We revise down our target price on Global Telecom to EGP 4.20 from a previous EGP 5.18, updating our recommendation to REDUCE in the absence of clear prospects for the future. We believe the upside potential will remain highly sensitive to the unstable macroeconomic and political environments of the countries in which the subsidiaries operate, foreign exchange exposure risk, in addition to the ongoing regulatory restrictions on Algeria’s Djezzy. GTH endured a challenging year with unimpressive results. Revenues dropped 5% during 2013 to USD 3.4 billion with the average revenue per user falling at a higher pace than the 7% growth in total subscribers. Moreover, GTH recorded a USD 944 million loss compared to USD 225 million loss a year earlier, negatively affected by high foreign exchange losses, a one-time accelerated depreciation of USD 130 million in Pakistan, and a full impairment of the company’s assets in Canada amounting to USD 619 million due to market and regulatory challenges. Going forward, we expect GTH to register a loss of USD 41 million in 2014, mainly as a result of flat revenues with lack of strong indicators of growth.
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GTH – 2013 FY Update