EQUITY RESEARCH

RESEARCH
EQUITY
ENTITY OF AUDI SARADAR GROUP

COMPANY UPDATE

HIGHLIGHTS

COMPANY UPDATE - SAUDI TELECOM & ETIHAD ETISALAT

Stock Data
Ticker
Current Price (SAR)
Fair Value (SAR)
Upside Potential
Rating
Bloomberg Median Target Price

STC AB
41.5
48.7
17.3%
Accumulate
52.8

(SAR)
Market Cap (SAR mn)
Number of Shares (mn)

83,000
2,000

52 week Low (SAR)

33.0

52 week High (SAR)

44.1

Stock Data
Ticker
Current Price (SAR)

EEC AB
70.5

Fair Value (SAR)

83.7

Upside Potential

19%

Rating
Bloomberg Median Target Price

Accumulate
85.2

(SAR)
Market Cap (SAR mn)

49,350

Number of Shares (mn)

700

52 week Low (SAR)

49.9

52 week High (SAR)

71.5

INVESTING IN FUTURE REVENUES

On 25/9/2011 and 12/11/2011 we initiated coverage on Mobily and STC. Both companies have
managed to exceed our estimates benefiting from the remarkable growth in the Saudi Telecom
sector. We remain bullish on the sector due to the growing momentum of the broadband market,
both mobile and fixed. STC and Mobily compete over the anticipated growth of the market, yet hold
distinct competitive advantages. Conversely, both are jeopardized by the introduction of MVNOs
in KSA.
We revise our fair values of STC and Mobily to SAR 48.7/share and SAR 83.7/share up from
SAR 38.2/share and SAR 74.6/share, respectively. The revised fair values offer an upside potential
of 17.3% for STC, and 19% for Mobily and therefore our ACCUMULATE rating for both stocks. Key
downside risks to our valuation are: 1) Intense competition in the mobile broadband segment and 2)
un-resolved spectrum issues in KSA. In addition, STCs bottom line is vulnerable to F/X fluctuations.
Despite STCs extensive international portfolio, we still believe that its core Saudi asset remains to
lead its growth direction. Symptoms of domestic recovery were shown during the course of the
year, and according to our estimates we expect KSA revenues to provide 70% of 2012 total revenues.
The main growth driver of STCs Saudi unit is the fixed broadband segment of the market, to which
we mainly attribute the 5-year expected CAGR of 5.5%. The bundled services that STC can provide to
the Saudi audience place it at a distinctive comparative advantage to its local rivals. STC trades at an
attractive PE13e of 7.9x and 2012e dividend yield of 4.8%. We highlight STCs potential in expanding
its dividend payout however this is highly subjective to the companys expansionary strategy. We
project higher payouts in 2013 translating into a 7.2% dividend yield until an official announcement
of a certain M&A activity.
Mobily, on the other hand, is focusing on diversifying its revenue streams as an attempt to weather
the heightened competitive pressures of the Saudi mobile market. A new organic source would be
hosting an MVNO on its network benefitting from incremental leasing revenues (to be operational
by Q3-13 according to CEO Al-Kaf ). Dominating the majority of mobile broadband users also bodes
well for Mobilys revenues providing a healthy growth trajectory. We forecast a 5-year revenue CAGR
of 7.9% accompanied with a long-term EBITDA margin of 35%. We assume continuous de-gearing,
and an apparent progressive dividend policy greatly assisted by a 5-year expected free cash flow
CAGR of 9%. Mobily trades at a PE13e of 7.7x accompanied with a 2012e and 2013e dividend yield
of 6.0% and 7.8% respectively; an excellent risk/reward profile.

FINANCIAL DATA
Saudi Telecom

2011

2012e

2013e

2014e

Revenues (SAR million)

55,662

60,657

64,841

68,354

EBITDA (SAR million)

20,024

21,836

23,343

24,266

EBITDA Margin

36.0%

36.0%

36.0%

35.5%

Net Profit (SAR million)

7,729

9,228

10,494

11,374

EPS (in SAR)

3.86

4.61

5.25

5.69

P/E (x)

10.7

9.0

7.9

7.3

DPS (in SAR)

2.00

2.00

3.00

4.00

Dividend Yield

4.8%

4.8%

7.2%

9.6%

Etihad Etisalat

2011

2012e

2013e

2014e

Revenues (SAR million)

20,052

23,701

25,948

28,301

EBITDA (SAR million)

7,455

8,532

9,289

10,132

COMPANY UPDATE
Kristle-Jo Sreik
Equity Analyst
Kristle-Jo.Sreik@asib.com

EBITDA Margin

37.2%

36.0%

35.8%

35.8%

Net Profit (SAR million)

5,084

5,877

6,432

7,056

7.26

8.40

9.19

10.08

9.7

8.4

7.7

7.0

Youssef Nizam, CFA

Head of Equity Research
Youssef.Nizam@asib.com

DPS (in SAR)

3.25

4.25

5.50

6.50

Dividend Yield

4.6%

6.0%

7.8%

9.2%

October 22, 2012

EPS (in SAR)

P/E (x)

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

WHAT HAS CHANGED IN THE TELECOM LANDSCAPE OF THE KINGDOM OF SAUDI ARABIA?
Growing momentum for post-paid services
The Saudi mobile market witnessed a growing number of mobile subscribers albeit at a decelerated
growth rate. The total number of subscriptions grew to reach 54.5 mn in the H1-12 indicative of
a 191% penetration rate. A positive anomaly observed was the growing migration of pre-paid
subscribers to post-paid services which aids in lifting ARPU levels. We expect the market to expand
by over 2.5 mn and 2.2 mn customers in 2012 and 2013, respectively. We reiterate the well-known
notion of the attractive demographics of KSA, given that 29% of the population is below 14 years
old. This is a worthy fact supporting our base case.
Chart 1: Mobile Subscriptions in KSA (in mn)

Source: CITC

Stagnant fixed line subscriptions amid growing demand for complementary

broadband services
Demand for fixed telephone lines has been stagnant during the course of the year, contrast to the
growing fixed broadband subscriptions whereby we estimate the penetration rate to be at 38.8%
of households currently. While comparing KSAs status among selected European countries (figures
as at end of 2011), it is evident that there is organic potential arising from that segment as KSA
approaches the developed countries standards.
Chart 2: Fixed Household Broadband Penetration as at end of 2011

Source: ITU, EuroStat, CIA Factbook, ASIB estimates

According to CITC, the number of fixed broadband subscribers stood at 2.21 mn as at June 2012,
a figure we foresee at 2.28 mn and 2.56 mn in 2012 and 2013, respectively. We highlight STC to
be the main beneficiary of the proliferation of fixed broadband services leveraging on the triple/
quadruple-play services it can competitively offer.
October 22, 2012

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

Mass adoption of smart-phones stirring broadband revenues

A Google study conducted in May 2012 found the smart-phone penetration rate in KSA to be at
60%, among the highest in the world, vs. that of the U.S. at 44%. According to the study, App usage
is ubiquitous with 36 apps installed on average, 58% of users use video at least once a day, and 53%
visit social networking sites at least once a day.
According to CITC figures, total mobile broadband subscriptions reached 12.6 mn by the end of H112 indicative of a penetration rate of 44.3% in KSA.
Chart 3: Standard & Dedicated mobile Data Subscriptions in KSA

Source: CITC

According to CITC, the number of broadband subscriptions for 2011 are substantially higher relative
to 2010 due to the newly adopted methodology recommended by ITU in early 2011.
Relying on the Google study, the disparity between smart-phone penetration (60%) and mobile
broadband penetration (44.3%) reveals an inherent possible demand for further broadband
services. Additionally, and for illustrative purposes, KSA measures well on a global scale and we
believe it will converge with developed markets standards in the medium term.
Chart 4: Mobile Broadband Penetration as at end of 2011

Source: ITU, ASIB estimates

October 22, 2012

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

LTE subscriptions in the low thousands amid spectrum scarcity issues

LTE subscriptions totaled only about 15 mn worldwide by the end of Q1-12 of which more than half
are accounted for by one operator - Verizon in the U.S. One of the factors behind the low take-up of
LTE in the Middle East is the lack of compatible devices until now (Source: telecoms.com).
According to a report conducted for the GSMA by Analysys Mason in May 2012, the current
spectrum allocation for LTE in KSA involves a totally non-harmonized arrangement in the 2.3 GHz
(STC) and 2.5 GHz (Mobily) bands. KSA must release the internationally harmonized spectrum band
plans of 140MHz of spectrum at 2.6GHz and at least 60MHz of digital dividend spectrum at 800MHz.
The combination of these 2 bands offers excellent coverage for rural areas and good in-building
penetration combined with high capacity for KSAs cities. This international harmonization is critical
to ensure that new devices, which are being developed around the world, will be able to work
in KSA. Failing to do so will result in KSA being forced to use higher-cost and poorly-performing
devices. Additionally, people from neighboring GCC countries will not be able to roam with their
devices in KSA.
Market leaders, STC and Mobily are undoubtedly already working on lobbying the Saudi
government to acquire more spectrum compatible with LTE devices. However, the problem with
higher frequency bands is that they offer less coverage, and therefore require more base stations
and capital expenditure. They are also less efficient for indoors propagation (Source:commsmea.
com). On the other hand, if the re-allocation of spectrum occurred in the 800MHz band this will
permit larger coverage, which requires fewer cell towers, and is therefore cheaper. According to
Mobilys CEO Al-Kaf, the regulator is working with different authorities in the Kingdom to free the
spectrum since they dont have the required spectrum for mobile LTE. Al-Kaf added that spectrum
will be a big issue in Saudi Arabia with the exponential growth in data.
Table 1: Middle East Band Status
Country

Band to be allocated

Possible Award Date

Bahrain

790- 862 MHz

2012/13

Egypt

698-806 MHz

2015

Jordan

790-862 MHz

2015

Lebanon

698-806 MHz

2015

Saudi Arabia

790-862 MHz

2015

UAE

790-862 MHz

2013

Source: GSMA - Making sense of the Digital Dividend Spectrum

Infrastructure sharing agreement remains immobilized

There has been no material progression regarding the deal until now. The latest info we have is
that the towers will be spun off into an independent firm worth $ 2.5 Billion and that STC and
Mobily are considering selling a large stake of the company. As a reminder, STC owns 11,000 towers
vs. Mobily 7,500. Ex-CEO of International Operations Hasbani, stated that tower sharing could
potentially reduce STCs CAPEX and OPEX by up to 30% across its portfolio of assets knowing that
the company will consider deals in all markets. On another note, Zain KSA might impose an obstacle
as the regulator could fear the deal could put it at a disadvantage vs. other operators. Our financial
forecasts dont take account of the prospective benefits of the tower sharing deal since the timeline
of the agreement remains in doubt.

October 22, 2012

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

Late admission of the MVNOs to the Saudi market

Mobily is considered to be the most active operator regarding the liberalization plan put ahead by
the Saudi regulator. CEO Khalid Al-Kaf revealed that Mobily already signed MoUs with a number of
MVNOs and will host one if it is going to add value for them. Specifically, they are looking at MVNOs
that can address particular segments of the market better than Mobily. Host operators can count
the MVNO subscribers as their own as well. By convention, MVNOs target the low income segments
of the market that are already the center of attention of Zain KSA, hence putting latters subscriber
base at risk. Al-Kaf expects the service to become operational by Q3-13.
Chart 5: Mobile Penetration Rates upon (potential) Entrance of MNVOs

N.B.: KSA and Egypts are our 2012 estimates

Source: Booz&co., ASIB estimates

October 22, 2012

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

ETIHAD ETISALAT ( MOBILY)

Mobily is focusing on diversifying its revenue streams as an attempt to weather the heightened
competitive pressures of the Saudi mobile market. CEO Al Kaf, expects data revenues to contribute
as much as 30% of total revenues by the end of 2012, and the corporate segment to supply up to
10%. A new organic source for Mobily would be hosting an MVNO on its network benefitting from
incremental leasing revenues (to be operational by Q3-13 according to Al-Kaf ). Dominating the
majority of broadband users bodes well for Mobilys revenues providing a healthy growth trajectory.
Focusing on data, Bayanat Al-Oula is working on delivering optical fiber services (FTTX) to 250,000
buildings, i.e. covering 800,000 residential and commercial units in the Kingdom by the end of 2016.
We also note Mobilys announced collaboration with Etihad Atheeb Telecom to provide fixed voice
services to a number of commercial and residential projects. We have to admit though that STC
leads in this regard. Financially, Mobily runs a firm balance sheet with debt to equity ratio below
0.5x, with Al-Kaf ensuring sufficiency regarding further business financing needs. Mother company
ETISALAT has also revealed interest in taking a higher ownership stake in Mobily during several
occasions which we view positively given the material support it could offer.

Valuation: Assumptions & key downside risks

We raise our previous set forecasts for Mobily after exhibiting substantial growth in the data and
corporate segments. We forecast a 5-year revenue CAGR of 7.9% accompanied with a long-term
EBITDA margin of 35%. Despite that higher data revenues contribute positively to margins, we still
take into account the developing low-margin corporate segment, and higher competitive forces.
We assume continuous de-gearing, and an apparent progressive dividend policy greatly assisted by
the 5-year expected free cash flow CAGR of 9%.
Using the DDM methodology, we upgrade our fair value of Mobily from SAR 74.6/share to SAR 83.7/
share, offering an upside potential of 19% and hence our ACCUMULATE rating on the stock. According
to our estimates, Mobily trades at a PE12e and PE13e of 8.4x and 7.7x respectively, supplemented
with a 6.0% and 7.8% dividend yield, respectively for the mentioned periods. Mobily clearly offers a
very attractive risk/reward profile vs. its MENA peers that trade at much higher valuations.

Key downside risks to our valuation include:

-Destructive business environment post MVNO entrance.
-Prolonged spectrum issues in KSA delaying returns on LTE investments.
-Adverse regulatory amendments.
Table 2: Dividend Discount Model
2012e

2013e

2014e

2015e

2016e

2017e

Earnings Per Share (in SAR)

8.40

9.19

10.08

10.57

11.22

11.57

Dividend Payout Ratio (%)

51%

60%

64%

71%

71%

73%

Dividends Per Share (in SAR)

4.25

5.50

6.50

7.50

8.00

8.50

Present Value of DPS (in SAR)

26.5

Present Value of Terminal Value (in SAR)

57.2

Fair Value/Share (in SAR)

83.7

October 22, 2012

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

SAUDI TELECOM
Despite STCs extensive international portfolio, we still believe that its core Saudi asset remains
to lead its growth direction. Symptoms of domestic recovery were shown during the course of
the year, and according to our estimates we expect KSA revenues to provide 70% of 2012 total
revenues. The main growth driver of STCs Saudi unit is the fixed broadband segment of the market,
to which we mainly attribute the 5-year expected CAGR of 5.5%. The bundled services that STC
can provide to the Saudi audience place it at a distinctive comparative advantage to its local rivals.
STC is looking into delivering FTTH to 500,000 homes by the end of this year and go up to 2 mn in
2013. Regardless of the resignation of the CEO of international operations, STC still plans to boost
its international presence depending upon the opportunities available in the market. Compared
to other international MENA operators, STC is characterized to own minority stakes in its major
holdings endowing it a privilege to upgrade its ownership.
Internationally, we believe that Turk Telekoms fixed line performance will subdue growth arising
from mobile and ADSL and hence our conservative 5-year expected CAGR of 3.1%. Turk Telekom is
well-positioned to benefit from the growing broadband hype via AVEA, knowing that smart-phone
penetration level in Turkey is below 20% according to statistics. However, rapid migration from wireline to wireless services is negatively outweighing the final operational outcome of the company. It
is worth reiterating that fixed services (excluding ADSL) contribute up to 31% of total revenues. The
company is investing aggressively as AVEA requires an increased capacity in its backhaul network
to extend 3G coverage and prepare for LTE. Moving to the other continent, we positively view
the effort Maxis is putting into network sharing agreements starting with the U-mobile to share
RAN infrastructure for 3G and LTE networks and with REDtone for 2,600 MHz LTE spectrum. STCs
management is open to tower sharing agreements and suggested that it could potentially reduce
CAPEX and OPEX by up to 30% across its portfolio of assets.

Valuation: Assumptions & key downside risks

We raise our previous forecasts for STC projecting positive earnings growth for 2012 after profits were
down 18% in 2011. We predict revenues to grow at a 5-year CAGR of 5%, along with EBITDA margins
not breaching the 35% level, given STCs apparent commitment for high cost-discipline. STC has
high potential to expand its dividend payout however this is highly subjective to its expansionary
strategy. Despite that, we project a progressive dividend payout until an official announcement of
a certain M&A activity.
Using the DCF model, we attain a fair value of SAR 48.7/share for STC up from our previous SAR 38.2/
share implying an 17.3% upside potential and therefore our ACCUMULATE rating on the stock. STC
trades at a PE12e and PE13e of 9.0x and 7.9x, respectively, accompanied with a 4.8% and 7.2% 2012
and 2013 dividend yield, respectively.

Key downside risks to our valuation include:

-Weak demand on fixed broadband in Saudi Arabia.
-Prolonged spectrum issues in KSA delaying returns on LTE investments.
-Increased leverage due to expansion activities which puts higher dividend payout at risk.
-Adverse F/X fluctuations.
-Adverse regulatory changes in Saudi Arabia and the other subsidiaries.

October 22, 2012

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

Table 3: Discounted Cash Flow Model

(In mn of SAR unless otherwise stated)

2012e

2013e

2014e

2015e

2016e

2017e

Net Income

9,228

10,494

11,374

12,065

12,501

13,480

Other (including non-cash charges)

9,325

9,403

9,401

9,624

9,887

9,911

Less: Capex

(10,013)

(10,226)

(10,272)

(9,777)

(9,532)

(9,932)

Free Cash Flow to the Firm

8,540

9,672

10,503

11,913

12,856

13,459

Present Value of FCFFs

48,563

Present Value of Terminal Value

69,361

Intrinsic Value of the Firm

117,924

Less: Net Debt (as of Q2-12)

(20,609)

Intrinsic Value of Equity

97,315

Fair Value/share (in SAR)

October 22, 2012

48.7

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

PRO-FORMA FINANCIALS - ETIHAD ETISALAT

Income Statement (SAR million)
Revenues

2012e

2013e

2014e

2015e

2016e

23,701

25,948

28,301

30,499

32,748

EBITDA

7,455

8,532

9,289

10,132

10,827

11,626

EBITDA Margin

37.2%

36.0%

35.8%

35.8%

35.5%

35.5%

EBIT

5,306

6,082

6,657

7,280

7,673

8,147

EBIT Margin

26.5%

25.7%

25.7%

25.7%

25.2%

24.9%

Net Profit

5,084

5,877

6,432

7,056

7,399

7,853

EPS

7.26

8.40

9.19

10.08

10.57

11.22

DPS

3.25

4.25

5.50

6.50

7.50

8.00

Balance Sheet (SAR million)

2011

2012e

2013e

2014e

2015e

2016e

Cash and Cash Equivalents

1,690

2,371

2,288

1,866

2,320

3,297

Other Current Assets

8,203

9,866

10,803

11,782

12,741

13,680

Property, Plant, & Equipment (net)

16,412

18,639

20,689

22,614

24,108

25,418

Intangibles

9,665

9,134

8,603

8,072

7,541

7,010

Other Non-Current Assets

1,530

1,530

1,530

1,530

1,530

1,530

37,500

41,541

43,914

45,863

48,240

50,935

Total Assets
Dues to Banks

7,072

7,742

6,647

5,614

4,643

3,929

Other Liabilities

12,040

12,509

13,395

13,871

15,070

16,227

Total Shareholders' Equity

18,388

21,290

23,872

26,378

28,527

30,780

Total Liabilities & Shareholders' Equity

37,500

41,541

43,914

45,863

48,240

50,935

2011

2012e

2013e

2014e

2015e

2016e

9.7

8.4

7.7

7.0

6.7

6.3

4.6%

6.0%

7.8%

9.2%

10.6%

11.3%

Key Ratios
P/E (x)
Dividend Yield
P/B (x)

2.7

2.3

2.1

1.9

1.7

1.6

Sales Growth

25.2%

18.2%

9.5%

9.1%

7.8%

7.4%

EPS Growth

20.8%

15.6%

9.4%

9.7%

4.9%

6.1%

45%

51%

60%

64%

71%

71%

2.2

2.0

1.7

1.6

1.4

1.4

ROE

28%

28%

27%

27%

26%

26%

ROA

14%

14%

15%

15%

15%

15%

Capex/Sales

19%

18%

16%

15%

14%

13%

Net Debt/EBITDA (x)

0.72

0.63

0.47

0.37

0.21

0.05

Total Debt/Equity (x)

0.38

0.36

0.28

0.21

0.16

0.13

Payout Ratio
Dividend Cover (x)

October 22, 2012

2011
20,052

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

COMPANY UPDATE

PRO-FORMA FINANCIALS - SAUDI TELECOM

Income Statement (SAR million)

2011

2012e

2013e

2014e

2015e

2016e

Revenues

55,662

60,657

64,841

68,354

71,284

74,201

EBITDA

20,024

21,836

23,343

24,266

25,306

25,971

EBITDA Margin

36.0%

36.0%

36.0%

35.5%

35.5%

35.0%

EBIT

11,171

12,847

14,111

14,762

15,553

15,969

EBIT Margin

20.1%

21.2%

21.8%

21.6%

21.8%

21.5%

Net Profit

7,729

9,228

10,494

11,374

12,065

12,501

EPS

3.86

4.61

5.25

5.69

6.03

6.25

DPS

2.00

2.00

3.00

4.00

4.00

5.00

2011

2012e

2013e

2014e

2015e

2016e

Balance Sheet (SAR million)

Cash and Cash Equivalents

6,589

9,846

11,462

11,173

13,281

14,485

Other Current Assets

15,378

16,095

16,749

17,297

17,755

18,211

Property, Plant, & Equipment (net)

55,085

57,406

59,696

61,760

63,080

63,907

Intangibles

29,318

28,022

26,726

25,430

24,134

22,838

5,032

5,032

5,032

5,032

5,032

5,032

111,402

116,401

119,665

120,692

123,282

124,472

Dues to Banks

29,932

28,861

27,148

24,378

22,532

20,847

Other Liabilities

27,388

27,905

28,387

28,810

29,181

29,555

Other Non-Current Assets

Total Assets

Total Shareholders' Equity

Total Liabilities & Shareholders' Equity

Key Ratios

59,635

64,130

67,504

71,569

74,070

116,401

119,665

120,692

123,282

124,472

2016e

2011

2012e

2013e

2014e

2015e

P/E (x)

10.7

9.0

7.9

7.3

6.9

6.6

Dividend Yield

4.8%

4.8%

7.2%

9.6%

9.6%

12.0%

P/B (x)
Sales Growth
EPS Growth

October 22, 2012

54,082
111,402

1.8

1.6

1.5

1.4

1.4

1.3

7.5%

9.0%

6.9%

5.4%

4.3%

4.1%

-18.1%

19.4%

13.7%

8.4%

6.1%

3.6%

Payout Ratio

52%

43%

57%

70%

66%

80%

Dividend Cover (x)

1.93

2.31

1.75

1.42

1.51

1.25

ROE

16.5%

17.8%

18.9%

19.6%

19.7%

19.9%

ROA

6.9%

7.9%

8.8%

9.4%

9.8%

10.0%

Capex/Sales

12%

17%

16%

15%

14%

13%

Net Debt/EBITDA (x)

1.17

0.87

0.67

0.54

0.37

0.24

Total Debt/Equity (x)

0.55

0.48

0.42

0.36

0.31

0.28

10

EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

FAIR VALUE DEFINITION

RATING GUIDE

COMPANY UPDATE

It is an unbiased estimate of the 12-month potential market price of the stock

SELL
Downside

REDUCE
-30%

HOLD
-10%

ACCUMULATE
+10%

+30%

BUY
Upside

BUY: Upside potential in share price is more than 30%

ACCUMULATE: Upside potential in share price is between 10 and 30%
HOLD: Upside or downside potential in share price less than 10%
REDUCE: Downside potential in share price is between 10 and 30%
SELL: Downside potential in share price is more than 30%

ISSUER

Audi Saradar Investment Bank

Audi Saradar Investment Bank SAL Lebanese joint stock company with a registered capital of
10,000,000,000 Lebanese Pounds Commercial Registrar in Beirut: 30812 Holding number 33 on
the Central Banks Banks List.
Bank Audi Plaza Bab Idriss Beirut 2021 8102 Lebanon P.O. Box 11-2560 Beirut 1107 2808 Lebanon. Phone: +961 1 964072 Fax: +961 1 970403 Email: contactus@asib.com

October 22, 2012

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EQUITY RESEARCH
SAUDI TELECOM & ETIHAD ETISALAT

DISCLAIMER

COMPANY UPDATE

All rights reserved. This research document is prepared for the use of clients of Audi Saradar Investment Bank SAL and/or
clients of any entity within the Audi Saradar group.
This research document is disclosed to you on a confidential basis. Receipt and/or review of this research document
constitute your agreement not to copy, modify, redistribute, retransmit, or disclose to others the contents, opinions,
conclusion, or information contained in this document prior to public disclosure of the same by the Audi Saradar group or
without the express written consent of Audi Saradar Investment Bank SAL.
This material is not intended for dissemination, distribution to, or use by, any person or entity in any country or jurisdiction which
would subject Audi Saradar Investment Bank SAL or any entity within the Audi Saradar group, to any registration or licensing
requirements within these jurisdictions or where it might be considered as unlawful. Accordingly, this material is for distribution
solely in jurisdictions where permitted and to persons who may receive it without breaching any applicable legal or regulatory
requirements.
Your attention is drawn to the fact that you should not access this material if the regulations of your country of citizenship
and/or residency or any applicable regulations prohibit it. In any case, persons who are subject to any restrictions in any
country, such as US persons are not permitted to access information contained herein.
Neither the information, nor any opinion expressed herein constitute an offer or an invitation, or a recommendation to make
an offer, to buy or sell any securities or other investment products related to such securities or investments. This research
document provides general information only, is not intended to provide personal investment advice or recommendation
and does not take into account the specific investment objectives, financial situation and the particular needs of any specific
person who may receive it. Investors should seek financial, legal or tax advice regarding the appropriateness and suitability
in investing in any securities, other investment or investment strategies discussed or forecasted in this document.
The information herein was obtained from various public sources believed in good faith to be reliable but we do not
guarantee its accuracy nor completeness. Neither Audi Saradar Investment Bank SAL nor any entity within the Audi Saradar
group represent that the information contained in this document is complete, accurate or free from any error and make no
representations or warranties whatsoever as to the data, information and opinions provided herein.
This research document and any information, opinion, and prospect contained herein reflect a judgment at its original date
of publication by Audi Saradar Investment Bank SAL and are subject to change without notice. Audi Saradar Investment
Bank SAL and/or any entity within the Audi Saradar group may have issued, and may in the future issue, other research
documents that are inconsistent with, and reach different conclusions from, the information and opinions presented in
this research document. Those research documents reflect the different assumptions, views and analytical methods of the
analysts who prepared them; Audi Saradar Investment Bank SAL and the Audi Saradar group are under no obligation to
ensure that such other documents are brought to the attention of any recipient of this document.
Audi Saradar Investment Bank SAL, any entity within the Audi Saradar group, their officers and/or one or more of their
affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments. Audi
Saradar Investment Bank SAL and/or any entity within the Audi Saradar group may engage in securities transactions, on a
proprietary basis or otherwise, in a manner inconsistent with the view taken in this document. In addition, Audi Saradar
Investment Bank SAL, any entity within the Audi Saradar group and/or any of their strategists, analysts and sales staff, may
take a view that is inconsistent with that taken in this research report.

The price, value of and income from any of the securities or financial instruments mentioned in this document can
fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may
have a positive or adverse effect on the price or income of such securities or financial instruments. Any forecasts
on the economy, stock market, bond market or the economic trends of the markets are not necessarily a guide
to future returns. You should understand that statements regarding future prospects may not be realized. Past
performance should not be taken as an indication or guarantee of future performance, and no representation or
warranty, express or implied, is made regarding future returns. As a result of the preceding, you may lose, as the case
may be, the amount originally invested.
Audi Saradar Investment Bank SAL and any entity within the Audi Saradar group shall not be liable for any loss or
damages that may arise, directly or indirectly, from any use of the information contained in this research document
nor for any decision or investment made on the basis of information contained herein.

October 22, 2012

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