Telecom Egypt concluded its AGM, where shareholders approved some key decisions, chief of which is settling the company’s dispute with VFE, which will allow the release of dividends that have been retained since 2012. This also paves the way going forward for a normalised relationship with VFE and a return to normal dividend distributions by VFE, in our view, which is important for TE’s cash flows. Accordingly, and in line with our estimates, TE will be able to return to more generous dividend distributions in FY2016; we estimate TE will pay EGP1.00/share in cash dividends for 2016, implying a generous dividend yield of 12.8%. We reiterate our Buy rating on TE. Below are some of the key resolutions passed today:   VFE dispute settlement: - The board of directors (BoD) was authorised to settle the dispute between TE and Vodafone Egypt (VFE) under the proposed agreement between both companies, which stipulates that VFE commit to distributing a minimum of EGP3.34 billion from its retained earnings. TE’s 44.95% stake in VFE will entitle it to EGP1.5 billion of the said dividends, which will be paid on two equal installments in April and June 2016 (these are the dates of VFE’s general assemblies) - Moreover, VFE’s parent Vodafone Group (VG) agreed to waive the arbitration case against VFE relating to increasing the brand royalties charged by VG to VFE, which TE had been blocking in its capacity as a VFE shareholder, and which it now agreed to as part of the dispute resolution, with gradual increases in the fees from the current 0.7% to 1.75% between April 2016 and April 2019 - TE and VFE have also agreed to add an annex to the transmission services agreement that will be signed by both - As part of the agreement, TE will commit not to appeal against certain rulings of the arbitration panel and will approve that any future disputes related to interconnection rates will be solely with VFE as the sole party to the interconnection agreements During the AGM, management highlighted that the company had reached an agreement with two of the three existing mobile operators in Egypt (VFE and Orange Egypt) regarding the interconnection disputes.   New board of directors announced, new CEO to be elected soon: Shareholders approved the appointment of the new board of directors for a term of three years. Below are the names of the new board members, of which a CEO will be elected in the board’s first meeting. The two executive members that are eligible for the CEO position are Mohamed Shamroukh (currently Senior Finance Director and ex-CFO) and Tamer Gadallah (currently VP and Enterprise CCO). 1.       Mr. Ahmed Mohamed Gamal Aboali (independent) 2.       Dr. Eskandar Adel Eskandar Teama (independent) 3.       Dr. Mohamed Hany Seif El-Nasr (independent) 4.       Mr. Mohamed Abdel-Latif Attia (employees’ representative) 5.       Dr. Maged Ibrahim Osman (government representative) 6.       General Ashraf Mohamed Said Halim Ismail Mohamed Farid (government representative) 7.       Ms. Lobna Mohamed Helal (government representative) 8.       Mr. Ahmed Mohamed Hamdy El-Behery (government representative) 9.       Mr. Mohamed Hassan Shamroukh (government representative) 10.   Dr. Hassan Yousry Mohamed (government representative) 11.   Mr. Tamer Abdel Aziz Gad Allah (government representative)   2015 dividend approved: Shareholders approved the cash dividend for FY2015 of EGP0.75/share, implying an attractive yield of 9.6%. The assembly also approved the transfer of EGP2,000 million from the general reserve to carry-forward profits. This was necessary for the company to be able to distribute profits in 2015 given that the retained earnings pre 2015 dividend would have been only EGP1,290 million, which would have been insufficient for the distribution of 2015 dividends of EGP1,280 million in addition to employees’ share in dividends of EGP551 million. We note that as per Egyptian law, TE is not allowed to distribute more than 100% of retained earnings. (Company disclosure, Omar Maher, Karim Riad)   Telecom Egypt: EGP8.26 as of 30 March 2016, Rating: Buy, FV: EGP12.21 per share, MCap: USD1,588 million, ETEL EY / ETEL.CA