1. Trade Price Target: EGP0.40/share
Downside Potential: 29%
Stock Performance (OTMT)
Stock Details
Last price (EGP) 0.57
52-W High (EGP) 1.46
52-W Low (EGP) 0.56
Mubasher Ticker OTMT.EGX
Bloomberg Ticker OTMT:EY
No. of Shares (mn) 5,245.7
Mkt Cap (EGPmn) 2,990.0
Mkt Cap (USDmn) 380.2
Free Float (% ) 48.3
Company Profile
Orascom Telecom Media & Technology
Holding (OTMT.EGX) is a joint stock company
incorporated in Egypt. OTMT was created at
the end of 2011 with the demerger of
Orascom Telecom Holding (ORTE.EGX)
following VimpleCom’s acquisi on of certain
assets of ORTE. OTMT is a holding company
for a group with investments in three major
business ac vi es. First among these, the
Global System for Mobile Communica ons
(GSM), a standard of protocols set for the
opera on of 2G networks, is represented by
the company’s 75% stake in North Korea’s
Koryolink and its Alfa Telecom management
contract in Lebanon, MENA Cable and 51% of
Pakistan TWA submarine cable.
Ahmed Ramadan
Equity Analyst
Mubasher International
Ahmed.Ramadan@MubasherFS.com
Koryolink out of hand: Orascom Telecom Media & Technology Holding
(OTMT.EGX) adopted an accoun ng treatment entailing the de-
consolida on of its North Korea-based Koryolink from its
consolidated financial statements. Koryolink will become an
associate instead of being a subsidiary due to the current
sanc ons on North Korea that are affec ng OTMT's ability to
impose control over Koryolink as well as the conver bility of
cash and repatriation of dividends.
Disappoin ng nego a ons with North Korean party: OTMT and the
Korea Post & Telecommunica ons Corpora on (KPTC) are in
discussions regarding the merger of Koryolink with the other
state-owned mobile operator Byol. Although the nego a ons
are ongoing, OTMT believes that it is difficult to exercise control
on the poten al merged en ty. Although IFRS and EAS
accoun ng standards require the company to exercise a
significant control on its investee to be treated as a 'subsidiary'
and consolidated in its financial statements, OTMT has to
reconsider its 75% ownership stake in Koryolink as 'investment
in associates'. Accordingly, OTMT recognized in Q3 2015 a total
loss of EGP3.1bn from Koryolink as discounted opera ons. We
note that in H1 2015 Koryolink contributed 90% of OTMT's
consolidated revenues and 83% of consolidated EBITDA.
For what it's worth: OTMT valuation
Base Case Scenario
To value OTMT, we used sum-of-the-parts (SOTP) method. In our
base case scenario, we assume removing Koryolink from our
SOTP valua on due to the substan al risk of na onaliza on
(despite having been denied by OTMT) or any governmental
ac on nega vely impac ng OTMT's ownership right in
Koryolink. Thus, OTMT's valua on would include the following
(excluding the real estate investment in Brazil):
1. Cables Segment: OTMT owns 100% of MENA Cable and
51% of Trans World Associate. We used our 2016e
EBITDA for the segment to es mate free cash flow to
the firm (FCFF) using a reinvestment rate of 27%, a cap
rate of 14%, and a terminal growth rate of 5%. This
resulted in an es amted equity value of EGP92mn for
the cables segment.
2. Management Contract of Alfa in Lebanon: In view of the
Lebanese Ministry of Communica ons decision to
dismiss OTMT from the upcoming tender of managing
the mobile network "Alfa", we conserva vely
es mate the contract to be worthless in our
valuation.
3. Stake in Beltone Financial Holding (BTFH.EGX): Based on the successful closing of the tender offer
submi ed jointly by OTMT and ACT Financial, OTMT will now own 84.4% of BTFH. Based on an
average PBV of 1.6x for the financial sector in the MENA region, OTMT's stake in BTFH would be
valued at EGP463.2mn (implying a 19% premium paid in the deal).
Orascom Telecom Media & Technology
Holding
Trade Idea
Telecommunication Services | Egypt
Tuesday, 24 November 2015
Losing control of Koryolink — Time to 'sell/short sell'

2. valued at EGP463.2mn (implying a 19% premium paid in the deal).
4. Adjusted Net Cash/(Debt): We factored the adjusted net cash/ (debt) balance of EGP1.26bn a er
considering the expected cash outflow needed for BTFH deal of EGP549.4mn.
Based on our SOTP valua on in this scenario, we valued OTMT at EGP0.35/share, implying a downside
potential of 39%.
Best Case Scenario
In this scenario, we think the best case for OTMT would be to value its investment in Koryolink at its fair value
calculated by an independent financial advisor (IFA), which is EGP614mn. Using the same above valua on
assump ons for the other segments, we valued OTMT at EGP0.46/share, implying a downside poten al of
19%.
Sell OTMT now pending visibility on its future — Se ng a weighted average PT of EGP0.40/share (a 29% downside
poten al): Applying equal weights to both 'base' and 'best' scenarios, we reached a weighted value of
EGP0.40/share, implying a downside poten al of 29%. Thus, we believe it would be best to either sell OTMT's
local shares with a trading price target (PT) of EGP0.40/share (or short sell its GDRs with a trading PT of
USD0.26/GDR).

3. Disclosure Appendix
Important Disclosures Methodology The consensus ra ngs and target prices are based on the last three months. Analyst
ra ngs sta s cs chart is based on recommenda ons made by third-party analysts during the last 12 months. We do not
a ach a consensus ra ng (i.e. "na" or "not applicable/available" if 1) a consensus target price has not been updated over
the last three months or 2) the company is not rated or covered by any third-party analyst. Other Disclosures MFS does not
have any proprietary holding in any securities. Only as a nominee, MFS holds shares on behalf of its clients through Omnibus
accounts. MFS is not currently a market maker for any listed securities. For detailed disclosure appendix click here.
Analyst Certification
I (we) Ahmed Ramadan,Equity Analyst, employed with Mubasher Interna onal, a company under the Na onal Technology
Group of Saudi Arabia being a shareholder of Mubasher Financial Services BSC (c) and author(s) of this report, hereby cer fy
that all the views expressed in this research report accurately reflect my (our) views about the subject issuer(s) or
security(ies). I (we) also cer fy that no part of my (our) compensa on was, is or will be directly or indirectly related to the
specific recommenda on(s) or view(s) expressed in this report. Also, I (we) cer fy that neither myself (ourselves) nor any of
my (our) close relatives hold or trade into the subject securities.
Head ofResearch Certification
I, Amr Hussein Elalfy, Global Head of Research of Mubasher Financial Services BSC (c) confirm that I have ve ed the
informa on, and all the views expressed by the Analyst in this research report about the subject issuer(s) or security(ies). I
also cer fy that the author(s) of this report, has (have) not received any compensa on directly related to the contents of the
Report.
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