Maroc Telecom : 2013 Consolidated Results

2013 CONSOLIDATED RESULTS

Results in line with forecasts:

• customer bases continue to grow and now comprise 37 million customers: mobile customer bases (+13.5%), fixed-line customer bases (+5.0%), and internet customer bases (+20.4%);

• resumption of fixed-line and internet activities growth in Morocco, the result of growth in customer bases for fixed lines (+8.7%) and broadband (+22.6%);

• very strong profitability growth maintained among subsidiaries: revenues up 9.5% like for like and EBITDA margin up 3.7 points, to 50.4%;

• improved Group profitability: EBITDA margin 0.8 point higher, to 56.8%, the result of tight cost control and subsidiaries performance;

• EBITDA - CAPEX up slightly, by 0.7%, as forecast in the annual outlook for 2013;

• Earnings from operations (EBITA) growth of 0.1%;

• continuing investment in fixed-line and mobile services in Morocco and subsidiaries;

• settlement out of court of a tax audit by agreement to pay MAD 1.5 billion, for which MAD 468 million had already been provisioned.

Proposed dividend payment of 100% of 2013 earnings (i.e., MAD 6 per share), representing a yield of 6.1%.*

Maroc Telecom Group outlook for 2014:

• Slight decrease in EBITDA;

• Slight growth in CAPEX**.

On the occasion of the publication of this press release, Abdeslam Ahizoune, Chairman of the Management Board, stated:

"In 2013, Maroc Telecom Group once again achieved its objectives while providing its customers significant price reductions. Exemplary teamwork, constant innovation, high-quality products, performances from subsidiaries, and continual cost control allowed the Group to improve profitability. Maroc Telecom also pursued its proactive policy of investing substantially to raise service quality. The Group's bold actions are intended to pave the way for ultra-high-speed internet, not just for the mobile segment but also for the fixed-line and ADSL segments, whose success is no longer in doubt.

In 2014, the Group will maintain its investment and innovation momentum, both in Morocco and sub-Saharan Africa, where Maroc Telecom intends to continue to diversify successfully in high-growth areas."

* Based on the share price on February 12, 2014 (MAD 97.99).

** Excluding any acquisitions of new spectra or licenses.

Group Consolidated results

Revenues

In 2013, Maroc Telecom Group generated consolidated revenues⁴ of MAD 28,559 million, 4.3% less than revenues in 2012 (-4.3% like for like³). This was caused by lower revenues in Morocco (-8.1%), where mobile services and mobile termination rates experienced sharp price cuts. Strong growth (+9.5%) in international revenues compensated partially for these declines.

Group revenues in the fourth quarter declined by 3.3% from the previous year, to MAD 7,091 million.

The Group customer base grew to more than 37 million customers, a strong rise of 13.3% from the previous year. This excellent momentum is due mainly to growth in the international customer base, up 28.8% year on year, to 16.8 million customers.

Earnings from operations before depreciation and amortization

In 2013, Maroc Telecom Group's earnings from operations before depreciation and amortization (EBITDA) amounted to MAD 16,213 million, 3.0% less than in 2012 (-3.0% like for like). The 8.2% decline in EBITDA in Morocco was partially compensated for by growth of 18.1% (18.0% like for like) in international EBITDA. However, with gross margin up 2.0 pts and operating expenses stable, the EBITDA margin improved by 0.8 pt from the previous year, to a substantial 56.8%.

In the fourth quarter, EBITDA amounted to MAD 3,829 million, 8.4% less than in 2012 (-8.5% like for like).

Earnings from operations

At December 31, 2013, Maroc Telecom Group's consolidated earnings from operations⁵(EBITA) stood at MAD 10,978 million, up 0.1% (+0.1% like for like) from a year earlier. Excluding restructuring costs recorded in 2012 (MAD 877 million) and in 2013 (MAD 200 million), EBITA fell 5.6% year on year (-5.6% like for like), with a substantial operating margin of 39.1%, only 0.5 pt less than the previous year's. Higher depreciation charges (+3.3%) for major capital-expenditure programs carried out in Morocco and in subsidiaries outside Morocco explain the slight decline in earnings from operations.

Net income

In 2013, Maroc Telecom Group's had net income of MAD 5,540 million, down 17.4% (-17.4% like for like) from net income in 2012. This decline was the result of a MAD 1 billion expense taken for the settlement of a tax audit.

Cash flow

At December 31, 2013, cash flow from operations (CFFO⁶) had fallen year on year by only 1.6%, to MAD 11,644 million. Excluding restructuring charges, CFFO came to MAD 11,715 million, down 7.3% from a year earlier despite 42.9% growth in international CFFO. This trend follows the decline in EBITDA, which only partially compensated for the 10.9% fall in capital spending.

At December 31, 2013, Maroc Telecom Group's consolidated net debt⁷ stood at MAD 6,890 million, down 3.1% year on year and only 0.4 times annual Group EBITDA.

Dividend

The Supervisory Board of Maroc Telecom will propose to the general shareholder's meeting of April 22, 2014, the payment of an ordinary dividend of MAD 6 per share, representing a total amount of MAD 5.3 billion. This dividend, which corresponds to 100% of distributable earnings from 2013, will be made available for payment on June 2, 2014.

Outlook for 2014

On the basis of recent market trends, and insofar as no major extraordinary event occurs to disrupt Group activity, Maroc Telecom forecasts a slight decrease in EBITDA and a slight growth in CAPEX^*.

*Excluding any acquisitions of new spectra or licenses.

Overview of Group activities

Morocco

IFRS in MAD millions	2012	2013	Change
Revenues	23,178	21,294	-8.1%
Mobile	17,477	15,719	-10.1%
Services	16,979	15,416	-9.2%
Equipment	498	303	-39.2%
Fixed line	6,669	7,391	10.8%
o/w Fixed-line data*	1,757	1,865	6.2%
Elimination	-968	-1,816
EBITDA	13,414	12,308	-8.2%
Margin (%)	57.9%	57.8%	-0.1 pt
EBITA before restructuring	10,020	8,795	-12.2%
Margin (%)	43.2%	41.3%	-1.9 pts
EBITA	9,219	8,595	-6.8%
CAPEX2	3,792	3,601	-5.1%
CAPEX/Revenues	16.4%	16.9%	0.5 pt
CFFO before restructuring	10,955	9,314	-15.0%
CFFO	10,199	9,274	-9.1%
Net debt	6,059	6,429	6.1%
Net debt / EBITDA	0.45 x	0.52 x

*Fixed-line data include internet, ADSL TV, and data services to businesses.

Activities in Morocco in 2013 generated revenues of MAD 21,294 million, a decrease of 8.1% year on year. This performance was the result of the prepaid mobile rates, whose continuous decline is due mainly to the adoption of a per-second billing and more frequent promotional offers.

Earnings from operations before depreciation and amortization (EBITDA) amounted to MAD 12,308 million, 8.2% less than in 2012. The substantial EBITDA margin of 57.8% was nearly unchanged (-0.1% year on year), because of stable operating expenses and a 1.8 pt rise in gross operating margin.

Earnings from operations (EBITA) declined 6.8%, totaling MAD 8,595 million. Excluding restructuring charges accounted for in 2012 and 2013, EBITA declined by 12.2%, resulting in a 41.3% margin. This change can be explained by the decline in EBITDA and by the 3.5% rise in depreciation charges for significant capital expenditures carried out in recent years.

Cash flow from operations in Morocco fell 9.1% in 2013, to MAD 9,274 million. This was the result of lower EBITDA, which only partially compensated for the 5.1% decline in capital expenditure. Excluding restructuring charges, cash flow from operations declined by 15.0%, mainly because of lower revenues.

Mobile

In 2013, mobile-segment revenues generated in Morocco fell 10.1%, to MAD 15,719 million. Because of fierce competition, fourth-quarter mobile revenues declined by 9.7% year on year, to MAD 3,778 million.

The mobile customer base⁸ continued to grow, however, expanding 1.9% year on year, to  18,193 million customers. This rise was due to growth of 0.9% in the prepaid customer base (+157,000 customers) and to solid momentum from the high-value postpaid customer base (+15.1%), each the result of continually enhanced product offers and of migration of prepaid customers to subscription plans. The churn rate⁹ increased slightly, to 22.2% (+1.4 pts from 2012).

Outgoing mobile revenues declined year on year by 9.5%. The 19.4% increase in outgoing call traffic was not enough to compensate for the 27% fall in prices. Revenues from mobile services fell by 9.2% because of the 8.0% decline in incoming revenues resulting from reductions in mobile termination rates effective January 1, 2013. Equipment revenues continued to decline (-39.2% year on year) as a consequence of Maroc Telecom's decision to reduce acquisition costs through a more targeted policy for handset subsidies.

In 2013, blended ARPU¹⁰ fell by 12.1% year on year, to MAD 69. The impact of severe price cuts in the mobile segment and of reduced mobile termination rates was partially compensated for by a rise in voice consumption (+19.4%) and by growth in data services¹¹,which account for 14.2% of ARPU (+3.1 pts more than in 2012).

The 3G mobile internet customer base¹² grew by 51.7%, to 2.3 million customers at December 31, 2013.

Fixed line and internet

At December 31, 2013, annual revenues from fixed-line and internet activities in Morocco amounted to MAD 7,391 million, a rise of 10.8% year on year. Much of this performance reflects the increase in lines leased by Maroc Telecom's mobile segment from its fixed-line segment (+91.6%). Excluding this effect, fixed-line and internet revenues declined by 2.1%. Since June 2013, however, fixed-line revenues excluding lines leased by the mobile segment have risen slightly (+0.6% in the second half of 2013). The impetus from the double play rate plans and enhanced unlimited offers has underpinned the improvement in fixed-line business.

Revenues from fixed-line data rose to MAD 1,865 million (+6.2%), driven by customer-base growth, particularly in broadband internet.

Growth of the fixed-line customer base in Morocco continued to accelerate (+8.7% year on year), with 1,379 thousand lines at December 31, 2013. The fixed-line business was boosted by price cuts, enhanced offers (particularly the inclusion in rate plans of free minutes to mobiles), and continuing strong growth in the ADSL customer base (+22.6% in 2013).