Mena april 2010_final2

April 1, 2010

MENA - Telecoms Mobily Remains Our Top Pick

Following 2009 results, we have updated numbers for six of our MENA stocks. Our key changes include:

• Mobily remains our top pick; we lower our price target to SAR64.

• We upgrade Wataniya to Overweight, as we see a window of opportunity for the company to take market share in Algeria.

• We upgrade Maroc Telecom to Equal-weight and raise the price target to MAD161, driven by our change in price target methodology.

• Our price target for STC drops 33%, driven by a 15% cut to 2010 earnings and a lower target P/E of 9.3x. We maintain our Equal-weight, given low earnings visibility and lack of conviction.

• For mobinil, we re-introduce our price target of EGP219, as we now feel the probability of a successful tender by France Telecom is low.

Telecom Egypt: Downgrade to Underweight on potential for lower dividend – new price target of EGP15.4 suggests 9% downside. Despite the company’s strengths, we believe management’s new focus on becoming a total telecommunication provider in Egypt, through building a mobile business, means visibility on dividends will be low and execution risk high over the next 12-18 months. In addition, accelerating fixed to mobile substitution and risk of price pressure on wholesale business means we have cut our 2010 net income by 16% and 2011 by 24%. Risks we see to the upside include the company choosing to roll out a MVNO strategy, instead of pursuing its preferred choice of having its own mobile network, and a recovery in fixed line retail revenues.

Change in price target methodology. Across our EEMEA Telecom coverage, we are transitioning to a new target P/E approach – we now use a long run average 1-year forward P/E for the specific stock, based on FactSet consensus estimates. We think this better reflects the value the market is prepared to assign to telecom stocks, whereas previously we had set our target P/E at a country level, which did not fully reflect the market’s view of telecom as a sector.

Key Changes

Ratings

Old New

Wataniya Equal-weight Overweight

Maroc Telecom Underweight Equal-weight

Telecom Egypt Equal-weight Underweight

Price Target P/E EV/

EBITDA

FX Old New 2010e 2010e

Overweight

Mobily SAR 67 64 9.8x 7.5x

Wataniya KWf 1,900 1,950 9.5x 4.2x

Equal-weight

Maroc Telecom MAD 152 170 14.7x 8.1x

mobinil EGP NA 219 11.0x 5.0x

STC SAR 61 43 10.3x 6.2x

Underweight

Telecom Egypt EGP 22.5 15.4 9.9x 3.6x

Source: Morgan Stanley Research estimates

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Morgan Stanley & Co International plc (DIFC Branch)+

Sean Gardiner [email protected] +971 4 709 7120

Madhvendra Singh [email protected] +971 4 709 7122

OOO Morgan Stanley Bank+ Polina Ugryumova, CFA

M O R G A N S T A N L E Y R E S E A R C H M I D D L E E A S T & N O R T H A F R I C A

Industry View In-Line

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M O R G A N S T A N L E Y R E S E A R C H

April 1, 2010 MENA - Telecoms

Exhibit 1 MENA-Telecoms: Mobily is our top pick

27% 23%

7%2%

-9% -9%

(60.0)

(40.0)

(20.0)

0.0

20.0

40.0

60.0

80.0

100.0

Mobily Wataniya Maroc Telecom STC mobinil Telecom Egypt

CurrentPrice

Overweights Equal-weights Underweights

Source: Morgan Stanley Research estimates Exhibit 2 MENA-Telecoms: Table of comparables 2010e-11e Share Rating Price % Up M Cap P/E EV/EBITDA Divd yield (%)

FX Price Target Side USD 2010e 2011e 2010e 2011e 2010e 2011e Regional peers Du * AED 2.9 NA NA NA 3,126 27.1x 15.1x 11.5x 8.4x 0.2 0.7 Etisalat * AED 12.5 NA NA NA 24,460 9.5x 9.1x 6.4x 5.9x 5.4 5.9 Maroc Telecom MAD 159 EW 170 7 16,710 14.7x 13.8x 8.1x 8.0x 6.8 7.2 Mobily SAR 50.3 OW 64 27 9,380 9.8x 8.7x 7.5x 6.4x 4.0 5.2 mobinil EGP 215 EW 219 2 3,899 11.0x 10.0x 5.0x 4.5x 6.8 9.0 Oman Tel * OMR 1.3 NA NA NA 2,504 8.1x 8.4x 4.9x 5.1x 7.9 8.1 Orascom Telecom USD 5.1 EW NA NA 5,346 12.3x 10.0x 4.6x 4.1x 4.1 5.0 STC SAR 47.5 EW 43 -9 25,332 10.3x 10.2x 6.2x 6.0x 6.3 6.3 Telecom Egypt EGP 17.0 UW 15.4 -9 5,275 9.9x 10.0x 3.6x 3.2x 5.1 6.0 Wataniya KWf 1,580 OW 1,950 23 2,755 9.5x 8.6x 4.2x 3.6x 3.2 6.8 Average 12.2x 10.4x 6.2x 5.5x 5.0 6.0 Average exc Du 10.6x 9.9x 5.6x 5.2x 5.5 6.6 Source: Company data, Morgan Stanley Research estimates, * Based on FactSet Consensus estimates

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April 1, 2010 MENA – Telecoms

Mobily Remains Our Top Pick in the MENA Region; PT now SAR64 Exhibit 3 Mobily: Key financial summary 2009-12e SAR million 2009 2010e 2011e 2012e Revenues 13,058 14,939 15,813 16,481 % YoY change 21.0 14.4 5.8 4.2 EBITDA 4,837 5,576 6,251 6,567 margin % 37.0 37.3 39.5 39.8 Net Income 3,014 3,580 4,041 4,184 margin % 23.1 24.0 25.6 25.4 EPS 4.31 5.11 5.77 5.98 % YoY change 7.6 18.8 12.9 3.5 Capex 3,292 3,157 2,688 2,307 % of Sales 25.2 21.1 17.0 14.0 Subscribers 18200 19536 20406 20610 % YoY change 22.9 7.3 4.5 1.0 ARPUs 65.9 66.0 66.0 67.0 % YoY change -5.4 0.1 0.0 1.5 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We remain Overweight and maintain Mobily as one of our top picks in MENA; our price target moves to SAR64. A quick recap: We expect revenue growth of 14%, driven by HSPA and postpaid revenues. An improving revenue mix (more data and postpaid), as well as cost efficiencies, should help the EBITDA margin rise to 37.3% in 2010. Valuation is attractive, in our view, with the stock trading at 9.8x 2010 EPS (no tax means the EV/EBITDA multiple is high at 7.5x). Our price target for Mobily drops 4% due to a lower target P/E of 11.9x, from 13.5x previously.

Fine-tuning our forecasts for 1Q10 and 2010. Mobily says intense competition has continued into 1Q10 but added that it would maintain its focus on growing revenues. As a result, we forecast EBITDA margins will remain at 34% in 1Q10, and we estimate higher revenue growth – 20.4% YoY, compared to 13% earlier. Our net income forecasts increase by 3% to SAR675 million, driven by lower depreciation and finance costs expectations. For 2010, our revenue forecasts are now 3% higher at SAR14.9 billion, growing by 14% YoY, and our net income forecast rises by 4% to SAR3.58 billion – 19% growth over 2009.

Changes to our price target methodology. We now derive our target 2010 P/E for Mobily using its three-year average 1-year forward P/E of 11.9x, compared to 13.5x previously. We think this better reflects the value the market is prepared to assign to telecom stocks, whereas previously we had set our target P/E at a country level, which did not fully reflect the market’s view of telecom as a sector. Our price target is a

30% discount to our DCF fair value of SAR92; one catalyst to narrow the discount gap in the coming years is a higher dividend payout ratio from the 29% level in 2009.

Exhibit 4 Mobily: Deriving our price target of SAR64

Target Multiple Bear case Base case Bull case

NTM EPS SAR 7.9x 11.9x 13.8x

Bear case 4.27 34 51 59

Base case 5.37 42 64 74

Bull case 6.41 50 76 88Source: Company data, Morgan Stanley Research estimates

Exhibit 5 Mobily 3-year average 1 year fwd P/E is 11.9x

10.0x

3 Yr Avg, 11.9x

-1 STD, 9.4x

+1 STD, 14.5x

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0M

ar-0

7

May

-07

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7

Sep

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8

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fwd

P/E

Source: FactSet, Morgan Stanley Research

Dividend story is becoming more attractive. We expect Mobily’s capex to stabilize from 2010 onwards as the company completes its 3G and Wi-Max rollout. As a result, we estimate free cash flow will grow by a CAGR of 58% from 2009 to 2012. For 2010, we expect FCF to more than double to SAR2 billion from SAR933 million in 2009. Since Mobily is a subsidiary of Etisalat, we believe any expansion strategy outside Saudi Arabia could be carried out by the parent. If so, we would expect higher dividends as Mobily upstreams cash to fund this strategy. The dividend payout in 2009 was SAR1.25/share, implying a payout of 29%. We estimate Mobily could pay around SAR2/share in 2010, implying 39% payout and 4% dividend yield. The board is also exploring options for interim dividends, but has no concrete plans as of now. We estimate the company’s free cash flow could easily support a much higher dividend payout than its current 1.25/sh.

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Exhibit 6 We expect Mobily’s revenue growth to remain double-digit in 2010

8,440 10,795 13,058 14,939 15,813 16,481 17,146

34.9 35.1

37.037.3

39.539.8 40.0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2007 2008 2009 2010e 2011e 2012e 2013e

Revenues (SAR million)

32.0

33.0

34.0

35.0

36.0

37.0

38.0

39.0

40.0

41.0EBITDA Margin %

Revenue EBITDA Margin Source: Company data, Morgan Stanley Research estimates

Exhibit 7 …margins improvement driven by lower cost of sales and savings in G&A…

40.941.041.342.542.2

44.244.9

8.08.0

8.08.3

8.4

7.6

5.5

11.211.2

11.211.9

12.4

13.1

11.2

12.913.0

12.612.3

12.5

12.0

12.2

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2007 2008 2009 2010e 2011e 2012e 2013e

SAR million

71.0

72.0

73.0

74.0

75.0

76.0

77.0

78.0% of sales

D&A

G&A

Selling &Mktg

Cost ofSales

Totalexpenseas % ofSales

Source: Company data, Morgan Stanley Research estimates

Exhibit 8 …FCF to continue to grow strongly, giving further room to increase dividend payout from current 29%

277

593

953

1,995

3,184

4,1083,789

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2007 2008 2009 2010e 2011e 2012e 2013e

(SAR million)

0

10

20

30

40

50

60

70

80

90payout ratio

Free cash flow Dividend Pay-out Ratio Source: Company data, Morgan Stanley Research

Exhibit 9 Mobily: 1Q10 preview SAR million 1Q09 4Q09 1Q10e Revenues 2,810 3,537 3,383 % yoy change 21.8 13.8 20.4 EBITDA 908 1,520 1,150 EBITDA margin 32.3 43.0 34.0 Net Income 480 1,052 675 Net margin 17.1 29.7 20.0 EPS 0.69 1.50 0.96 % yoy change 10.0 1.0 40.6

Capex 908 906 575 % of Sales 32.3 25.6 17.0

Subscribers 15561 18200 18359 % yoy change 21.9 22.9 18.0 ARPUs 61.7 66.9 61.7 % yoy change -4.7 -6.4 0.0 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

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Wataniya: Window of Opportunity in Algeria; Upgrade to OW Exhibit 10 Wataniya: key financial summary 2009-12e KD ('000s) 2009 2010e 2011e 2012e Revenue 475,421 538,174 582,939 604,609 % YoY Chg -0.1 13.2 8.3 3.7 EBITDA 190,200 219,586 247,478 256,555 EBITDA margin % 40.0 40.8 42.5 42.4 Net profit 108,291 83,409 92,429 101,571 % YoY Chg 31.4 -23.0 10.8 9.9 Subscribers (000s) 15,151 17,956 18,803 19,453 % YoY Chg 38.6 18.5 4.7 3.5 Kuwait Revenue 203,313 213,578 226,713 233,991 % YoY Chg -10.3 5.0 6.1 3.2 EBITDA 95,800 101,450 108,148 110,450 EBITDA margin % 47.1 47.5 47.7 47.2 Subscribers (000s) 1,538 1,683 1,739 1,753 % YoY Chg 17.1 9.4 3.3 0.8 Tunisia Revenue 102,330 108,927 108,381 108,529 % YoY Chg 3.2 6.4 -0.5 0.1 EBITDA 55,200 58,444 57,067 56,928 EBITDA margin % 53.9 53.7 52.7 52.5 Subscribers (000s) 5,211 5,452 5,669 5,859 % YoY Chg 22.4 4.6 4.0 3.4 Algeria Revenues 141,443 180,821 206,689 215,955 % YoY Chg 8.4 27.8 14.3 4.5 EBITDA 46,500 62,142 76,475 79,903 % margin 32.9 34.4 37.0 37.0 Subscribers (000s) 8,003 10,300 10,704 11,063 % YoY Chg 56.5 28.7 3.9 3.4 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We upgrade Wataniya to Overweight and increase our price target by 3% to KWf1950. We have reduced our 2010 net income by 8% to KWD83 million, mostly driven by a lower EBITDA contribution from Kuwait and Algeria and higher income tax expenses. But 2011 looks very promising, in our view, as Wataniya benefits from a much higher subscriber base gained during 4Q09-1Q10. We believe low EBITDA margins of 31% seen in Algeria during 4Q09 will rise to 37% by 4Q10 and remain at 37% in 2011. As a result, we expect 2011 net income to increase by 11% to KWD92 million. We expect the group’s effective income tax rate to rise – Management reported that Algeria has turned profitable at a pre-tax level now, and Tunisia’s contribution to net profit is also increasing. Algeria has some deferred tax assets, so it will not affect the cash taxes for now, but it will still push up the group tax expense in the income statement. Our detailed calculations for income tax expenses indicate an increase of KWD7 million in total tax expenses. Our new price target of

KWf1950 is based on an 11.1x NTM base case EPS of KWf175. The stock trades on 9.5x 2010 EPS, a 15% discount to its peers.

Exhibit 11 Wataniya: Deriving our price target of KWf1950


NTM EPS KWf 7.3x 11.1x 12.9x

Bear case 135 1,000 1,510 1,750

Base case 175 1,290 1,950 2,260

Bull case 194 1,430 2,160 2,500 Source: Company data, Morgan Stanley Research

Exhibit 12 Wataniya is trading at 20% below its consensus long-run average P/E of 11.1x

8.9x

3 Yr Avg, 11.1x

-1 STD, 8.1x

+1 STD, 14.1x

0.0

2.0

4.0

6.0

8.0

10.0

12.0

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Jun-

07

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fwd

P/E

Source: FactSet, Morgan Stanley Research

Exhibit 13 Algeria: Wataniya’s revenues share gain to accelerate in 2010

63.5 60.6 62.2 62.7 58.3 55.6 54.6

10.6 12.9 16.1 20.0 21.7 21.3

14.9

0%

10%

20%

30%

40%

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100%

2006e 2007e 2008e 2009e 2010e 2011e

Rev

enue

sha

re (%

)

0.0

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2.0

2.5M

obile

as

% o

f GD

P

Orascom Algiers Telecom Wataniya % of GDP


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Algeria is the main driver of our higher revenue forecasts for the group. We estimate Nedjma (the Algerian operating company) will contribute 33.4% of the group revenues by 2010, up from 29.7% in 2009. Nedjma added more than 2 million subscribers in 4Q09, benefitting mostly from nationalistic sentiments after a controversial football match between Egypt and Algeria – Orascom Telecom, an Egyptian company, owns the number one operator in the Algerian mobile market – Djezzy. Wataniya says it ran an aggressive marketing campaign during the period, which helped it in consolidating its position against Djezzy.

The Algeria EBITDA margin should improve later in 2010, in our view. The company’s aggressive marketing resulted in margins coming under pressure in 4Q09 – 31% compared to the 35% we expected. Management has continued its marketing campaign in 1Q10, which should impact its margin further – we expect 31%, the same as 4Q09. But this will also help high subscriber growth to continue – we expect net adds of 866K for 1Q10 and 2.3 million for 2010. This should help revenue growth in 2010 and 2011 – we expect 28% and 14%, respectively. Structural improvement in EBITDA margins – as seen prior to 4Q09 – should return in the later quarters, 37% for 4Q10 and averaging 34.4% for 2010. As a result, we expect 2011 EBITDA margins to be 37% and EBITDA to grow by 23% to KWD76.5 million.

In Kuwait, we expect Wataniya to benefit from easy year-on-year comps after a tough 2009. Revenues were down 10% in 2009 due to the abolition of incoming call charges from the fixed-line network in 4Q08. This also impacted EBTIDA margins, which fell to 47%, compared to 53% in 2008. We expect ARPU dilution to continue in 2010, declining by 7%, but revenues should benefit from easier comps. We expect revenue growth to rebound to 5% and EBITDA margins to stabilize at ~47% level. Our 2010 EBITDA in Kuwait is now 2% lower, mainly due to the structural shift in the margins. One leg up to the margins could happen, in our

view, if mobile operators get their own international gateway, which is currently under control of Kuwait’s ministry of communications.

Tunisiana is doing well, but the launch of a third mobile operator, France Telecom, in 2H10 will increase competitive pressure, in our view. However, we believe France Telecom will gain market and revenue share mostly from state-owned incumbent Tunisie Telecom and that the impact on Tunisiana will be muted. Revenues in local currency grew by 6% in 2009, compared to 3% in reported currency. The decline in ARPUs was much milder in 2009, compared to a subscriber addition of almost a million. New competition could disrupt the smooth sailing of Tunisiana, nonetheless; hence, we have assumed a conservative 6% growth in revenues in 2010. We expect ARPUs in Tunisia to decrease by 3% in 2010 and forecast an EBITDA margin of 53.7%, slightly lower than 2009, as competition only launches in 2H10.

Exhibit 14 Algeria becoming more important market, expected to contribute 33% of revenues in 2010

Tunisia21%

Maldives2%

Saudi Arabia4%

Kuwait40%

Palestine0.2%

Algeria33%


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Maroc Telecom: New Price Target Methodology Suggests 7% Upside; Move to EW Exhibit 15 Maroc Telecom: Key financial summary 2009-12e Year to Dec - (MAD 'Millions) 2009e 2010e 2011e 2012e Revenues 30,339 31,234 32,158 32,938 % YoY Chg 2.9 2.9 3.0 2.4 EBITDA 18,201 18,183 18,773 19,164 EBITDA margin (%) 60.0 58.2 58.4 58.2 EBIT 14,008 14,165 15,294 15,898 EBIT margin (%) 46.2 45.4 47.6 48.3 Net income 9,403 9,440 10,185 10,522 EPS (MAD) 10.70 10.79 11.60 12.05 % YoY Chg -0.9 0.9 7.5 3.9 DPS (MAD) 10.31 10.79 11.60 12.05 Payout ratio (%) 96.4 100.0 100.0 100.0 Revenue drivers ARPUs 98 97 95 96 % YoY Chg (9.3) (1.9) (1.5) 0.6 Subscribers 19,602 20,849 21,747 22,416 % YoY Chg 14.1 6.4 4.3 3.1 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We upgrade Maroc Telecom to Equal-weight; our new price target of MAD170 is based on a target 15.2x NTM EPS and suggests 7% upside. We now use the same valuation methodology as for other MENA peers, i.e., based on its long-run average 1-year forward P/E of 15.2x compared to earlier based on a country level target P/E of 14.0x. Results in 2H09 were uninspiring after adjusting for the Sotelma acquisition. Organic revenues of MAD29.8 billion, up 1% YoY, were in-line with our estimates, and clean operating income of MAD13.6 billion was 3% ahead, mainly driven by some cost savings on payroll expenses – 3% lower than our estimate. For 2010, management is guiding for moderate growth in revenues and maintaining high profitability. We estimate revenue growth of 3% in 2010 and organic revenues growth of ~1%. Our new 2010 EBITDA estimate is 2.4% higher, mainly due to the Sotelma acquisition, implying a margin of 58.2% for 2010. Our 2010 net income, however, is 1% lower, due to higher depreciation expenses and an increase in the effective tax rate.

The stock is trading at a 2010 dividend yield of 7%, compared to 8% for the integrated peers. Maroc Telecom continues to pay out 100% of distributable net income. Our 2010 DPS is 1% lower now, due to the lower EPS. It is currently trading at 1-year forward FactSet consensus P/E of 14.1x, 7%

lower than its long-run average P/E of 15.2x (see Exhibit 17). Our price target implies a 6.3% target dividend yield for 2010.

Changes to our price target methodology. We now derive our target 2010 P/E for Maroc Telecom using its 5-year average 1-year forward P/E of 15.2x, compared to 14.0x previously. We think this better reflects the value the market is prepared to assign to telecom stocks, whereas previously we had set our target P/E at a country level, which did not fully reflect the market’s view of telecom as a sector. Our price target is a 37% premium to our DCF fair value of MAD124.

Exhibit 16 Maroc Telecom: Deriving our price target of MAD170


NTM EPS MAD 10.0x 15.2x 17.6x

Bear case 10.31 103 157 182

Base case 11.19 112 170 197

Bull case 11.54 116 175 204


Exhibit 17 Maroc Telecom is trading at 7% below its long-run average P/E of 15.2x

14.1x5 Yr Avg, 15.2x-1 STD, 13.4x

+1 STD, 17.0x

0.0

5.0

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25.0

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7

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Source: FactSet consensus, Morgan Stanley Research

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Saudi Telecom Co: Pressure on EPS Continues; Remain EW Exhibit 18 STC: Key financial summary 2009-12e 2009 2010e 2011e 2012e Revenue 50,750 52,445 53,521 54,301 % YoY Chg 6.9 3.3 2.1 1.5 EBITDA 20,607 21,420 21,859 22,446 EBITDA margin % 40.6 40.8 40.8 41.3 Net Income 10,822 9,180 9,283 9,891 Net Margin 21.3 17.5 17.3 18.2 EPS 5.41 4.59 4.64 4.95 % YoY Chg -2.0 -15.2 1.1 6.6 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We maintain our Equal-weight rating on STC, as visibility of earnings and our conviction remains low. We lower our price target to SAR43. Following a weaker than expected 2H09 – revenues were 3% and EBITDA 15% lower than our forecasts – we are cutting our 2010 EPS by 23%. We calculate that in Saudi Arabia, STC lost 800bps of mobile revenue share to both Zain KSA and Mobily. In addition, cost pressures for the group mounted, with the 2009 EBITDA margin falling to 40.6% vs. 45.2% in 2008. We continue to prefer Mobily over STC, as STC trades at an 5% premium to Mobily, and our new target P/E of 9.3x (10.1x previously) is a 21% discount to Mobily’s, based on the long-run average. Although we maintain our EW, in the short term, we would look to take profits on any signs of strength.

We expect Saudi Arabia revenues to be soft and that international will see FX tailwinds in 2010. Backing out reported and estimated revenues from STC’s key subsidiaries, we calculate that Saudi Arabian mobile revenues grew just 1% for the company in 2009. This compares to 21% growth for Mobily. We believe market share losses in the postpaid market to Mobily are STC’s biggest headwind for now. For 2010, we forecast another flat year of growth, implying another 500bps of revenue share loss. Internationally, we expect improved foreign exchange rates to flatter underlying growth – reported revenues are forecast to grow 3.3% compared to constant currency growth of 2.7%. We also expect both Turkey and South Africa to experience sizeable interconnect rate cuts – 50% and 20%, respectively, at the end of 1Q10.

Only slight room for EBITDA margin improvement in 2010. Saudi revenues remain under pressure and STC’s Kuwaiti business, Viva, is still ramping up. We forecast a group EBITDA margin of 41%, compared to 40.6% in 2009. The 50% cut in interconnect should help improve Turk Telekom’s mobile EBITDA margin, which was 41.1% in 2009, but this business accounts for only 5% of group revenues. Below

EBITDA, we expect depreciation to rise 15% as capex spend from 2009 filters through.

Changing our target P/E approach

Our price target drops 33% to SAR43. There are two drivers to our lower target. 1) We have lowered our net income for 2010 by 23% to SAR9.2 billion following a disappointing 2H09 where EBITDA was 15% below our expectations. 2) We now derive our target 2010 P/E for STC using its five-year average 1-year forward P/E of 9.3x. We think this better reflects the value the market is prepared to assign to telecom stocks. Previously, we had set our target P/E of 10.1x at a country level, which did not fully reflect the market’s view of telecom as a sector. Our price target is a 23% discount to our DCF fair value of SAR56. Exhibit 19 Deriving our price target of SAR43

Target Multiple Bear case Base case Bull case NTM EPS SAR 6.1x 9.3x 10.8x

Bear case 3.09 19 29 33 Base case 4.62 28 43 50 Bull case 5.84 36 54 63

Source: Morgan Stanley Research estimates Exhibit 20 STC – 1-year forward average P/E was 9.3x over the last three years

8.9x3 Yr Avg, 9.3x

-1 STD, 7.6x

+1 STD, 11.0x

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Sep

-09

Nov

-09

Jan-

10

1 yr

fwd

P/E


9



Exhibit 21 We expect dividends to remain flat into 2010, given pressure on net income…

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2008 2009 2010e 2011e 2012e0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Dividends % of Net income % of Face Value of shares Source: Company data, Morgan Stanley Research e = Morgan Stanley Research estimates

Exhibit 22 …but STC’s mobile revenue share is declining

79.573.9

66.558.9 53.8 52.3 52.0

20.526.1

32.0

33.433.6 33.4 33.4

0.0 0.0 1.57.7 12.6 14.4 14.6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2007 2008 2009 2010e 2011e 2012e

Saud

i Ara

bia

mob

ile re

venu

e sh

are

STC Mobily Zain Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

Exhibit 23 We expect Forex tailwinds to benefit group revenues in 2010…

47,469

50,750

2,219

3,038 1,357

52,441

1,975

334

44,000

45,000

46,000

47,000

48,000

49,000

50,000

51,000

52,000

53,000

54,000

2008 reported Organic Consolidationeffect

FX headwind 2009 reported Organic FX tailwind 2010 MS est


Exhibit 24 …But see net income declining again in 2010

12,847

9,670

8,3108,730 9,073

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2008 2009 2010e 2011e 2012e

SAR million

Clean net income

SAR2.6 billion drop in EBIT from lower margin and higher

D&A

Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

10



Mobinil: A Tough 2010 Ahead; Remain EW Exhibit 25 Mobinil: Key financial summary 2009-12e (EGP mn) 2,009 2010e 2011e 2012e Revenue 10,807 11,466 12,589 13,459 % YoY Chg 7.9 6.1 9.8 6.9 EBITDA 5,122 5,360 5,887 6,280 EBITDA margin % 47.4 46.7 46.8 46.7 Net income 1,834 1,940 2,122 2,325 net income margin % 17.0 16.9 16.9 17.3 Subscribers (000s) 25,354 28,645 29,655 31,091 % YoY Chg 26.0 13.0 3.5 4.8 ARPU 39 35 35 36 % YoY Chg -16.5 -10.8 0.7 2.7 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We maintain our Equal-weight on mobinil and reintroduce a price target of EGP219. We think the probability of a tender offer going ahead is low now, so we return to valuing mobinil on operations. The mobile environment in Egypt remains challenging, following intense competition in 2009. But mobinil proved resilient, losing just 50bps of revenue share to 43.6%, compared to Vodafone Egypt, which lost 260bps to Etisalat. We think mobinil will continue to fare better than Vodafone in 2010, and we forecast just 10bps revenue share loss to 43.5%. Mobinil has guided for 5% revenue growth in 2010, compared to 8% growth in 2009; we forecast 6% growth. We have cut our 2010 revenues and EBITDA for mobinil by 2% each. However, our 2010 net income increases by 1%, driven by lower depreciation and cheaper refinancing obtained in January 2010. Our operational fair value of EGP219 implies 2% upside from the current share price. The stock is trading at 11.0x 2010 EPS, inline with its peers.

Exhibit 26 Deriving our price target of EGP219


NTM EPS EGP 7.1x 10.7x 12.4x

Bear case 17.6 124 188 218

Base case 20.4 144 219 254

Bull case 25.6 181 274 318


Exhibit 27 Mobinil is trading at a 5% premium to its consensus long-run average P/E of 10.7x

11.2x5 Yr Avg, 10.7x

-1 STD, 8.7x

+1 STD, 12.6x

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan-

10

Mar

-10

1 yr

fwd

P/E


Dividends payout improved in 2H09. After paying just 23% of dividends in 1H09, mobinil announced a 2H09 dividend of EGP7.5 per share, implying a payout of 75% of distributable profit. We now expect a similar 75% payout for 2010, compared to 50% earlier. This implies an attractive dividend yield of 6.8% for 2010, compared to 5% for Telecom Egypt.

Exhibit 28 Mobinil: Dividend payout improved in 2H09 EGP million 2009 2010e 2011e 2012e 2013e Net Income 1,834 1,940 2,122 2,325 2,514 % YoY Chg 17.0 16.9 16.9 17.3 17.7 Dividends 932 1,458 1,910 2,092 2,262 DPS (EGP) 9.50 14.66 19.24 21.08 22.80 Pay out ratio 51.4 75.0 90.0 90.0 90.0 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We expect a tough 2010 for the telecom sector in Egypt

We expect telecom sector revenues in Egypt to grow by just 4% in 2010, compared to 14% growth in its nominal GDP, as estimated by the IMF. Fixed-line business is on a structural decline, down 2% over 2008, due to continued fixed to mobile substitution. The mobile segment, on the other hand, is facing intense price competition, mainly from Etisalat Misr. As a result, incumbents – mobinil and Vodafone Egypt together – could grow their revenues by just 5.5% in 2009, compared to 19% growth in 2008. Etisalat Misr plans to invest a further $1.5 billion, which should give it capacity close to mobinil,

11



suggesting this may not be the last round in a price war in Egypt.

Exhibit 29 Telecom revenues in Egypt to grow slower than nominal GDP

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2006 2007 2008 2009 2010e 2011e 2012e

Mob

ile re

venu

es (E

GP

mn)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

% o

f nom

inal

GD

P

Mobile Fixed % of nominal GDP Source: Company data, Morgan Stanley Research estimates

The mobile market in Egypt is also struggling, due to intense price competition. Mobile revenues in 2009 grew by just 9%, compared to 16% growth in nominal GDP, as estimated by the IMF. The mobile business in Egypt is facing three key issues currently, in our view.

1) Headline penetration touching 75%. Lower incremental revenues from new subscribers as mobile penetration has already reached 73%, albeit real penetration is somewhere close to 50%, in our view.

2) We expect price competition will continue to increase in 2010. Increased price competition could depress revenue growth in the short run as elasticity may lag before it compensates for loss in revenues. Etisalat Misr, on the other hand, is targeting to double its capital expenditure in next three years, taking cumulative capex to US$3 billion. This will give Etisalat a network similar to mobinil, but it has just 1/4th the subscriber base as mobinil currently, leaving it with significant unused capacity. This excess capacity will need to be filled, and the process starts with dropping prices in many cases. Furthermore, it will be difficult to see elasticity close to 100%, in our view.

3) Regulations discourage tariff differentiation between on-net and off-net traffic. New

interconnect rates methodology introduced by the telecom regulator in Egypt will make it more difficult for operators to differentiate between on-net and off-net tariffs, in our view. Now the regulator has set the interconnect rates to 65% of the on-net rates offered by the operator. In addition, Telecom Egypt is also trying to get a fourth mobile license. This would further increase competition and regulatory uncertainty surrounding it over the next 12-18 months, in our view. We expect mobile revenue growth to slow further in 2010, growing by just 6%.

Exhibit 30 Our base case assumes mobile revenue growth returns remain sluggish…

24.8

27.1

31.4

36.4

13.9

18.4

22.7

24.8

24.926.4

27.226.4

31.629.3

8.0

13.0

18.0

23.0

28.0

33.0

38.0

2006 2007 2008 2009 2010e 2011e 2012e

Mob

ile m

arke

t rev

enue

s (E

GP

bn)

Bull Base Bear Source: Company data, Morgan Stanley Research estimates

Exhibit 31 …and Etisalat Misr continues to take revenue share from mobinil and Vodafone Egypt…

45.7 44.5 44.1 43.6 43.5 43.0 42.6

54.3 54.0 51.0 48.4 47.1 45.5 44.1

0.0 1.5 4.9 8.1 9.4 11.5 13.2

0%

20%

40%

60%

80%

100%

2006 2007 2008 2009 2010e 2011e 2012e

Egyp

t mob

ile re

venu

e sh

are

mobinil Vodafone Egypt etisalat Misr Source: Company data, Morgan Stanley Research estimates

12



Telecom Egypt: Revised Strategy Could Mean Lower Dividends for now, Downgrade to UW Exhibit 32 Telecom Egypt: Key financial summary 2009-12e (EGP million) 2009 2010e 2011e 2012e Revenue 9,960 9,911 9,441 9,352 % YoY Chg -1.5 -0.5 -4.7 -0.9 EBITDA 4,683 4,542 4,301 4,153 EBITDA margin % 47.0 45.8 45.6 44.4 Net income 2,904 2,947 2,900 3,036 % margin 29.2 29.7 30.7 32.5 Fixed Revenues Access 2,049 1,814 1,766 1,735 Voice 2,618 2,267 2,161 2,080 Internet and Data 649 741 763 722 Wholesale 4,197 4,686 4,360 4,431 ARPL reported 54.1 56.7 56.5 55.6

Subscribers - Fixed Line Total 9,554 9,474 9,624 9,724 Net Adds -2,149 -80 150 100 Vodafone Egypt Revenue 11,991 13,111 14,012 14,619 % YoY Chg 3.6 9.3 6.9 4.3 Mobile Subscribers 23,325 26,302 28,116 29,459 EBITDA 6,008 6,424 6,796 7,017 EBITDA margin % 50.1 49.0 48.5 48.0 Net income 3,215 3,300 3,523 3,674 % margin 26.8 25.2 25.1 25.1 ARPUs 46 42 41 41 MoU 149 147 153 159 Source: Company data, Morgan Stanley Research; E = Morgan Stanley Research estimates

We downgrade Telecom Egypt to Underweight and lower our price target. Although we highlight Telecom Egypt’s strong reputation and capable management team, we believe its revised strategy could mean a lower dividend for now, due to pressure on the fixed line business and potential investment in the new mobile business. We therefore downgrade to Underweight and lower our PT by 31% to EGP15.4

Telecom Egypt has announced steps to become a total telecom provider in its home market, Egypt. As a result, it is actively pursing an entry into the mobile market, through either a greenfield license, its preferred option, or as a virtual network operator/reseller. We see a risk the new strategy could pressure dividends, as well as free cash flow. In addition, we are lowering our EBITDA forecasts for 2010 by 16% and net income by 16% as a result of faster-than-expected deterioration in fixed line revenues in 4Q09 and weaker-than-expected guidance for 2010 (revenue flat to down 2%, EBITDA margin in the mid-40s and capex between EGP1.5-2.0 billion).

Our price target falls to EGP15.4, suggesting 10% downside to the current share price. Our price target

reduction is driven by our new target P/E of 9.0x NTM EPS of EGP1.71, compared to 10.4x 2010 EPS earlier. The stock is trading on a free cash flow yield of 8% for 2010, and we expect this to improve to 12% in 2011 after a capex hump from finishing off the TE North project. However, we think the structural challenges that management has identified – the need for a total telecom provider solution in Egypt – could pressure dividends for the next few years. We forecast a dividend yield for 2010 of 5% and for 2011 of 6%. Accordingly, we downgrade the stock to Underweight. We believe our top picks – Mobily and Wataniya in MENA and Turk Telecom, Safaricom and MTS in broader EEMEA – offer on average 23% upside potential.

Deriving our EGP15.4 price target – target P/E of 9.0x and NTM EPS of EGP1.71. Historically Telecom Egypt has traded on 10.0x 1-year forward EPS, implying an expected earnings yield of 10%. But we think Telecom Egypt’s revised strategy to build out a mobile business in Egypt warrants a discount to reflect the lower dividend potential of the group. As a result, we apply a 10% discount to the historical multiple when setting our target P/E of 9.0x.

Exhibit 33 Telecom Egypt’s 4-year average P/E is 10.0x

9.2x4 Yr Avg, 10.0x

-1 STD, 8.3x

+1 STD, 11.7x

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan-

10

Mar

-10

1 yr

fwd

P/E


Exhibit 34 Deriving our price target of EGP15.4


NTM EPS EGP 5.9x 9.0x 10.4x

Bear case 1.11 6.6 10.0 11.5

Base case 1.71 10.2 15.4 17.9

Bull case 1.91 11.3 17.2 19.9Source: Company data, Morgan Stanley Research estimates

13



Where could we be wrong

Risks to our Underweight rating include the company choosing to roll out a MVNO strategy instead of pursuing its preferred choice of having its own mobile network, as well as a recovery in fixed line retail revenues. Rolling out an MVNO strategy would require much less cash for the license fees – generally much lower than a full mobile license, and associated capex.

Mobile business – a must for Telecom Egypt, according to management

Fixed-line business is on a structural decline. The decline in fixed-line voice revenues accelerated in 2009, down 13% compared to a 5% decline in 2008. In 4Q09, voice revenues actually declined by 35%, compared to 4Q08, mainly due to its 50% lower new fixed to mobile calling rates and promotions on domestic long distance calls. Total retail revenues in 2009 declined by 7% in 2009, despite a 13% increase in Internet and data revenues. The retail business still forms about 58% of group revenues, so despite the wholesale business showing moderate growth of 7% in 2009, group revenues declined by 1.5%. The decline in fixed-line revenues is structural and very difficult to reverse, as we have seen in the cases of European operators (see Exhibit 35 and Exhibit 36). Telecom Egypt has guided for flat to -2% growth in revenues in 2010, including contributions from TE North. This implies a 500-600bps decline in the organic revenues in 2010.

Exhibit 35 Deutsche Telecom: Germany fixed voice and access revenues on decline but Internet still growing…

0

2,000

4,000

6,000

8,000

10,000

12,000

2003 2004 2005 2006 2007 2008 2009e 2010e

Voice & Access revenues Internet Source: Company data, Morgan Stanley Research estimates

Exhibit 36 France Telecom: France fixed revenues faced a similar trend

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2002 2003 2004 2005 2006 2007 2008 2009e 2010e

Voice & Access revenues Internet Source: Company data, Morgan Stanley Research estimates

Declining traditional revenue base leaves Telecom Egypt with few options but to pursue a mobile license, in our view. We see four ways it can go “mobile”:

1. A bundled deal with Vodafone Egypt. Telecom Egypt’s existing 45% stake in Vodafone Egypt should have put it in a good position to offer bundled mobile and fixed products in conjunction with Vodafone Egypt, in our view. Management has not confirmed pursuing this option, but its attempts to seek 4th mobile license suggest it was not able to strike such a deal.

2. An MVNO license. Management did not rule out the option of getting an MVNO license, rather than going for a full mobile license. This would enable it to become a total telecom provider without incurring any significant cost/ investment. But the pricing structure of an MVNO could limit its ability to compete effectively, in our view, which would not serve Telecom Egypt’s main objective to go mobile.

3. Acquire a controlling stake in an existing mobile operator. Telecom Egypt has expressed its desire to acquire a controlling stake in a mobile operator but has not been successful so far. Acquiring an existing operation could prove the best solution to Telecom Egypt’s quest to go mobile, as it could provide a ready network and lower risk of execution, in our view. But in Egypt, none of the existing mobile players have indicated interest in selling down their stakes. And, while Telecom Egypt owns 45% of Vodafone Egypt, the other 55% is owned by Vodafone Group whose strategy is to control its operations. As a result, we assign little

14



probability to Vodafone being willing to sell down its stake to below 50%.

4. Fourth mobile license. Management has said it is exploring the possibility of obtaining a 4th mobile license in its home market – Egypt. According to management, Etisalat’s license condition states that no new GSM/3G license can be issued before 3Q11 for a price less than what Etisalat paid for its license, i.e., $2.9 billion. Telecom Egypt has said it is not willing to pay a similar price for the mobile license. Management has kept its options open in terms of class of license, and it may look for only an LTE spectrum license where it sees no constraint on frequency, and it could be cheaper to get the license, as well. The company could then apply for a GSM/mobile license once Etisalat’s license conditions expire.

Fourth mobile license Spike in capex decrease in FCF further uncertainty over dividends

We believe an important concern for investors is the possibility of a further cut in dividends as Telecom Egypt builds out mobile coverage, if it is successful in obtaining a fourth mobile license. In November 2009, Etisalat – the number 3 mobile operator – said it has spent US$1.46 billion on rolling out its network since entering the market in 2007. In addition, Etisalat has said it plans to spend a further US$1.5 billion over the next three years. For Telecom Egypt, we would expect some savings to materialize from its already installed telecom infrastructure base – both fixed as well as CDMA wireless local loop. As a result, our sensitivity modeling for dividends assumes it spends just 75% of Etisalat’s spend to date, or ~EGP6 billion.

Exhibit 37 details the impact on FCF for the group. One option to fund the mobile network capex and license fees would be to dispose of its 45% stake in Vodafone Egypt. Management says there is no legal requirement for such a disposal, and has stated no plan to do so, but we think it would not make sense for the company to retain ownership in two competing assets over time. In terms of potential proceeds, if we use a similar valuation to that of its listed Egyptian market peer, Mobinil, at 5.1x 2010 EBITDA, we calculate an inflow of up to EGP15 billion.

Exhibit 37 Our analysis indicates Telecom Egypt could see a funding gap by 2011 if awarded a mobile license…

1,667

2,344

3,461

844

1,435

1,860

3,914 1,1331,688

2,954

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Cas

h 20

09

OC

F

Reg

. Cap

ex

Mob

Cap

ex

09 D

iv P

ayou

t

Cas

h 20

10

OC

F

Reg

. Cap

ex

Mob

Cap

ex

Cas

h 20

11

Source: Company data, Morgan Stanley Research

Exhibit 38 …and may result in more cuts in dividends…

1,291 1,860 2,367 1,435 1,612 1,886

73.0

87.4

44.1

60.0 60.0

50.0

0

500

1,000

1,500

2,000

2,500

2007 2008 2009 2010e 2011e 2012e0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Dividends % Payout Source: Company data, Morgan Stanley Research estimates

Exhibit 39 …but low leverage gives ample room to raise debt

0.0x0.1x

-1.9x

-0.3x

-1.2x

-0.6x

-2.0x

-1.5x

-1.0x

-0.5x

0.0x

0.5x

2007 2008 2009 2010e 2011e 2012e

Net Debt to EBITDA Source: Company data, Morgan Stanley Research estimates

15



Risk Reward Snapshots

16



Etihad Etisalat (Mobily, 7020.SE) Overweight PT SAR64 Exciting bull case supports Overweight rating

SAR64.00 (+27%)SAR 50.50

SAR34 (-33%)

SAR88 (+74%)

0

10

20

30

40

50

60

70

80

90

100

Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11

SAR

Price Target (Mar-11) Historical Stock Performance Current Stock Price Source: FactSet (historical share price data), Morgan Stanley Research estimates

Price target Target P/E Scenario Intrinsic value*

Bull Case SAR 88

13.8x 2010 bull case EPS of SAR6.41

Zain fails to capture market attention, helping Mobily to increase its revenue share to 34%. ARPU grow by 3% in 2010 to SAR68; EBITDA margin rises to 39.3%.

Base Case SAR 64

11.9x NTM base case EPS of SAR5.37

Competition remains intense, but rational. We assume Zain KSA gains 500bps of revenue share in 2009. As a result, we expect Mobily’s revenue growth to slow from 28% in 2008 to 14% in 2010. EBITDA margin improves to 37.3%; long-term EBITDA margin rises to 40%.

SAR 92

Bear Case SAR 34

7.9x NTM bear case EPS of SAR4.27

Competitive price war in Saudi Arabia, with increased focus on quality of service. 2010 ARPU drops 7% for Mobily. EBITDA margin also comes under pressure as advertising and promotional spend increases; margins drop to 35% in 2010. We assume the value destroyed during the 2009 price war is not recovered.

* Intrinsic value based on our sum-of-the-parts DCF using a WACC of 9.2% and average terminal growth rate of 3.0%

Drivers for revenue growth in 2009/10

4.8

3.1

3.4

11.2

Other, -1.6

4.4

1.50.4

5.9

2.2

Total, 21.0

Total, 14.4

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

2009e 2010e

% re

venu

e gr

owth

HSPA Other data Roaming Postpaid Other Total Source: Morgan Stanley Research estimates

Why Overweight?

• Best bet on Saudi mobile growth, in our view: Well positioned to be a winner in the fight for revenue share in Saudi Arabia. Mobily remains one of our top picks in the MENA region.

• Valuations attractive: Mobily trades on 2010e EPS of 9.8x, a discount of ~5% vs the 10.3x for STC. We believe a ~25% premium is justified due to a simpler business model and better execution. A lower cost of capital around 5.7% should also support our case for 11.9x target P/E, which is a 9% premium over EMEA peers.

• More room for margin improvements due to higher share of broadband and postpaid revenues in the mix, and cost efficiencies.

• Bayanat acquisition in 2008 gives company access to data market and its own transmission network.

Key Value Drivers • Elasticity of mobile to help support ARPU

during periods of price pressure.

• EBITDA margin expansion from increased scale, new and more profitable revenue streams (such as data), and cost efficiencies.

Potential Risks • Irrational competition in Saudi Arabian

market, especially in Broadband market.

• Potential for de-rating in Saudi Arabian stock market.

Catalysts • Potential for higher dividends, FCF

generated by Mobily can support a much higher payout ratio compared to 40% now.

17



NMTC/Wataniya (NMTC.KW) Overweight, PT KWf1950 Kuwait customer stickiness; Algeria margin hits target

KWD1.95 (+23%)

KWD 1.58

KWD1.00 (-37%)

KWD2.50 (+58%)

0.00

0.50

1.00

1.50

2.00

2.50

3.00


KWD

Price Target (Mar-11) Historical Stock Performance Current Stock Price

What’s Changed Price Target

Target P/E Scenario Intrinsic Value**

Bull Case KWf2500

12.9x bull case NTM EPS of KWD194

Competition in Kuwait benign. Kuwait market share drops less rapidly to 42% in 2010. In Algeria, market share increases to 32% and EBITDA margins expand to 39% by 2011.

Base Case KWf1950

11.1x base case NTM EPS of KWD175

Kuwait market share drops to 38% in 2010. Algeria market share rises slightly to 24% and margins expand to 37% by 2010. KWf2800

Bear Case KWf1000

7.3x bear case NTM EPS of KWf135

Higher competition in Kuwait reduces market share to 36.6% by 2011. For Algeria, we forecast flat market share at 25% and EBITDA margins of 33% in the longer term.

** Intrinsic value based on our sum-of-the-parts DCF using a WACC of 11.3% and average terminal growth rate of 2.4%

Target multiples and key assumptions, 2010-11e 2010e 2011e

Bear Base Bull Bear Base Bull Target multiples P/E 7.2x 11.7x 13.7x 7.5x 10.6x 12.2x EV/EBITDA 2.1x 4.1x 5.2x 1.8x 3.5x 4.4x Dividend yield (%) 4.2 2.6 2.2 7.9 5.5 4.8 Key operating matrix Revenues (KWD mns) 514 538 546 531 583 598 YoY change (%) 8.2 13.2 14.9 3.3 8.3 9.6 EBITDA (KWD mns) 203 220 229 214 247 261 EBITDA margin 39.6 40.8 42.0 40.3 42.5 43.7 EPS (KWf) 138 165 182 133 183 205 DPS (KWf) 42 50 55 78 108 120 Source: Morgan Stanley Research estimates

Why Overweight?

• We believe 2011 looks very promising. We expect Wataniya to benefit from a much higher subscriber base gained during 4Q09-1Q10.

• We foresee further subscriber growth from under-penetrated markets and EBITDA margin expansion, as key markets such as Algeria gain scale.

• Customer stickiness in Kuwait should help protect the subscriber base.

• Scale benefits from Qtel acquisition, including access to cheap debt and consolidated purchasing agreements.

• Valuation is not demanding at 9.5x 2010 EPS, compared to 10.9x for EEMEA peers.

Potential Risks • Competition getting tougher in Kuwait

as Viva tries to increase its presence in the market.

• Lack of interconnection framework continues in Kuwait, resulting in continued decline in mobile ARPUs.

Key Value Drivers • Market share in Algeria as the

operations gain scale.

• Customer stickiness in Kuwait.

18



Maroc Telecom (IAM.CS) Equal-weight, PT MAD170Resilient market share supports our base case

MAD170.00 (+7%)MAD 159

MAD103 (-35%)

MAD204 (+28%)

0

50

100

150

200

250


MAD


What’s Changed

Price Target Target P/E Scenario

Intrinsic Value**

Bull Case MAD204

17.6x bull case NTM EPS of MAD11.54

Gears up the balance sheet to 50% leading to reduced WACC%. Competition is ineffective and it maintains mobile market share at 65% and EBITDA margins at 58% and stable increase in ARPUs to MAD114 by 2013.

Base Case MAD170

15.2x base case NTM EPS of MAD11.19

Competition continues to be ineffective. Maroc Telecom sees a slight reduction in its mobile market share from 64% at 2008 to 59% in 2013. Some pressure on ARPUs takes it to MAD 101 by 2013. EBITDA margin down to 57%.

MAD124

Bear Case MAD103

10.0x bear case NTM EPS of MAD10.31

Increased pressure on ARPUs and EBITDA margins leads to a decline to MAD90 and 55% respectively by 2013. Market share drops to 54% by 2017.

** Intrinsic value based on our sum-of-the-parts DCF using a WACC of 12.1% and average terminal growth rate of 2.3%

Target multiples and key assumptions, 2010e-11e 2010e 2011e

Bear Base Bull Bear Base Bull

Target multiples P/E 10.3x 15.8x 18.3x 9.8x 14.6x 17.0x EV/EBITDA 5.6x 8.5x 9.8x 5.5x 8.2x 9.6x Dividend yield (%) 9.7 6.3 5.5 10.3 6.8 5.9 Key operating matrix Revenues (MAD mn) 30,674 31,234 31,375 31,029 32,158 32,266 YoY change (%) 1.1 2.9 0.5 1.2 3.0 2.8 EBITDA (MAD mn) 17,216 18,183 18,631 17,461 18,773 19,236 EBITDA margin 56.1 58.2 59.4 56.3 58.4 59.6 EPS (MAD) 10.0 10.8 11.1 10.6 11.6 11.9 DPS (MAD) 10.0 10.8 11.1 10.6 11.6 11.9 Source: Morgan Stanley Research estimates

Why Equal-weight? • Our new price target methodology

suggests just 7% upside from current levels.

• Valuation unattractive: Our Equal-weight rating is a relative call. The stock is trading at a dividend yield of 6.8%, below the peer group average of 7.9%, but below its long run average 1 year forward P/E of 15.2x.

• Increased risk aversion could lead to a de-rating of the stock in the medium term.

Key Value Drivers • Muted impact from competition:

despite new entrants to the market, Maroc Telecom has shown resilient ARPUs and revenue share.

• Continued 100% dividend payout and 2010e dividend of MAD10.8; we see a possibility for a special dividend of up to ~MAD6 per share.

• Stabilised fixed line customer base, increasing broadband revenues.

• Still room for growth in the subscriber base, with mobile penetration at 70%.

Potential Catalysts • Possible special dividend payment of

MAD6. • Announcement of further

acquisitions.

Key Risks • 3rd license in 2G category. • Further regulatory restrictions on

promotions. • Success in integrating and turning

around acquired businesses.

19



Saudi Telecom Company (STC, 7010.SA) EW, PT SAR 43 Weak 2009 results and low visibility drive our EW rating

SAR43.00 (-9%)

SAR 47.50

SAR29 (-39%)

SAR63 (+33%)

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SAR

Price Target (Mar-11) Historical Stock Performance Current Stock Price Source: FactSet (historical share price data), Morgan Stanley Research estimates

Price Target

Target P/E Scenario Intrinsic Value**

Bull Case SAR 63

10.8x bull case NTM EPS of SAR 5.84

Zain fails to capture market attention, leading to a more benign competitive environment. Saudi Arabian mobile market remains rational and ARPU for STC is down 4% in 2009-10, rising to 97 by 2012. EBITDA margin rises to 44% for Saudi Arabia.

Base Case SAR 43

9.3x base case NTM EPS of SAR 4.62

Competition remains intense, but rational. We assume Zain KSA gains 500bps of revenue share in 2010. As a result, we expect STC’s Saudi mobile revenue growth to remain flattish in 2010. Group EBITDA margins are flattish at 41%; long-term group EBITDA margin rises to 42%.

SAR 56

Bear Case SAR 29

9.3x bear case NTM EPS of SAR 3.09

Competitive price war in KSA with increased focus on quality of service. 2009 Saudi ARPU drops 21% for STC and its market share falls to 46%. EBITDA margins also come under pressure as advertising and promotional spend increases; group margins drop to 44% in 2009. We assume the currencies in the international businesses drop a further 20% versus the US dollar.

** Intrinsic value based on our sum-of-the-parts DCF using a WACC of 10.7% and average terminal growth of 1.1%.

Summary target multiples 2010e 2011e

Bear Base Bull Bear Base Bull

Target multiples P/E 8.2x 9.4x 11.1x 10.8x 9.2x 10.5x EV/EBITDA 4.4x 5.2x 6.4x 4.7x 5.0x 6.1x Dividend yield (%) 8.0 7.0 5.9 7.6 8.9 7.9 Key operating matrix (SAR mn) Revenues 49,118 52,445 53,167 48,101 53,521 55,753 % YoY Chg -3.0 3.3 5.0 -2.1 2.1 4.9 EBITDA 18,810 21,420 23,634 17,385 21,859 24,741 EBITDA margin 38.3 40.8 44.5 36.1 40.8 44.4 EPS (SAR) 3.51 4.59 5.66 2.65 4.64 6.02 DPS (SAR) 2.30 3.00 3.70 2.19 3.84 4.98 Source: Company data, Morgan Stanley Research

Why Equal-weight?

• STC is facing increasing competition in its home market, which could put pressure on revenue growth and profitability. 2009 results were weak, reflecting the challenges faced by the company.

• Visibility on some items is low – such as Binariang operating results – and volatility on items below EBIT has been high in recent years.

• Acquisitions will support growth, but we see risk of overpayment and, in the short term, associated currency risk.

• Valuation is not attractive at 10.3x 2010 EPS, and the stock trades at a 5% premium to Mobily; we think a 20-25% discount – in line with its historic average – would be more appropriate.

Key Value Drivers • ARPU

• Mobile revenue share – we expect this to decline for STC

• EBITDA margin

Potential Risks • Competitive environment becomes

irrational, leading to a full-scale price war. This would lower our intrinsic fair value to ~SAR 29.

• Further currency devaluation in its key investee markets – Turkey, South Africa and Malaysia; our bear case assumes a 20% decline.

20



Mobinil (EMOB.CA), Equal-weight, EGP219

Unattractive risk-reward, funding shortfall could pressure dividend

EGP219.00 (+2%)

EGP 215EGP188 (-13%)

EGP318 (+48%)

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EGP


Price target

Target P/E

Scenario

Intrinsic value *

Operational Bull Case EGP318

12.4x 2010 NTM bull case EPS of EGP25.6

Margins expand further to go back to pre 2006 levels; we assume ~51%. ARPUs decline is not very steep and remains stable ~EGP35-36 level. Market share remains robust at 46% in 2010.

Base Case EGP219

10.7x 2010 NTM base case EPS of EGP20.4

Market share drops 4%; margin pressure. Etisalat gains 27% market share longer term. This is below the company’s guidance of 30% by 2011, but we feel it is justified as it is based on ‘quality’ subscribers rather than just adding multiple SIMs to the market and diluting its ARPU. EBITDA margins remain stable in the medium term.

EGP260

Bear Case EGP188

10.7x NTM bear case EPS of EGP17.6

Short-term margin pressure to defend market share. EBITDA margins drops to 44% in 2013 – similar to Orascom Telecom’s experience in Algeria and Pakistan, where it used margins to protect its market share. Longer term, we assume that the EBITDA margin remains at 44% (versus 47% in our base case).

* Intrinsic value base on our sum of the parts DCF using a WACC of 15% and average terminal growth rate of 2.8%

Target multiples and key assumptions, 2009-10e 2009e 2010e Bear Base Bull Bear Base Bull Target multiples P/E 11.1x 11.2x 13.1x 10.3x 10.2x 11.8x EV/EBITDA 4.8x 5.0x 6.1x 4.8x 4.6x 6.1x Dividend yield (%) 6.8 6.7 5.7 8.7 8.8 7.7 Key operating matrix Revenues 11,459 11,466 11,849 12,450 12,589 13,139 YoY change (%) 6.0 6.1 7.3 8.6 9.8 10.9 EBITDA 5,013 5,360 6,013 5,013 5,887 6,013 EBITDA margin 43.7 46.7 50.7 40.3 46.8 45.8 EPS (EGP) 17.0 19.5 24.3 18.2 21.4 27.0 DPS (EGP) 12.8 14.7 18.2 16.4 19.2 24.3

Source: Morgan Stanley Research estimates, EPS is adjusted for forex and other one off

Why Equal-weight? • The stock should trade on operations

as the probability of a tender offer is low now, in our view.

• Our fair value for the stock is EGP219, which suggests just 2% upside from current levels.

• The company raised the dividends in 2H09 to 75% of net income. We expect a similar dividend for 2010, implying a 6% dividend yield.

• We find better investment opportunities in Mobily and Wataniya. In addition, we see a risk to the dividend from upcoming 3G license payments.

Key Value Drivers • Mobinil offers pure play exposure to

growth opportunity in Egypt. Low current usage levels suggest potential upside.

• Rising mobile penetration. Egyptian penetration is just ~73% and will benefit from falling equipment prices and increased competition; we forecast 100% by 2017.

Potential Catalysts • Announcement of secured funding for

2010 requirements.

21



Telecom Egypt (ETEL.CA) Underweight, PT EGP15.4 Tariff rebalancing supports base case

EGP15.40 (-9%)

EGP 17.01

EGP10.0 (-41%)

EGP19.9 (+17%)

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EGP


Price Target Target P/E Scenario

Intrinsic Value**

Bull Case EGP20

10.4x bull case NTM EPS of EGP1.91

Fixed revenues stop declining in 2010; mobile competition benign. Subscriber net adds turn positive in 2011 onwards. Vodafone Egypt achieves a stable EBITDA margin in the longer term from lower-than-expected levels of competition.

Base Case EGP15.4

9.0x base case NTM EPS of EGP1.71

2010 Fixed revenues continue the decline seen in 2009, Dividends remain under pressure in 2010 as Telecom Egypt pursues its mobile strategy. Vodafone Egypt loses 3% revenue share in 2009-2011. Group revenues decline 0.5% in 2009; EBITDA margin 46% in 2010.

EGP19

Bear Case EGP10.0

9.0x bear case NTM EPS of EGP1.11

Subscriber loss continues in fixed segment; Mobile competition intense. Telecom Egypt loses 180K additional subscribers in 2010 ; its mobile market share drops to 36% (41% in our base case) as Etisalat achieves its target of 30% market share.

** Intrinsic value base on our sum-of-the-parts DCF using a WACC of 14.5% and average terminal growth rate of 2.4%

Target multiples and key assumptions, 2010-11e

2010e 2011e

Bear Base Bull Bear Base Bull Target multiples P/E 8.4x 8.9x 10.5x 9.6x 9.1x 10.4x EV/EBITDA 3.8x 5.2x 6.6x 3.3x 4.9x 6.3x Dividend yield (%) 5.9 5.6 4.8 6.2 6.6 5.8 Key operating matrix Revenues 8,796 9,911 10,044 8,175 9,441 9,760 YoY change (%) -11.7 -1.5 0.8 -7.1 -4.7 -2.8 EBITDA 3,811 4,542 4,754 3,520 4,301 4,593 EBITDA margin (%) 43.3 45.8 47.3 43.1 45.6 47.1 EPS (EGP) 1.2 1.7 1.9 1.0 1.7 1.9 DPS (EGP) 0.6 0.9 0.9 0.6 1.0 1.2 Source: Morgan Stanley Research estimates

Why Underweight? • Fixed-line business is on structural decline,

forcing Telecom Egypt to pursue a mobile license…

• …resulting in a cut in dividend payout in 2009. We would expect a funding gap if Telecom Egypt does get the license, due to incremental capex and license fees. This could pressure future dividends.

• In our view, other companies in our universe offer better dividend growth, such as Mobily, which offers upside to the dividend payout, along with growth in net income.

• Valuation looks unattractive at 9.9x. A similar company in South Africa, Telkom SA has seen a derating to just 6.3x, from 9.6x since May 2009, as it sold of its stake in mobile operator Vodacom to pursue its own mobile strategy.

Key Value Drivers • Exposure to a still-growing mobile industry,

with 45% stake in Vodafone Egypt — penetration is 73% and elasticity on usage is showing positive trends.

• Mobile competition getting tougher in three-player market.

• International gateway revenues. Highly profitable revenues from its international gateway business are at risk in the long term, in our view.

Potential Catalysts • Downside surprise to our dividend

forecasts as company pursues its mobile strategy.

22



Exhibit 40 Key change to forecasts 2010-11e Change in forecasts Old New Diff (%) Consensus MS vs Cons Diff (%)

10e 11e 10e 11e 10e 11e 10e 11e 10e 11e

Maroc Telecom Revenues 30,565 31,263 31,234 32,158 2.2 2.9 31,472 32,167 -0.8 0.0 YoY change (%) 3.4 2.3 2.9 3.0 1.9 2.2 EBITDA 17,761 18,165 18,183 18,773 2.4 3.3 18,421 18,853 -1.3 -0.4 EBITDA margin 58.1 58.1 58.2 58.4 58.5 58.6 Net Income 9,537 10,107 9,490 10,199 -0.5 0.9 9,410 9,472 0.8 7.7 Net margin 31.2 32.3 30.4 31.7 29.9 29.4 EPS 10.85 11.50 10.79 11.60 -0.5 0.9 10.58 10.78 2.0 7.6 Capex (5,502) (5,002) (5,622) (5,145) 2.2 2.9 mobinil Revenues 11,667 11,897 11,466 12,589 -1.7 5.8 11,571 12,272 -0.9 2.6 YoY change (%) 7.1 2.0 6.1 9.8 6.9 6.1 EBITDA 5,459 5,542 5,360 5,887 -1.8 6.2 5,248 5,504 2.1 7.0 EBITDA margin 46.8 46.6 46.7 46.8 45.4 44.8 Net Income 1,917 1,825 1,940 2,122 1.2 16.3 1,940 1,966 0.0 7.9 EPS 19.32 18.39 19.55 21.38 1.2 16.3 18.36 19.87 6.4 7.6 Capex (4,300) (2,141) (5,345) (2,266) 24.3 5.8 mobily Revenues 14,490 15,337 14,939 15,813 3.1 3.1 14,766 15,796 1.2 0.1 YoY change (%) 11.0 5.8 14.4 5.8 13.5 7.0 EBITDA 5,516 6,063 5,576 6,251 1.1 3.1 5,494 5,902 1.5 5.9 EBITDA margin 38.1 39.5 37.3 39.5 37.2 37.4 Net Income 3,450 3,800 3,580 4,041 3.7 6.3 3,363 3,591 6.4 12.5 EPS 4.99 5.28 5.11 5.77 3.7 6.3 4.80 5.13 6.4 12.6 Capex (3,071) (2,607) (3,157) (2,688) 2.8 3.1 STC Revenues 53,040 54,225 52,445 53,521 -1.1 -1.3 52,768 54,432 -0.6 -1.7 YoY change (%) 3.0 2.2 3.3 2.1 4.2 3.2 EBITDA 23,351 23,969 21,420 21,859 -8.3 -8.8 21,833 22,905 -1.9 -4.6 EBITDA margin 44.0 44.2 40.8 40.8 41.4 42.1 Net Income 11,920 12,645 9,180 9,283 -23.0 -26.6 9,781 9,662 -6.1 -3.9 EPS 5.99 6.37 4.59 4.64 -23.0 -26.6 5.02 4.83 -8.6 -3.9 Capex (11,669) (9,760) (13,359) (11,775) 14.5 20.6 Telecom Egypt Revenues 11,428 11,267 9,911 9,441 -13.3 -16.2 10,277 9,843 -3.6 -4.1 YoY change (%) 7.1 -1.4 -0.5 -4.7 3.2 -4.2 EBITDA 5,388 5,453 4,542 4,301 -15.7 -21.1 4,902 4,460 -7.3 -3.6 EBITDA margin 47.2 48.4 45.8 45.6 47.7 45.3 Net Income 3,711 3,999 3,107 3,044 -16.3 -23.9 3,206 3,201 -3.1 -4.9 EPS 2.17 2.34 1.73 1.70 -20.6 -27.5 1.89 1.86 -8.9 -8.8 Capex (996) (926) (1,667) (1,133) 67.3 22.4 Wataniya Revenues 521,466 549,641 538,174 582,939 3.2 6.1 521,851 549,547 3.1 6.1 YoY change (%) 8.4 5.4 13.2 8.3 8.3 5.3 EBITDA 229,805 241,670 219,586 247,478 -4.4 2.4 196,676 209,618 11.6 18.1 EBITDA margin 44.1 44.0 40.8 42.5 37.7 38.1 Net Income 90,263 94,534 83,409 92,429 -7.6 -2.2 86,871 88,333 -4.0 4.6 EPS 0.18 0.19 0.17 0.18 -7.6 -2.2 0.17 0.18 -3.2 1.2 Capex (73,682) (75,557) (78,939) (82,871) 7.1 9.7 Source: Company data, Morgan Stanley Research, FactSet Consensus E = Morgan Stanley Research estimates

Exhibit 41 Mobily: Summary financials 2009-18e SAR (million) 2009 2010e 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e

Summary income statement Revenues 13,058 14,939 15,813 16,481 17,146 17,836 18,555 19,303 20,081 20,890 YoY Chg 21.0 14.4 5.8 4.2 4.0 4.0 4.0 4.0 4.0 4.0 EBITDA 4,837 5,576 6,251 6,567 6,850 7,146 7,435 7,736 8,050 8,376 EBITDA margin (%) 37.0 37.3 39.5 39.8 40.0 40.1 40.1 40.1 40.1 40.1 Depreciation and amortisation 1,629 1,835 1,990 2,136 2,220 2,284 2,351 2,421 2,495 2,571 EBIT 3,208 3,741 4,262 4,430 4,630 4,862 5,084 5,315 5,555 5,804 EBIT margin (%) 24.6 25.0 27.0 26.9 27.0 27.3 27.4 27.5 27.7 27.8 Net income 3,014 3,580 4,041 4,184 4,359 4,598 4,827 5,064 5,309 5,564 YoY Chg 44.1 18.8 12.9 3.5 4.2 5.5 5.0 4.9 4.9 4.8 ModelWare EPS 4.31 5.11 5.77 5.98 6.23 6.57 6.90 7.23 7.58 7.95 YoY Chg 7.6 18.8 12.9 3.5 4.2 5.5 5.0 4.9 4.9 4.8 DPS 1.25 2.00 2.60 4.48 4.98 5.25 5.52 5.79 6.07 6.36 Payout ratio 29.0 39.1 45.0 75.0 80.0 80.0 80.0 80.0 80.0 80.0 Gearing 62.6 43.8 27.1 14.0 8.6 4.5 0.8 -2.5 -5.5 -8.3 Net debt to EBITDA 1.6 1.2 0.8 0.4 0.3 0.1 0.0 -0.1 -0.2 -0.3 Summary balance sheet Cash and cash equivalents 933 2,053 3,837 5,808 6,778 7,593 8,398 9,209 10,025 10,847 Property, plant and equipment 10,370 12,215 13,437 14,132 14,665 15,224 15,810 16,422 17,062 17,730 Intangible assets 10,450 9,926 9,402 8,878 8,354 7,830 7,306 6,782 6,258 5,734 Other assets 9,174 9,935 10,264 10,547 10,829 11,121 11,426 11,743 12,073 12,416 Total assets 30,926 34,128 36,939 39,365 40,626 41,768 42,939 44,155 45,417 46,726 Shareholders' equity 12,243 14,948 17,589 19,954 21,175 22,286 23,434 24,637 25,895 27,212 Long term debt 6,448 6,448 6,448 6,448 6,448 6,448 6,448 6,448 6,448 6,448 Short term debt 2,147 2,147 2,147 2,147 2,147 2,147 2,147 2,147 2,147 2,147 Other liabilities 10,088 10,585 10,755 10,815 10,855 10,887 10,910 10,923 10,927 10,919 Total equity and liabilities 30,926 34,128 36,939 39,365 40,626 41,768 42,939 44,155 45,417 46,726 Net debt/(cash) 7,662 6,542 4,759 2,787 1,817 1,002 197 (613) (1,430) (2,251) Summary cash flow Net income 3,014 3,580 4,041 4,184 4,359 4,598 4,827 5,064 5,309 5,564 Depreciation and amortisation 1,105 1,311 1,466 1,612 1,696 1,760 1,827 1,897 1,971 2,047 Other 127 260 365 301 282 263 242 221 198 173 Cash flow from operations 4,246 5,151 5,872 6,097 6,337 6,621 6,896 7,181 7,477 7,785 Tangible capex (3,292) (3,157) (2,688) (2,307) (2,229) (2,319) (2,412) (2,509) (2,611) (2,716) Free cash flow 953 1,995 3,184 3,789 4,108 4,302 4,484 4,672 4,867 5,069 Dividends paid (525) (875) (1,400) (1,818) (3,138) (3,487) (3,678) (3,861) (4,051) (4,247) Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

Exhibit 42 Wataniya: Summary financials 2008-17e KD ('000s) 2008 2009 2010e 2011e 2012e 2013e 2014e 2015e 2016e 2017e

Summary income statement Revenues 475,970 475,421 538,174 582,939 604,609 634,880 666,258 697,880 730,234 762,945 YoY Chg 16.8 -0.1 13.2 8.3 3.7 5.0 4.9 4.7 4.6 4.5 EBITDA 201,860 190,200 219,586 247,478 256,555 270,021 287,850 301,261 314,960 328,761 EBITDA margin (%) 42.4 40.0 40.8 42.5 42.4 42.5 43.2 43.2 43.1 43.1 Proportionate EBITDA (ex-Iraq) 167,925 217,659 171,164 189,035 194,515 203,731 216,627 226,567 236,709 246,872 Depreciation and amortisation (78,213) (83,176) (82,784) (83,036) (80,422) (80,723) (80,343) (80,380) (80,783) (81,600) EBIT 123,647 107,024 136,802 164,442 176,133 189,298 207,507 220,882 234,177 247,161 EBIT margin (%) 26.0 22.5 25.4 28.2 29.1 29.8 31.1 31.7 32.1 32.4 Net income 82,429 108,291 83,409 92,429 101,571 107,225 119,146 127,436 135,453 142,962 Net margin (%) 17.3 22.8 15.5 15.9 16.8 16.9 17.9 18.3 18.5 18.7 ModelWare EPS 0.16 0.21 0.17 0.18 0.20 0.21 0.24 0.25 0.27 0.28 YoY Chg 2.1 31.4 -23.0 10.8 9.9 5.6 11.1 7.0 6.3 5.5 DPS 0.05 0.05 0.05 0.11 0.16 0.17 0.21 0.24 0.25 0.27 Payout ratio 27.6 22.5 30.2 58.7 77.3 80.5 90.0 93.5 94.1 94.7 Gearing 10.4 2.3 -15.9 -26.6 -32.9 -40.3 -44.2 -46.0 -46.5 -45.8 Net debt to EBITDA 0.2 0.1 -0.3 -0.5 -0.6 -0.6 -0.6 -0.6 -0.6 -0.6 Summary balance sheet Cash and cash equivalents 113,352 135,260 215,745 260,728 287,276 315,922 330,731 338,553 342,597 342,867 Property, plant and equipment 380,810 413,139 425,319 440,139 448,214 451,182 456,406 463,592 473,090 484,595 Intangible assets 256,637 205,417 192,083 180,013 168,635 158,318 148,984 140,555 132,962 126,139 Other assets 150,322 134,609 146,007 154,769 159,011 164,936 171,077 177,267 183,600 190,002 Total assets 901,121 888,425 979,154 1,035,649 1,063,135 1,090,357 1,107,199 1,119,967 1,132,249 1,143,603 Shareholders' equity 370,011 451,947 510,154 548,367 571,373 592,263 604,184 612,475 620,491 628,000 Minority interest 45,001 33,147 41,228 37,365 31,125 22,482 11,880 715 -11,026 -23,362 Long term debt 138,080 128,863 128,863 128,863 128,863 128,863 128,863 128,863 128,863 128,863 Short term debt 18,243 16,815 16,815 16,815 16,815 16,815 16,815 16,815 16,815 16,815 Other liabilities 329,786 257,653 282,093 304,239 314,959 329,934 345,456 361,100 377,105 393,287 Total equity and liabilities 901,121 888,425 979,154 1,035,649 1,063,135 1,090,357 1,107,199 1,119,967 1,132,249 1,143,603 Net debt/(cash) 42,971 10,418 (70,067) (115,050) (141,598) (170,244) (185,053) (192,875) (196,919) (197,189) Summary cash flow Net income 82,429 108,291 83,409 92,429 101,571 107,225 119,146 127,436 135,453 142,962 Depreciation and amortisation 78,213 83,176 82,784 83,036 80,422 80,723 80,343 80,380 80,783 81,600 Other 80,017 (20,381) 13,043 13,383 6,478 9,050 9,381 9,454 9,673 9,779 Cash flow from operations 240,659 171,086 179,235 188,848 188,471 196,998 208,870 217,270 225,909 234,341 Tangible capex (112,537) (105,376) (78,939) (82,871) (74,096) (70,199) (72,902) (75,646) (79,037) (82,468) Free cash flow 128,122 65,710 100,296 105,976 114,375 126,798 135,968 141,623 146,872 151,873 Dividends paid (22,780) (24,387) (25,202) (54,216) (78,564) (86,335) (107,225) (119,146) (127,436) (135,453) Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

Exhibit 43 Maroc Telecom: Summary financials 2009-17e Year to Dec - (MAD 'Millions) 2008 2009e 2010e 2011e 2012e 2013e 2014e 2015e 2016e 2017e

Summary income statement Revenues 29,487 30,339 31,234 32,158 32,938 33,771 34,363 34,879 35,408 35,949 YoY Chg 7.1 2.9 2.9 3.0 2.4 2.5 1.8 1.5 1.5 1.5 EBITDA 17,914 18,201 18,183 18,773 19,164 19,585 19,837 20,030 20,224 20,418 EBITDA margin (%) 60.8 60.0 58.2 58.4 58.2 58.0 57.7 57.4 57.1 56.8 Depreciation and amortisation (4,059) (4,193) (4,018) (3,479) (3,266) (3,201) (3,209) (3,226) (3,231) (3,260) EBIT 13,855 14,008 14,165 15,294 15,898 16,384 16,627 16,804 16,993 17,158 EBIT margin (%) 47.0 46.2 45.4 47.6 48.3 48.5 48.4 48.2 48.0 47.7 Net financial income/(expense) 394 (149) (200) (231) (339) (363) (382) (399) (399) (399) Tax Charge (4,196) (4,120) (4,141) (4,468) (4,616) (4,753) (4,820) (4,867) (4,924) (4,973) Net income 9,486 9,403 9,440 10,185 10,522 10,836 10,987 11,096 11,224 11,336 Net margin (%) 32.2 31.0 30.2 31.7 31.9 32.1 32.0 31.8 31.7 31.5 Net margin (%) 13.2 MW EPS (MAD) 10.79 10.70 10.74 11.59 11.97 12.33 12.50 12.62 12.77 12.90 YoY Chg 18.1 -0.9 0.4 7.9 3.3 3.0 1.4 1.0 1.2 1.0 DPS (MAD) 10.83 10.31 10.74 11.59 11.97 12.33 12.50 12.62 12.77 12.90 Payout ratio (%) 100.4 96.4 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Gearing (%) -1.2 17.5 20.8 22.4 24.5 26.0 27.4 27.2 27.1 27.1 Effective Tax rate (%) 29.6 29.8 29.8 29.8 29.8 29.8 29.8 29.8 29.8 29.8 Summary balance sheet Cash and cash equivalents 2,678 874 (171) 4,122 3,314 2,660 2,082 2,104 2,105 2,070 Property, plant and equipment 18,684 21,468 24,952 27,733 29,812 31,529 32,870 33,528 34,183 34,837 Intangible assets 3,889 3,723 2,143 1,329 895 667 540 444 399 379 Other assets 13,232 19,855 20,210 20,578 20,888 21,219 21,455 21,661 21,873 22,089 Total assets 38,483 45,920 47,134 53,761 54,908 56,074 56,947 57,737 58,560 59,376 Shareholders' equity 18,709 18,564 18,941 19,686 20,022 20,336 20,488 20,596 20,725 20,837 Minority interest 1,647 4,369 4,701 5,058 5,428 5,808 6,194 6,584 6,978 7,376 Long term debt 1,039 3,108 3,108 8,108 8,108 8,108 8,108 8,108 8,108 8,108 Short term debt 1,412 1,697 1,697 1,697 1,697 1,697 1,697 1,697 1,697 1,697 Other liabilities 15,677 18,182 18,688 19,212 19,653 20,125 20,460 20,752 21,052 21,358 Total equity and liabilities 38,483 45,920 47,134 53,761 54,908 56,074 56,947 57,737 58,560 59,376 Net debt/(cash) (227) 3,931 4,976 5,683 6,491 7,145 7,723 7,701 7,700 7,735 Summary cash flow Net income 9,486 9,403 9,440 10,185 10,522 10,836 10,987 11,096 11,224 11,336 Depreciation and amortisation 3,863 4,046 3,718 3,179 2,966 2,901 2,909 2,926 2,931 2,960 Other (1,335) 1,091 154 159 134 143 102 89 91 93 Cash flow from operations 12,566 14,816 13,641 13,878 13,989 14,258 14,382 14,497 14,637 14,785 Tangible capex 5,659 5,306 5,341 4,888 4,381 4,171 3,917 3,314 3,364 3,415 Intangible capex 298 279 281 257 231 220 206 174 177 180 Free cash flow 6,837 9,231 8,019 8,733 9,377 9,867 10,258 11,009 11,096 11,190 Dividends 8,246 9,516 9,063 9,440 10,185 10,522 10,836 10,987 11,096 11,224 Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

Exhibit 44 STC: Summary financials 2009-18e (SAR mn) 2008 2009e 2010e 2011e 2012e 2013e 2014e 2015e 2016e 2017e 2018e

Summary income statement Revenues 47,469 50,750 52,445 53,521 54,301 54,981 55,891 57,096 58,520 59,758 61,081 YoY Change 37.8 6.9 3.3 2.1 1.5 1.3 1.7 2.2 2.5 2.1 2.2 EBITDA 21,743 20,607 21,420 21,859 22,446 22,727 23,100 23,623 24,256 24,781 25,342 EBITDA margin (%) 45.8 40.6 40.8 40.8 41.3 41.3 41.3 41.4 41.4 41.5 41.5 Proportionate EBITDA 20,890 18,760 19,454 19,873 20,439 20,721 21,071 21,556 22,165 22,690 23,257 Depreciation and amortisation 6,408 7,843 8,863 9,056 9,212 9,357 9,478 9,581 9,710 9,812 9,923 EBIT 15,335 12,764 12,557 12,803 13,233 13,370 13,622 14,043 14,546 14,968 15,419 EBIT margin (%) 32.3 25.2 23.9 23.9 24.4 24.3 24.4 24.6 24.9 25.0 25.2 Net income 11,038 10,822 9,180 9,283 9,891 10,232 10,515 11,003 11,616 12,400 13,029 Net margin (%) 23.3 21.3 17.5 17.3 18.2 18.6 18.8 19.3 19.8 20.8 21.3 ModelWare EPS 5.52 5.41 4.59 4.64 4.95 5.12 5.26 5.50 5.81 6.20 6.51 YoY Chg -8.2 -2.0 -15.2 1.1 6.6 3.4 2.8 4.6 5.6 6.8 5.1 DPS 3.75 3.00 3.00 3.00 3.71 3.84 3.94 4.13 4.36 4.65 4.89 Payout ratio 67.9 55.4 65.4 64.6 75.0 75.0 75.0 75.0 75.0 75.0 75.0 Gearing 63.1 56.9 55.5 50.5 43.5 37.1 28.2 18.8 8.9 (0.5) (9.0) Net debt to EBITDA 1.1 1.2 1.2 1.1 1.0 0.9 0.7 0.5 0.2 (0.0) (0.2) Summary balance sheet Cash and cash equivalents 8,064 7,422 6,221 6,858 9,154 11,474 15,472 20,258 25,821 31,637 37,439 Property, plant and equipment 44,412 53,026 59,574 64,344 68,043 70,635 71,592 72,056 72,005 72,013 72,082 Intangible assets 31,767 28,916 26,864 24,813 22,761 20,710 18,658 16,607 14,555 12,504 10,452 Other assets 15,667 19,909 20,407 20,724 20,953 21,153 21,420 21,775 22,193 22,557 22,946 Total assets 99,909 109,272 113,066 116,738 120,912 123,971 127,142 130,695 134,574 138,711 142,919 Shareholders' equity 37,766 41,999 45,179 48,462 50,935 53,493 56,122 58,872 61,776 64,876 68,134 Long term debt 28,081 22,254 22,254 22,254 22,254 22,254 22,254 22,254 22,254 22,254 22,254 Short term debt 3,827 9,061 9,061 9,061 9,061 9,061 9,061 9,061 9,061 9,061 9,061 Other liabilities 30,235 35,958 36,572 36,961 38,662 39,164 39,706 40,508 41,483 42,520 43,471 Total equity and liabilities 99,909 109,272 113,066 116,738 120,912 123,971 127,142 130,695 134,574 138,711 142,919 Net debt/(cash) 23,845 23,893 25,094 24,457 22,161 19,841 15,843 11,057 5,494 (322) (6,124) Summary cash flow Net income 11,038 10,822 9,180 9,283 9,891 10,232 10,515 11,003 11,616 12,400 13,029 Depreciation and amortisation 6,408 7,843 8,863 9,056 9,212 9,357 9,478 9,581 9,710 9,812 9,923 Other 3,752 (2,920) 116 73 53 46 62 82 97 84 90 Cash flow from operations 21,198 15,744 18,158 18,412 19,157 19,635 20,055 20,666 21,423 22,297 23,042 Tangible capex (16,357) (15,926) (13,359) (11,775) (10,860) (9,897) (8,384) (7,993) (7,608) (7,768) (7,941) Free cash flow 4,841 (181) 4,799 6,637 8,296 9,738 11,671 12,672 13,815 14,528 15,102 Dividends paid (8,552) (5,943) (6,000) (6,000) (6,000) (7,418) (7,674) (7,886) (8,252) (8,712) (9,300) Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

Exhibit 45 mobinil: Summary financials 2009-17e 31 Dec (EGP mn) 2008 2009 2010e 2011e 2012e 2013e 2014e 2015e 2016e 2017e Summary income statement Revenues 10,015 10,807 11,466 12,589 13,459 14,181 14,681 15,158 15,569 15,989 YoY Chg 22.1 7.9 6.1 9.8 6.9 5.4 3.5 3.3 2.7 2.7 EBITDA 4,694 5,122 5,360 5,887 6,280 6,603 6,836 7,058 7,250 7,445 EBITDA margin (%) 46.9 47.4 46.7 46.8 46.7 46.6 46.6 46.6 46.6 46.6 Depreciation and amortisation (1,660) (1,907) (2,001) (2,084) (2,142) (2,165) (2,138) (2,147) (2,133) (2,136) EBIT 3,034 3,215 3,360 3,803 4,138 4,438 4,698 4,911 5,117 5,310 EBIT margin (%) 30.3 29.7 29.3 30.2 30.7 31.3 32.0 32.4 32.9 33.2 Net financial income/(expense) (546) (688) (666) (856) (909) (947) (915) (831) (742) (656) Tax Charge (511) (535) (539) (589) (646) (698) (757) (816) (875) (931) Net income 1,772 1,834 1,940 2,122 2,325 2,514 2,724 2,938 3,150 3,351 Net margin (%) 17.7 17.0 16.9 16.9 17.3 17.7 18.6 19.4 20.2 21.0 Modelware EPS (EGP) 17.86 18.48 19.55 21.38 23.43 25.33 27.45 29.60 31.74 33.76 YoY Chg 5.4 3.5 5.8 9.4 9.6 8.1 8.4 7.8 7.2 6.4 DPS (EGP) 13.34 9.50 14.66 19.24 21.08 22.80 24.70 26.64 28.57 30.39 Payout ratio (%) 74.7 51.4 75.0 90.0 90.0 90.0 90.0 90.0 90.0 90.0 Gearing (%) 58.3 40.1 56.1 54.4 50.6 44.6 38.8 31.3 23.5 14.9 Tax rate (%) 20.6 20.8 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 Summary balance sheet Cash and cash equivalents 650 629 269 870 1,867 2,673 2,835 3,115 3,332 3,530 Property, plant and equipment 7,870 8,911 10,073 10,673 10,968 10,923 10,965 10,903 10,900 10,942 Intangible assets 3,187 2,956 2,698 2,440 2,182 1,924 1,666 1,408 1,150 892 Other assets 1,951 2,143 2,177 2,477 2,586 2,676 2,738 2,798 2,849 2,902 Total assets 13,658 14,640 15,218 16,460 17,603 18,195 18,204 18,223 18,232 18,266 Shareholders' equity 2,240 3,680 4,161 4,373 4,606 4,857 5,130 5,423 5,738 6,073 Long term debt 3,076 2,309 4,809 5,309 5,809 5,809 5,309 4,809 4,309 3,809 Short term debt 702 782 782 782 782 782 782 782 782 782 Other liabilities 7,641 7,870 5,466 5,996 6,407 6,748 6,984 7,209 7,403 7,602 Total equity and liabilities 13,658 14,640 15,218 16,460 17,603 18,195 18,204 18,223 18,232 18,266 Net debt/(cash) 3,127 2,461 5,322 5,221 4,723 3,918 3,256 2,476 1,758 1,060 Summary cash flow Net income 1,772 1,834 1,940 2,122 2,325 2,514 2,724 2,938 3,150 3,351 Depreciation and amortisation 1,660 1,907 2,001 2,084 2,142 2,165 2,138 2,147 2,133 2,136 Other 124 301 162 230 302 251 174 166 143 146 Cash flow from operations 3,556 4,042 4,103 4,436 4,769 4,929 5,035 5,251 5,425 5,632 Tangible capex (2,671) (2,616) (2,745) (2,266) (2,019) (1,702) (1,762) (1,667) (1,713) (1,759) Intangible capex (750) 0 (2,600) 0 0 0 0 0 0 0 Free cash flow 135 1,426 (1,242) 2,170 2,750 3,228 3,274 3,583 3,713 3,873 Dividends paid (1,117) (932) (1,458) (1,910) (2,092) (2,262) (2,452) (2,644) (2,835) (3,016) Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

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Exhibit 46 Telecom Egypt: Summary financials 2009-17e 31 Dec (EGP millions) 2008 2009 2010e 2011e 2012e 2013e 2014e 2015e 2016e 2017e

Summary income statement Revenues Retail 6,181 5,764 5,225 5,080 4,920 4,749 4,577 4,408 4,244 4,088 Wholesale 3,936 4,197 4,686 4,360 4,431 4,506 4,550 4,596 4,645 4,695 Total 10,117 9,960 9,911 9,441 9,352 9,255 9,128 9,005 8,889 8,783 YoY Chg 1.2 -1.5 -0.5 -4.7 -0.9 -1.0 -1.4 -1.3 -1.3 -1.2 EBITDA 4,676 4,683 4,542 4,301 4,153 3,997 3,816 3,635 3,455 3,279 EBITDA margin (%) 46.2 47.0 45.8 45.6 44.4 43.2 41.8 40.4 38.9 37.3 Proportionate EBITDA 7,278 7,386 7,433 7,359 7,311 7,191 7,093 6,994 6,899 6,808 Depreciation and amortisation (2,739) (2,738) (2,548) (2,523) (2,390) (2,096) (1,937) (1,801) (1,685) (1,585) EBIT 1,937 1,945 1,994 1,777 1,763 1,900 1,878 1,833 1,770 1,694 EBIT margin (%) 19.1 19.5 20.1 18.8 18.9 20.5 20.6 20.4 19.9 19.3 Net financial income/(expense) (203) (5) (38) (3) 80 153 220 244 262 277 Tax Charge (512) (453) (431) (411) (407) (451) (460) (455) (445) (432) Income from affiliates 1,312 1,411 1,490 1,592 1,663 1,703 1,769 1,836 1,876 1,917 Net income 2,539 2,904 2,947 2,900 3,036 3,224 3,321 3,372 3,380 3,375 Net margin (%) 25.1 29.2 29.7 30.7 32.5 34.8 36.4 37.5 38.0 38.4 Modelware EPS (EGP) 1.49 1.70 1.73 1.70 1.78 1.89 1.95 1.98 1.98 1.98 YoY Chg 8.6 14.4 1.5 -1.6 4.7 6.2 3.0 1.5 0.2 -0.1 DPS (EGP) 1.30 0.75 0.86 1.02 1.07 1.89 1.95 1.98 1.98 1.98 Payout ratio (%) 87.4 44.1 50.0 60.0 60.0 100.0 100.0 100.0 100.0 100.0 Gearing (%) 1.5 -5.5 -9.6 -21.3 -32.8 -44.2 -49.6 -54.4 -58.5 -62.1 Tax rate (%) 25.7 21.6 21.0 22.0 21.0 21.0 21.0 21.0 21.0 21.0 Summary balance sheet Cash and cash equivalents 2,735 2,453 3,554 6,306 8,738 10,980 11,774 12,402 12,886 13,274 Property, plant and equipment 17,531 16,086 15,205 13,814 12,547 11,561 10,719 9,998 9,380 8,849 Intangible assets 0 0 0 0 0 0 0 0 0 0 Other assets 13,604 13,922 14,767 14,536 14,492 14,445 14,382 14,322 14,265 14,213 Total assets 33,870 32,461 33,526 34,657 35,777 36,985 36,875 36,722 36,531 36,336 Shareholders' equity 26,631 27,227 28,740 30,028 31,177 32,418 32,350 32,238 32,086 31,926 Minority interest 38 41 41 41 41 41 41 41 41 41 Long term debt 1,626 858 858 858 858 858 858 858 858 858 Short term debt 1,520 186 186 186 186 186 186 186 186 186 Other liabilities 4,055 4,149 3,701 3,544 3,515 3,483 3,440 3,399 3,361 3,325 Total equity and liabilities 33,870 32,461 33,526 34,657 35,777 36,985 36,875 36,722 36,531 36,336 Net debt/(cash) 411 (1,409) (2,510) (5,263) (7,694) (9,936) (10,730) (11,358) (11,843) (12,231) Summary cash flow Net income 1,230 1,497 1,464 1,316 1,384 1,536 1,568 1,551 1,519 1,474 Depreciation and amortisation 2,739 2,738 2,548 2,523 2,390 2,096 1,937 1,801 1,685 1,585 Other 533 37 (551) 74 14 15 20 19 18 17 Cash flow from operations 4,502 4,272 3,461 3,914 3,788 3,648 3,525 3,372 3,222 3,076 Tangible capex (900) (967) (1,667) (1,133) (1,122) (1,111) (1,095) (1,081) (1,067) (1,054) Free cash flow 3,602 3,305 1,794 2,781 2,666 2,537 2,430 2,292 2,155 2,022 Dividends paid (1,860) (2,367) (1,435) (1,612) (1,886) (1,983) (3,389) (3,485) (3,532) (3,535) Source: Company data, Morgan Stanley Research E = Morgan Stanley Research estimates

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Disclosure Section Morgan Stanley & Co. International plc, authorized and regulated by Financial Services Authority, disseminates in the UK research that it has prepared, and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000, research which has been prepared by any of its affiliates. As used in this disclosure section, Morgan Stanley includes RMB Morgan Stanley (Proprietary) Limited, Morgan Stanley & Co International plc and its affiliates. For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA. Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Sean Gardiner. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies. Important US Regulatory Disclosures on Subject Companies As of February 26, 2010, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: Deutsche Telekom, Orascom Telecom, Telecom Egypt, Vodafone Group. As of February 26, 2010, Morgan Stanley held a net long or short position of US$1 million or more of the debt securities of the following issuers covered in Morgan Stanley Research (including where guarantor of the securities): Deutsche Telekom, France Telecom, Orascom Telecom, Qatar Telecom, Vodafone Group, Wataniya. Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of France Telecom, Vodafone Group. Within the last 12 months, Morgan Stanley has received compensation for investment banking services from Deutsche Telekom, France Telecom, Qatar Telecom, Saudi Telecom Co, Vodafone Group. In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Deutsche Telekom, Etihad Etisalat, France Telecom, Maroc Telecom, Orascom Telecom, Qatar Telecom, Safaricom, Saudi Telecom Co, Starcomms Plc, Telecom Egypt, Telkom SA, Vodacom Group, Vodafone Group, Wataniya, Zain. 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Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Global Stock Ratings Distribution (as of March 31, 2010) For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight, Not-Rated and Underweight. 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Coverage Universe Investment Banking Clients (IBC)

Stock Rating Category Count % of Total Count

% of Total IBC

% of Rating Category

Overweight/Buy 1042 41% 325 43% 31%Equal-weight/Hold 1095 43% 348 46% 32%Not-Rated/Hold 15 1% 4 1% 27%Underweight/Sell 373 15% 87 11% 23%Total 2,525 764 Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley or an affiliate received investment banking compensation in the last 12 months. Analyst Stock Ratings Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below. 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Industry Coverage:MENA - Telecoms

Company (Ticker) Rating (as of)Price* (03/31/2010)

Sean Gardiner Etihad Etisalat (7020.SE) O (05/18/2009) SAR50.25Maroc Telecom (IAM.CS) U (07/31/2007) MAD159Mobinil (EMOB.CA) E (12/11/2009) EGP214Orascom Telecom (ORTEq.L) E (11/26/2009) US$5.12Qatar Telecom (QTEL.QA) ++ QAR149.7Safaricom (SCOM.NR) O (09/10/2009) Kes5.5Saudi Telecom Co (7010.SE) E (05/18/2009) SAR47.5Starcomms Plc (STARCOM.LG) O (08/06/2009) NGN2.46Telecom Egypt (ETEL.CA) E (06/03/2009) EGP17.03Wataniya (NMTC.KW) E (01/22/2008) KWf1,580Zain (ZAIN.KW) E (02/16/2010) KWf1,360Zain Zambia (CELZ.LZ) E (01/16/2009) Zmk595

Stock Ratings are subject to change. Please see latest research for each company. * Historical prices are not split adjusted.

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