role in global internet traffic ensures resilience once stability returns.

*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 7

Telecom Egypt
Company Note 14 July 2025

Financial Performance in FY24

FIG.6a: Revenues FIG.6b: Retail vs Wholesale

EGPbn
100

80
2023 2024
Wholesale Segment Wholesale Segment
60 Revenue EGP25bn Revenue EGP38bn

40 82.0
56.7 2023 2024
20 Retail Segment Retail Segment
20.5 23.6 24.8 Revenue EGP 31bn Revenue EGP44bn
0
FY23 FY24 3Q24 4Q24 1Q25

Revenues: In FY23, the revenue was EGP56.7bn, which increased to EGP82.0bn in 2024, reflecting growth of 44.7%. In
the third quarter of 2024, revenue was EGP20.5bn, while the fourth quarter saw a higher figure of EGP23.6bn,
reflecting a QoQ increase of 15.3%. In 1Q25, revenue reached EGP24.8bn, an increase of 5.1% QoQ and 42% YoY.

FIG.6c: Net Profit & NPM FIG.6d: Gross Profit & GPM
EGPbn 21% EGPbn
19% 42%
14 35 40%
38% 37%
12 30 35%
12%
10 10% 25

8 20
6%
6 11.7 15 30.8
10.1
4 10 22.4
4.7

2 5 10.5
2.1 7.6 8.3
1.5
0 0
FY23 FY24 3Q24 4Q24 1Q25 FY23 FY24 3Q24 4Q24 1Q25
Net Profit NPM Gross Profit GPM

Net Profit & Gross Profit: In FY23, the company reported a net profit of EGP11.7bn, with a net profit margin of 21%. In
FY24, net profit decreased to EGP10.1bn, resulting in a margin of 12%. In 3Q24, net profit was EGP2.1bn (10% margin),
while 4Q24 declined to EGP1.5bn, with a margin of 6%. In FY23, the company achieved a gross profit of EGP22.4bn,
with a gross profit margin of 40%. In FY24, gross profit increased to EGP30.8bn, but the margin declined to 38%. In
3Q24, gross profit was EGP7.6bn (37% margin), and in 4Q24 it rose to EGP8.3bn, with a margin of 35%. In 1Q25, the net
profit Increased to EGP4.7bn, with a net profit margin of 19% and a gross profit reaching EGP10.5bn (42% GPM).

Return on Equity: While the preliminary ROE chart

FIG.6e: ROE
EGPbn
captures two fundamental variables (Net Income and
50 Average Total Equity), this dataset alone is insufficient
24.1%
0.25

0.24
for drawing substantive analytical conclusions. For
40 instance, in FY22, ETEL reported a net income of
0.23

EGP9bn against an average equity of EGP45bn,

30 0.22 yielding an ROE of 20.3%. The metric subsequently
20.9%
improved to 24.1% in FY23, before moderating to 20.9%
20 20.3% 0.21

in FY24 as net income declined to EGP10.1bn.

However, in the absence of operational and structural
0.2

10
0.19 context, such as margin dynamics, asset utilization
9 45 12 49 10 48
efficiency, and leverage considerations, these
0 0.18

FY22 FY23 FY24 fluctuations cannot be meaningfully interpreted. Thus,

a more comprehensive decomposition of ROE is
Net Income Avg. Total Equity ROE essential to uncover the underlying performance
drivers and derive actionable insights.
*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 8

Telecom Egypt
Company Note 14 July 2025

ROE through Dupont: To better understand the evolution of ETEL’s ROE , we apply DuPont decomposition. This
breaks ROE into three drivers: net profit margin (profitability), asset turnover (efficiency), and financial leverage (debt).
By analyzing these components, we can determine whether changes in ROE were driven by financial performance,
asset utilization, or capital structure—providing actionable insights into the company’s financial health.
NPM was stable in FY22-23 (21%) but ATO was stable in FY22-23 but Financial leverage grew from 2.77x to
dropped sharply by 9ppt in FY24 improved in FY24 to 0.47x. This 3.60x in FY24, demonstrating
reaching 12%... indicates better asset utilization in accelerating debt reliance...
generating revenue in FY24…

FIG.6f: Net Profit Margin FIG.6g: Asset Turnover FIG.6h: Financial Leverage
EGPbn EGPbn EGPbn
90 0.25
240 0.47x 0.48
240 3.60x 4

21% 21% 0.47

3.5

0.2

0.46 2.77x 3

60 160 0.45
160 2.31x
2.5

12% 0.15

x x
0.44

0.42x
2

0.1
0.42x 0.43

1.5

30 80 0.42
80
1

0.41

0.05

0.5
0.4

9 44 12 57 10 82 44 105 57 135 82 174 105 45 135 49 174 48

0 0
0 0.39
0 0

FY22 FY23 FY24 FY22 FY23 FY24 FY22 FY23 FY24

Revenue Avg. Total Assets Avg. Total Assets Avg. Total Equity
Net Income Revenue NPM
Asset Turnover Financial Leverage

FIG.6i: ROE Deep Dive Dupont: The large collapse in net profit margin (NPM) had an overwhelmingly
disproportionate impact on ROE that the positive contributions from asset turnover and
24% financial leverage couldn't offset because of how DuPont components interact
multiplicatively. While asset turnover improved and leverage increased, their gains were
arithmetic additions to the equation, whereas the NPM deterioration was catastrophic, it
= directly reduced the base profitability. Essentially, the 12% NPM in 2024 meant there was
far less profit to leverage, creating a "garbage in, garbage out" scenario where amplifying
a shrunken profit base through higher turnover and debt still yielded lower overall
21%
returns. The leverage increase also likely came with higher interest expenses (will be
20%
visible in the plunging interest burden in next analysis), which further eroded the
benefits of increased debt. This demonstrates that financial leverage and operational
efficiency (ATO) have limited power to compensate when core profitability (NPM)
collapses at such scale. Now we will make more analysis on NPM by decomposing it into
FY22 FY23 FY24
3 more metrics.

FIG.6j: Tax Burden Ratio FIG.6k: EBIT Margin FIG.6l: Interest Burden Ratio
EGPbn EGPbn EGPbn
16 90 21% 18
96%
0.98

21% 0.21 1.4

20% 118% 116%

0.96

1.2

0.205

12
0.94

86% 1

86% 0.92
60 0.2
12
0.8

x x
0.9

8
62%
0.195

0.8 8
0.6

0.8 6
30 0.19
6
0.4

4 0.8 4

0.18 5

0.2

0.8 2

9 11 12 14 10 11 9 44 12 57 17 82 11 9 14 12 11 17
0 0.8
0 0.18
0 0

FY22 FY23 FY24 FY22 FY23 FY24 FY22 FY23 FY24

Net Income EBT Tax Burden EBIT Revenue EBIT Margin EBT EBIT Interest Burden

The tax burden ratio improved by while the EBIT margin remained The real damage came from the
10ppt (from 86% to 96%), indicating remarkably stable.... interest burden ratio, which collapsed
better tax efficiency with higher by 54ppt (from 116% to 62%), directly
retention of EBT as net income…. linking to the company’s increase in
financial leverage.

The Analysis Reveals a Critical Insight: While EBIT margins remained stable and tax efficiency improved (+10ppt),
the surge in leverage proved destructive. The resulting 54ppt collapse in the interest burden ratio shows debt costs
devoured nearly half of operating profits, explaining the 9ppt NPM drop despite operational stability. This
demonstrates how excessive leverage can erase profits faster than it boosts returns.
*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 9

 Telecom Egypt
Company Note 14 July 2025

Financial Insights

EGPbn
FIG.7a: Revenue Breakdown
100 62% 70%
62%
57% 56% 57%
55% 55% 54% 52% 51%
60%

80
50%

60 49%
45% 45% 46% 48% 40%

43% 43%
38% 44%
38% 88.1 85.9 30%
40 80.2
72.6 73.3
65.6 62.9
58.9 53.5
20%

20 44.4 45.0
31.3 25.4 34.6
22.8 27.5 10%

18.3 13.6 14.3 16.7

0 0%

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Retail Revenue Wholesale Revenue Retail % to Revenue Wholesale % to Revenue

Revenue Breakdown: Between 2020 and 2024, ETEL's total revenue grew from EGP31.9bn to EGP82.0bn, a 157%
increase. Retail revenue rose at a CAGR of 24%, while wholesale grew faster at 28%. In 2023 and 2024, wholesale
revenue increased by 52% and 48% YoY, respectively, narrowing the gap with retail. Consequently, retail's contribution
to total revenue fell from 62% in 2021–2022 to 54% by 2024. Looking ahead (2025-2029), we project wholesale's share to
rise from 43% to 49%, with retail gradually declining from 57% to 51%, reflecting a structural shift driven by international
carriers, infrastructure leasing, and domestic interconnection demand. This rebalancing underscores ETEL's diversified
revenue base and improving profitability, as the maturing retail segment complements a robust wholesale business -
supported by long-term contracts and international traffic - with potential for margin expansion.

FIG.7b: ICA & ICN Revenues

Strong boost in EGP

revenues due to currency Sharp EGP revenue drop due
13000 devaluation. to currency impact and lower
12,208
earnings.
12000
10,207 10,472
11000 9,706
10000 8,877 8,507
8,444
9000 7,837 7,637
8000 6,769 7,050
0 60 61
7000 5,587 57 58
6000 55 56
250 53
0
5000 51 50
200 47 48 48
150 200
0 175 183 183
155 155 162
100 141 146 143 145
118
50 Modest growth in USD revenues Minor dip in USD revenues
0
1Q24 2Q24 3Q24 4Q24 1Q25 2Q25e 3Q25e 4Q25e 1Q26e 2Q26e 3Q26e 4Q26e

ICA & ICN Revenues (EGPmn) FX Rate ICA & ICN Revenues (USDmn)

ICA & ICN Revenues: Between 1Q24 and the projected 4Q26, Telecom Egypt’s USD denominated revenues from its
International Carriers Affairs (ICA) and International Cables & Networks (ICN) segments have shown a consistent
upward trajectory, rising from USD118mn to an estimated USD200mn, a 70% increase over the period. This growth
reflects the strategic strength of these segments, which are heavily reliant on global transit, voice termination, and
submarine cable capacity sales. In parallel, the Egyptian pound witnessed substantial devaluation. with the USD/EGP
exchange rate climbing from 47 in 1Q24 to a projected 61 in 4Q26. The combination of higher dollar denominated
revenues and the depreciating local currency has resulted in a sharp acceleration in EGP revenues from EGP5.6bn in
1Q24 to EGP7.8bn in 1Q25, extending to an estimated EGP12.2bn in 4Q26 effectively doubling the top-line figures. This
dynamic positions ICA and ICN as vital foreign currency generating engines for the company, not only bolstering
Telecom Egypt’s financial performance but also offering a natural hedge against FX volatility in a highly inflationary
environment. The resilience of these international operations underpins ETEL’s ability to maintain liquidity, fund
CAPEX, and service its rising foreign-currency debt.
*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 10

 Telecom Egypt
Company Note 14 July 2025

FIG.7c: Home & Consumer Breakdown (excl. Mobile)

0 350

0 300
304
299 299 299 304 304 304
0
294 250

0 241
230 231 200

0 213

14,083
13,833
13,584
13,334
13,085
12,840
12,550
12,039

12,179
11,784

150

11,484
11,636
11,583

11,285
10,886

11,085
10,687
0

10,491
10,296
10,055
9,938
9,720
9,496
9,330

100
0
30 37 37 37 37 38 38 38 38
0 27 28 29 50

0 0

1Q24 2Q24 3Q24 4Q24 1Q25 2Q25e 3Q25e 4Q25e 1Q26e 2Q26e 3Q26e 4Q26e

Fixed-voice Customers (000s) Fixed-Data Customers (000s) Fixed Voice ARPU ADSL ARPU

Home & Consumer: Telecom Egypt’s H&C segment continues to exhibit robust performance, with consistent growth
across both its fixed-voice and fixed-data (ADSL) services. Between 1Q24 and 4Q26e, the fixed-voice customer base is
projected to expand from approximately 11.6 million to 14.1 million, while fixed-data subscribers are expected to grow
from 9.3 million to 11.5 million. More notably, the ARPU shows a strong upward trend: fixed voice ARPU is forecasted to
rise from EGP27 to EGP38, and ADSL ARPU from EGP213 to EGP304 over the same period. This ARPU growth suggests
increased service utilization and possible upselling of higher-tier internet packages, reflecting heightened demand for
reliable home connectivity.

*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates

Company Note www.sigma-capital.com 11

11
 Telecom Egypt
Company Note 14 July 2025

Valuation & Recommendation

Our Discounted Cash Flow Model (DCF) generates a December 2025 price target of EGP68.90/share for the company,
which implies an upside potential of 78%. We used a weighted average cost of capital (WACC) that reflects a dynamic
risk profile. In FY25 we estimate a WACC of 21.3%, which will be gradually lowered throughout the forecast period to
14.9% by FY29e, reflecting our expectation of moderating inflation in Egypt. We expect a terminal growth rate of 2.5%.

DCF Valuation Summary (EGPmn) 9M25e FY26e FY27e FY28e FY29e

NOPLAT 14,524 23,851 28,001 32,286 36,964
Non-Cash Items 11,877 17,646 19,825 22,244 25,047
Gross Cash Flow 26,401 41,497 47,825 54,529 62,010
Change in Working Capital 5,204 2,424 2,829 3,180 3,608
Capex (20,288) (29,502) (33,586) (36,514) (41,407)
BOD & Employee Profit Share (1,930) (2,344) (2,807) (2,885) (3,160)
FCFF 9,388 12,075 14,261 18,310 21,082
WACC 21.3% 16.2% 15.3% 14.9% 14.9%
DCF 8,118 9,279 9,627 10,859 10,890
Terminal Value 154,033
PV of Terminal Value 79,564
Enterprise Value 128,337
Cash (Net Debt) (1Q25) (72,829)
Investments excl. VFE (1Q25) 206
ETEL’s Share of VFE* 41,435
Minority Interest (1Q25) (25)
Equity Value 97,123
Outstanding Shares (mn) 1,707
Fair Value, Mar 25 (EGP/Share) 56.89

Price Target, Dec 25 (EGP/Share) 68.90

Market Price (EGP/Share) 38.70
Upside Potential 78%

* The equity value of ETEL’s 45% stake in VFE was used instead of its BV, derived from the valuation implied by Vodacom’s acquisition of a 55% stake in VFE in Dec-
22, with a 15% minority discount applied to reflect ETEL’s lack of control over VFE.

Target Price Sensitivity

Terminal WACC

14.5% 15.5% 16.5% 17.5% 18.5%

Terminal Growth Rate

0.5% 67.80 64.12 60.90 58.05 55.52

1.5% 72.64 68.35 64.63 61.38 58.51

2.5% 78.29 73.24 68.90 65.15 61.86

3.5% 84.96 78.93 73.83 69.45 65.66

4.5% 92.96 85.66 79.57 74.42 70.00

*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates *Share Price as of 10 July 2025

Company Note www.sigma-capital.com 12

Telecom Egypt
Company Note 14 July 2025

Financial Summary
Balance Sheet (EGPmn) FY23a FY24a FY25e FY26e FY27e
Cash & Equivalents 10,978 8,279 7,374 12,078 11,731
Inventory 5,081 8,107 9,586 10,884 12,316
Accounts Receivable 10,218 17,048 20,668 23,681 26,950
Current Assets 34,360 42,949 47,704 58,188 64,135
Fixed Assets 78,003 104,141 113,772 123,970 136,145
Non-Current Assets 115,897 155,004 170,928 191,169 214,648
Total Assets 150,257 197,953 218,631 249,357 278,784
Creditors and other credit balances 31,115 42,888 54,578 61,971 70,123
CPLTD 29,616 42,315 46,440 52,381 47,848
Current Liabilities 63,494 89,485 105,171 119,500 124,313
LTD 19,726 38,411 36,859 34,442 33,518
Total Liabilities 99,372 152,015 162,095 174,103 179,754
Shareholders' Equity 50,867 45,914 56,493 75,178 98,911

Income Statement (EGPmn) FY23a FY24a FY25e FY26e FY27e

Revenue 56,679 82,037 103,909 119,058 135,491
Gross Profit 22,389 30,795 41,333 48,006 55,092
SG&A (9,890) (12,836) (14,517) (15,768) (17,298)
EBITDA 21,942 31,953 40,788 47,832 55,284
Depreciation (10,163) (14,994) (15,249) (17,056) (19,153)
EBIT 11,779 16,958 25,540 30,776 36,130
Net Interest Income (Expense) (3,909) (15,758) (17,510) (12,289) (9,834)
EBT 13,638 10,562 19,810 32,281 42,231
Net Profit 11,721 10,111 15,353 25,018 32,729

Per-Share Data (EGP) FY23a FY24a FY25e FY26e FY27e

EPS 5.85 4.79 7.85 13.26 17.50
DPS 1.25 1.50 1.50 2.10 3.26
Dividend Yield (%) 3% 4% 4% 6% 9%

Valuation Multipliers (x) FY23a FY24a FY25e FY26e FY27e

P/E 6.3 7.7 4.7 2.8 2.1
P/BV 1.2 1.4 1.1 0.8 0.6
EV/EBITDA 1.8 0.2 0.2 0.3 0.4

Liquidity (x) FY23a FY24a FY25e FY26e FY27e

Current Ratio 0.54 0.48 0.45 0.49 0.52
Quick Ratio 0.46 0.39 0.36 0.40 0.42
Cash Ratio 0.2 0.1 0.1 0.1 0.1

Profitability (%) FY23a FY24a FY25e FY26e FY27e

Revenue Growth 28% 45% 27% 15% 14%
EDITDA Growth 31% 46% 28% 17% 16%
Net profit Growth 28% -14% 52% 63% 31%
EPS Growth 27% -18% 64% 69% 32%
ROE 24% 21% 30% 38% 38%
ROA 9% 6% 7% 11% 12%
Gross Profit Margin 40% 38% 40% 40% 41%
EBITDA Margin 38% 39% 39% 40% 41%
Net Profit Margin 21% 12% 15% 21% 24%

*Unless otherwise noted, report and chart sources are company reports and Sigma Research estimates *Share Price as of 10 July 2025

Company Note www.sigma-capital.com 13

 Financial Analysis Team Technical Analysis Team

Marwan Karim Mohamed Ismail, CFTe, CETA, CPM

Senior Manager – Financial Analysis Senior Manager – Technical Analysis
marwan.karim@sigma-capital.com mohamed.ismail@sigma-capital.com

Bassem Ahmed, CFA Reem Hamdy, CFTe, CETA

Manager – Financial Analysis Technical Analyst
bassem.ahmed@sigma-capital.com reem.hamdy@sigma-capital.com

Nouran Ahmed
Equity Analyst
nouran.ahmed@sigma-capital.com

Karim El Gammal
Equity Analyst
karim.elgammal@sigma-capital.com

Menna Nageh
Junior Equity Analyst
menna.nageh@sigma-capital.com

Gehad El Maasrawy
Junior Equity Analyst
gehad.elmaasrawy@sigma-capital.com

Menna Rezk
Junior Equity Analyst
menna.rezk@sigma-capital.com
16675

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www.sigma-capital.com 14