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TELECOMS
Price on 09 13 2010: MAD 148
MAD m
Sales
Accumulate (unchanged)
Target price: MAD 166 unchanged on 03 31 2010
2008
29 521,0 7,2% 13 889,0 13,5% 47,0% 9 520,0 18,5% 32,2% 50,9% 48,5% 13,7 7,0x 7,3%
2009
2010
% change Op profit % change OM RNPG % change Net margin ROE ROCE P/E P/B Dividend yield
30 339,0 30 794,1 30 640,1 2,8% 1,5% -0,5% 14 008,0 13 852,1 13 782,8 0,9% 46,2% -1,0% 31,1% 50,8% 36,6% 13,8 7,0x 7,0% -1,1% 45,0% -3,1% 29,7% 49,0% 42,9% 14,2 7,0x 6,1% -0,5% 45,0% 9 012,5 -1,4% 29,4% 45,7% 38,9% 14,4 6,6x 6,1%
9 425,0 9 136,1
At the end of the first half of 2010, MAROC TELECOM records consolidated sales of MAD 15,465m (17.5% generated by the African subsidiaries), up 6.0% compared with the same period in 2009. This improvement is essentially down to the performance of the African subsidiaries, confirmed by the expansion of the reporting entity as a result of the consolidation of SOTELMA. Domestic activity, still the most important in terms of contribution, records net revenues of MAD 12,763m, up 1.5% compared with the end of June 2009. The mobile segment shows growth in its gross revenues of 5.6% to MAD 9,519m with (i) a subscriber base of 15.9 million (+11.2% compared with June 2009), (ii) mixed ARPU at MAD 94 and (iii) mixed MOU down by 9.1% to 49 minutes. Fixed line and internet business totals gross sales of MAD 4,312m, (a drop of 9.4% compared with H1 2009) for a base of (i) 1.237 million fixed lines (-4.1% compared with H1 2009) and (ii) 479,000 internet subscribers. In terms of market shares, MAROC TELECOM consolidates its position as leader on the mobile market with a share of 57% at the end of June 2010 (against 60.7% in H1 2009) while on the fixed line and internet market, the group has respective market shares of 33.6% (against 39.5% in H1) and 53.8% (against 59.4% in H1 2009).
Market shares Mobile Fixed Internet H1 2008 66,4% 48,1% 76,7% H2 2008 63,4% 43,4% 67,3% H1 2009 60,7% 39,5% 59,4% H2 2009 60,3% 35,1% 54,0% H1 2010 57,0% 33,6% 53,8%
mars-08
sept.-08
mars-09
sept.-09
mars-10
sept.-10
Source: ANRT
On the international scene, MAURITEL records net consolidated sales of MAD 595m, up 5.3% year on year. Benefiting from the growth of 17.6% in the subscriber base to 1.547 million subscribers, mobile segment gross revenues have expanded 7.8% to MAD 509m. On the other hand, fixed line and internet segment revenues have dropped 2.7% to MAD 110m, with a base of 42,000 fixed lines and 7,000 accesses.
As a result of this and the burden of financial expenses, net profit attributable to equity holders of the parent drops 5.7% to MAD 4,361m, bringing the net margin down to 30.1% against 31.7% the year before. After payment of MAD 9.4bn in 2009 dividends and network investment of over MAD 2.4bn, as well as the acquisition of SOTELMA for MAD 3.1bn, the groups net debt amounts to MAD 8.9bn, representing gearing of 48.9% at the end of June 2010. Net cash flow from operating activities stands at MAD 7,366m, up 20% compared with June 2009.
With reference to the latest methods used for the valuation of recent stock market transactions (ONA, SNI, BCP, etc), based on the average weighted price calculated over the last six months, the MAROC TELECOM public share offer should be made on the basis of a price excluding upside of MAD 155.
1 month 3 months 6 months 12 months Average weight price 146,52 150,34 155,00 149,22 Highest 150,55 159,00 163,90 163,90 Lowest 145,50 145,50 143,00 133,00
It should also be pointed out that IAM shares are not very volatile (3 month volatility of 12.54%) despite the shares high liquidity.
The BMCE CAPITAL scenario for MAROC TELECOM forecasts continuing erosion of market shares in 2010, once the WANA GSM license comes into service, which should further affect the historic operators margins. This prospect was confirmed by the decision of the regulator (ANRT) on April 27, 2010 to gradually reduce fixed line and mobile network interconnection traffic terminal tariffs between 2010 and 2013 (a drop of 65% for IAM and MEDITELECOM and 70% for WANA CORPORATE on the mobile segment, while on the fixed segment, the average target reduction should be between 24% and 40% by 2013), also establishing the principle of tariff asymmetry to MAROC TELECOMs disadvantage.
0,749 0,624
IAM
MEDITELECOM
WANA
However, given the small weight of this segment in MAROC TELECOMs, consolidated sales, the reduction in interconnection tariffs should not make a noticeable difference to the development prospects for the groups consolidated activity. Impact simulation on IAMs sales
BMCE Capital initila forecasts Mobile Weight/conso sales Interconnection Weight/conso sales Fixed (adjusted for internet sales) Weight/conso sales Interconnection Weight/Fixed line sales Consolidated sales 2007 17 096 62% 8 432 31% 27 532 2008 18 529 63% 8 611 29% 29 521 2009 18 866 62% 350 2% 8 273 27% 39 0,5% 30 339 2010E 19 200 62% 356 2% 8 937 29% 42 0,5% 30 794 2011P 19 129 62% 355 2% 8 728 28% 41 0,5% 30 640 2012P 19 286 62% 358 2% 8 745 28% 41 0,5% 30 947 227 -15,0% 34 -10,0% 7 0,0% 2013P 19 494 62% 362 2% 8 936 29% 42 0,5% 31 256 204 -10,0% 31 -10,0% 11 0,0%
Estimated impact of the reduction in interconnection tariffs on MAROC TELECOM's consolidated sales Mobile interconnection sales 350 356 267 % change -25,0% Fixed interconnection sales 39 42 38 % change -10,0% Difference 0 0 3 Impact conso sales 0,0% 0,0% 0,0%
This reduction in interconnection tariffs should cause erosion in the prices billed to customers, competitors having more latitude to take advantage of tariff asymmetry. The increase in special offers which will result reflects the entry of the domestic telecoms market into a phase of fierce competition which should lead to a fall in prices, difficult to offset by the expansion of the customer base, given the level of maturity of the market. BMCE CAPITAL assumptions concerning IAM drivers
Drivers Tariff erosion MOU Customer base Impact ARPU 2007 2008 2009 2010E -5% 0% 2% -3% 2011P -5% 1% 2% -3% 2012P -5% 1% 2% -3% 2013P -5% 1% 2% -2%
Conclusion
Despite increased competitive pressure on the different markets where MAROC TELECOM operates, the company seems to have strong resilience capability to maintain its lead as well as its margins, capitalizing on its business expertise as well as a generally sound financial base. Consequently, we maintain our recommendation to accumulate MAROC TELECOM shares.
Buy: for an upside above 15%; Accumulate: for an upside ranging from +6% to +15%; Hold: for spreads between 6% and +6%; Lighten: for a downside ranging from 6% to 15%; Sell: for a downside above 15%; Suspended: the recommendation is suspended due to a capital transaction (takeover bid, exchange offer, or other) or as a result of uncertainty concerning its future ;
Accumu+6% +15%
Sell -15%
Lighten -6%
Hold
Buy
Disclaimer:
The Analysis & Research Division of BMCE Capital is designated by BMCE Capital Bourse, a broking company in the form of socit anonyme (limited company) with share capital of MAD 10,000,000, headquartered at 140, Avenue Hassan II, Tour BMCE, Casablanca, registered in the Casablanca Trade Register under the number 77 971, authorized by approval of the Ministry of Finance number 3/26, as the entity in charge of the production of all stock market publications of BMCE Capital Bourse. The Analysis & Research office was detached from the broking company in fiscal year 2000, in order to guarantee greater editorial independence in exercising the functions of production and thus avoid, as far as possible, the occurrence of conflict of interest risks. The Analysis & Research Division has established an organizational structure and procedures (or Chinese wall) designed to guarantee the independence of the financial analysts and the priority of customers interests. A black-out period is stipulated, running from the date of the beginning of drafting of the research memorandum until 3 months after its publication, during which time the financial analysts refrain from trading on their own account in shares in relation with the issuers and sectors they are studying. Any unauthorized use, communication, reproduction or distribution of this document is forbidden. The information and explanations given in this study are the expression of an opinion; they are given in good faith and may be changed without notice. It is strictly forbidden to reproduce this document entirely or partially or pass it on to third parties without authorization. This document was drawn up by the Analysis & Research Division and published in accordance with current procedures. The information contained in this document comes from reliable sources, but is not binding on us. The information contained in this document and any opinion expressed in it do not under any circumstances encourage investment on the Stock Exchange. This document is intended for investors aware of the risks related to financial markets. This document was drawn up only for clients of BMCE Capital, BMCE Capital Bourse and Medicapital Bank and the Commercial, Marketing, Communication Division of BMCE Capital. It does not meet the investment objectives, the financial situation or specific needs of any individual who might receive it. It is not recommended to take a decision based only on this document. Investors should seek financial advice to make sure that it is appropriate to buy securities or that the investment strategies examined or recommended in this document are appropriate and should understand that the opinions on the future prospects may not materialize. Investors should note that any revenue from these securities may fluctuate and that the prices of securities may rise or fall. Investors may thus get back less than their initial investment. Past performance is no guide to future performance. Currency exchange rates can have a negative effect on the value, price or revenues of the securities mentioned in this document. In addition, foreign investors who hold securities assume a foreign currency risk. This research is destined only for the recipients internal use, unless our prior approval is given. If a private individual should come into possession of this document, he should not base any investment decision only on the basis of the said document but should consult his own advisors.
Sales Youssef Benkirane - Chairman of the Board Mehdi Bouabid, Anass Mikou, Mamoun Kettani Abdelilah Moutasseddik
Analysis & Research Fadwa Housni - Director Hicham Sadani Economic Intelligence Center Manager Zahra Lazrak, Zineb Tazi, Ada Mejatti Alami, Ghita Benider, Hajar Tahri, Amine Bentahila, Nasreddine Lazrak, Ismail El Kadiri
www.bmcecapitalbourse.com
Septembre 2009