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, cva@group-mmc.com)
Fran González (+34 616 285 092, fjg@group-mmc.com)

mmC GROUP Strategy Consultants – Orascom Profile Page 1

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

2008 Highlights

Markets Subs Revenues EBITDA

11 78 5.3 2.4
Million Billion $ Billion $
Canada

mmC GROUP Strategy Consultants – Orascom Profile Page 2

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.

Telecel Globe is a Leadership position in

holding structure for a each of its markets.
group of smal-market
investments in Africa.

mmC GROUP Strategy Consultants – Orascom Profile Page 3

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

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Mobinil (Egypt)
Fastlink (Jordan)
SabaFon (Yemen)
Mobilink (Pakistan)
Telecel (Benin)
Telecel (Burkina Faso)
Telecel (Zimbabwe)
Telecel (Burundi) U-Com (Burundi)
Telecel (CAR) Telecel RCA (CAR)
Cell 1 (Namibia)
Telecel (Cote d’Ivoire)
Oasis (Telecel) (DR Congo)
Telecel (Gabon) 2008 change of strategy:
Telecel (Togo) Orascom decides to target
Telecel (Uganda)
not only large markets but
Telecel (Zambia)
Telecel Niger (Niger) smaller ones too. It
Libertis (Congo) reenters some countries
Tchad Mobile (Chad) now with the Telecel Globe
Syriatel (Syria) brand.
Djezzy (Algeria)
Exit Tunisiana (Tunisia)
Original Telecel Iraqna (Iraq)
banglalink (Bangladesh)
Telecel Globe Koryolink (N Korea)
Not launched yet 2008 change of strategy: Globalive (Canada)
Continuing operation Orascom ventures in coutries
outside of its traditional domain.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

mmC GROUP Strategy Consultants – Orascom Profile Page 4

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
60%
7,000 Revenues EBITDA Net Profit EBITDA %

49%
6,000 50%
44% 44% 45%
42% 5,327

5,000 4,727 40%

3,906 Net income: extraordinary

4,000 gains realized when shares
3,226 in Hutchinson were sold. 30%

3,000
2,384
2,0732,021 20%
1,966
2,000 1,704
1,363
958 10%
1,000 667 721
295 431

0 0%
2004 2005 2006 2007 2008

1) Source: Orascom

mmC GROUP Strategy Consultants – Orascom Profile Page 5

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 3,601 +689 Current +381 Non-current liabilities
1,765 assets +1,461 Current liabilities
6,917 1,593 Total +145 ST loans
increase Non-current
in assets +5,163
1,044 assets
+5,852
4,068 +4,209 LT loans
7,743 8,155
1,076 7,082 -344
5,873

2,992

Increase Decrease Incrase

2004 2005 2006 2007 2008 assets in equity in liabilities
2004 – ‘08 2004 – ‘08 2004 – ‘08

1,239 652
513 287 756 1. Orascom reorganized its financing in
-868
2008. It decreased its equty by $2B, and
-1,381 -2,958 restructured its debt.
-3,433 -3,980 Key
-3,245 2. Orascom is the most leveraged of all
+ Cash -4,189
-5,219
-5,084 Highlights
peers; this also makes it the operator
Net debt -5,735
with highest ROE 36%. The second best
- Debt is STC at 26%.

Source: Operator, mmC analysis.

mmC GROUP Strategy Consultants – Orascom Profile Page 6

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

The crown The regular Need to Still

% jewel performers catch up warming up
EBITDA

70% 63%
58%
60%
48%
50% 41%
40%
30%
20%
10% 5% 2%
0%
Djezzy Tunisiana Mobilink Mobinil banglalink Telecel Globe

Share of
group 43% 7% 25% 19% 6% .5%
revenues

Source: Company reports

mmC GROUP Strategy Consultants – Orascom Profile Page 7

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

Largest revenue
ARPU
contributors
Subs US$ / month
millions Total Subscribers

12.1 ARPU Blended (US$/month)

50
45 6.4 10
3.5 3.7 2.3
40
0
35
30 28.48
-10
25
20.12
20
-20
14.11
15
10.34
10 -30
4.26
5
0.70
0 -40
Djezzy Mobilink Mobinil Tunisiana banglalink Telecel Globe

1) Source: Orascom

mmC GROUP Strategy Consultants – Orascom Profile Page 8

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 conso-
lidates 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 Page 9

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 first-
mover 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 Page 10