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Egypt in Brief

Sources at Etisalat, Egypt’s third mobile license holder, denied last month having requested to indefinitely postpone the launch of Egypt’s third mobile network “as certain unnamed weekly papers had mentioned,” the financial weekly Al-Mal has reported.

Etisalat won the bid for Egypt’s third mobile license last summer, paying what industry experts said was an exorbitant LE 16.7 billion in a consortium with the National Bank of Egypt, the Commercial International Bank (CIB, bt100 number 13) and the National Post Authority.

As the first company to acquire a 3G license in Egypt, Etisalat was granted the right to premier the service by May 20, after which Vodafone Egypt (Vodafone, bt100 number 5)—the only other mobile operator with a 3G license—would have the right to launch its service in the market. Mobinil (bt100 number 6) is the only mobile operator that has not bought a 3G license.

Hassan Samy, Etisalat’s sales manager, denied that there would be any delay in launching the new service in Egypt, though he did not mention a date. The company had said it would launch in February and delayed the debut to March, without specifying a date. It was contractually obliged to go live in late February and had not turned the switch as bt went to press on March 28.

Nevertheless, officials say that Etisalat has set its marketing and sales policies necessary for its launch and has finalized agreements with its distribution and sales agents Modern Distribution and Sky Distribution.

Sky was established in January as Etisalat’s retail-services arm and has already established five outlets in Cairo, Ismailia, Alexandria, Mansoura and Tanta, and aims to have outlets nationwide by the end of the year.

The nation in brief

OT Expansion

A consortium of Orascom Telecom (OT, bt100 number 1) and India’s Mahanagar Telephone Nigam failed to make the short list for Saudi Arabia’s third mobile license auction after handing in its technical and commercial offer.

The Saudi Communications and Information Technology Commission said that seven consortia qualified for the next round of bids, including South Africa’s MTN, Kuwait Mobile Telecommunications Company — which is bidding with Turkish mobile operator Turkcell — and Dubai-based Oger Telecom.

Meanwhile, OT has put in a bid for Telecom Italia’s stake in Brazil’s third-largest fixed-line operator, Brasil Telecom Participaç?es. Telecom Italia International N.V. holds a 38% stake in Solpart Participaç?es, Brasil Telecom’s holding company, and has yet to rule on the offer. The amount of the offer has not been disclosed.

Brasil Telecom serves north, center-west and south Brazil, offering fixed-line as well as wireless internet broadband services.

Telecom Italia had left the controlling group in 2002 after a battle for control of the company with Brazilian investment bank Banco Opportunity, Citigroup and a bloc of Brazilian pension funds. Citigroup and the pension funds have been in control of Brasil Telecom since September 2005.

OT Chairman and CEO Naguib Sawiris denied that OT had made a bid for stakes in Tele Norte Leste Participaç?es, or Telemar, Brazil’s largest telecom operator.

Telecom Egypt May Withdraw from Algeria

Telecom Egypt (bt100 number 3) Chairman Akil Beshir announced that the company might be pulling out of the Algerian market’s second fixed-line operator, LACOM, in which it holds a 50% stake with Orascom Telecom holding the balance.

The announcement comes as LACOM is facing regulatory problems and what they call unfair competition from state-owned operator Algérie Télécom, which had monopolized the market for years before the establishment of LACOM.

Despite announcing a 16% increase in TE’s net profits for 2006 to LE 2.4 billion, Beshir indicated that TE would not be directing any more funds to LACOM until a solution is reached on the technical problems the company is facing.

TE and Orascom Telecom won the 15-year exclusivity license for LACOM three years ago for $65 million. Algeria marked TE’s first step outside Egypt. In light of the current state of affairs in Algeria, TE has moved LACOM CEO Emad El-Azhar back to Cairo to head TE’s internet service provider, TE Data. Beshir did not mention how this would affect partner OT, which also kept silent on the issue so far.

In Saudi Arabia, TE dropped out of the race for Saudi Arabia’s second fixed-line operator due to the Saudi authority’s requirements that the winner offer 40% of the company on the market before launching operations, that 40% of the winning consortium be Saudi Arabian, and that any foreign partner should not hold more than 15% of the network.

At home, TE is aiming for 500,000 new subscribers this year. The company announced a new billing system that will be in effect as of the April billing cycle, with the aim of overcoming some of the old system’s shortcomings.

TE had signed a five-year contract with Convergence, a customer service, billing and human-resource development company, to reform the sole fixed-line operator’s billing system to slash IT costs through streamlining.

Intel Expands World Ahead Program

The success of Intel’s digital-transformation initiative in Oseem village (See “An Encouraging Development,” by Staff Writer Andrew Bossone, February 2007, page 86) has led to a chain of continued successes for Egypt’s educators.

Egypt’s pilot program was lauded as a great success last month, when a delegation of Egyptian teachers from various governorates, accompanied by Yasser Abdel Wahab, Intel’s education manager in Egypt, Levant and North Africa traveled to the United States to attend a conference with other educators from across the globe to discuss the implementation and results of each of their pilot programs.

The conference talks ended with Intel deciding that Egypt should be the first country to launch “Teach Essentials Online,” a program to train teachers in the effective use of technology and education. Other participating countries include the US, Russia, Brazil, Nigeria, South Africa and Turkey.

Intel will continue to donate equipment — computers and accessories — to technology centers around the country. Egypt is the largest recipient of PC donations from Intel, receiving a total of 8,000 of the 100,000 being donated worldwide. So far 4,600 of the 8,000 computers have been delivered.

Senior trainer and teacher Nehad Said of Monoufia discussed the benefits of the program. “Research has shown that when you read or hear something you only learn about 30%, but when you actually do it yourself, you learn around 90%, and that is what this program has enabled them to do,” she said.

Equally impressed with the program was senior trainer and teacher Ehab Elanany of Qalyoubeya governorate, who explained: “Take any of these kids in the village and put a computer near them, then look at their eyes. The kids who were jumping over the fence are now sitting and wanting to work and learn.”

Amlak Launches Cairo Office

Amlak Finance, the United Arab Emirates’ largest Islamic finance house, has launched its first branch in Egypt, Amlak Finance and Real Estate Investment, which will offer competitive Islamic home finance products for the first time in the Egyptian market.

Amlak debuts in the Egyptian market as the local home-loans market grows at 1.5% annually and shows a yearly shortfall of about 145,000 houses. Accordingly, the government has announced that it will be directing development efforts towards the real estate sector, among others, in 2007.

The introduction of the mortgage law in Egypt — regulated by the Mortgage Finance Authority (MFA) — is expected to spur the real estate market and enable individuals across Egypt to own their homes within a well regulated system. Customers will initially be able to purchase any completed property using a number of Shariah-compliant home finance offerings as Amlak is the first company in Egypt to offer Islamic home finance products. Reaching out to Egyptian nationals and other nationalities looking to invest in the country’s booming economy, the launch product will offer long term tenures of up to 20 years.

The MFA acts as a regulator aiming to create an efficient Egyptian mortgage finance market that plays a strong role in Egypt’s economic growth, helps Egyptians to own their homes and commercial properties and safeguards the rights of consumers and other mortgage market participants.

Amlak Finance, based in Dubai, was established in November 2000 as a wholly owned subsidiary of its major shareholder, Emaar Properties. In a 2004 capital increase executed through an IPO, Amlak listed on the Dubai Financial Market. Today, Emaar holds a 45% stake.

A similarly named company, Amlak Real Estate Investment and Marketing (amlakegypt.com) built and operates Tiba Gardens, Al-Fayroz (a Sixth of October development), Sara Residence (Sixth of October), Golf Residence (overlooking Dreamland Golf Club) and Royal Valley.

Look for interviews with both Amlak Egypt and Amlak Dubai in next month’s issues.

Egyptian Saudi Finance Bank for Sale

The National Bank of Egypt has been delegated to handle the sale of the state’s 12% stake in the Egyptian Saudi Finance Bank, which is 75% held by Al-Baraka Banking Group, and 13% in the hands of individual investors and its float on the Cairo and Alexandria Stock Exchange.

Negotiations will begin with Al-Baraka Group as the majority shareholder in the bank. If Al-Baraka’s offering price is less than their evaluation, negotiations will begin with other investors. The bank’s capital stands at LE 500 million distributed among 71 million shares.

Seven Competitors for Bank of Alexandria Issue

Seven companies and consortia are in the race to manage Bank of Alexandria-Sanpaolo’s 15% initial public offering and to give technical advice on the issue of 5% of the bank’s shares to its employees.

The competitors include Citibank, EFG-Hermes, HC Securities and Beltone Financial in addition to three consortiums: BNP Paribas with Banque Misr and Cairo Capital, the Arab African International Bank with the National Bank of Egypt and Prime Securities with an unnamed Gulf-based financial group.

Banque Misr Arranges Vodafone Egypt Loan

On March 14, a consortium of six banks lead by Banque Misr and including Commercial International Bank (bt100 number 13), HSBC, National Société Générale Bank (bt100 number 23), Barclays Bank and Citibank signed an agreement, to extend a syndicated loan worth LE 4 billion to Vodafone Egypt (bt100 number 5).

The seven-year loan will be used to increase Vodafone’s capital and to cover the cost of the 3G license for which Vodafone recently paid LE 3.34 billion. The loan will be delivered in two parts; the first is for LE 3 billion and is a cyclical credit facility which will allow Vodafone to withdraw and deposit according to its needs. The second part will be a LE 1 billion medium-term loan to be paid off in seven years.

Bank Audi Reveals Egypt Plans

Gaby Kasees, chairman of Banque Audi Egypt, announced that the bank’s board has agreed to increase its capital from $100 million to $200 million to become one of the five largest banks in Egypt in terms of capital.

Kasees added that Banque Audi plans to become one of the main players in the Egyptian banking sector and that the bank has a plan to increase its network of branches to 40 from 30 by the end of 2007 and to 70 in three years.

Kasees explained the bank’s strategy is its belief that Egypt is a gateway to Arab and Middle Eastern markets.

NSGB Announces Lower 2006 Profits

National Société Générale Bank (bt100 number 23) announced a drop in 2006 net profits to LE 147.9 million, less than half of 2005’s net profits of LE 493.4 million. NSGB merged with Misr International Bank (bt100 number 21) on November 30, 2006 to create what analysts described as Egypt’s second-largest private-sector bank.

The merger brought on a LE 498 million burden in the form of MIBank’s pension fund and LE 362 million in goodwill amortization, which negatively reflected on NSGB’s earnings.

The bank’s bottom line was not helped by NSGB’s heavy investment in retail banking throughout 2006, which raised its operating costs by 34%.

A report issued by EFG-Hermes had forecast net profits worth LE 471 million, adding that excluding the negative impact of the pension fund charge could have left net profits at LE 645.9 million.

NBK Eyes Egyptian Operations

While the price remains unannounced, National Bank of Kuwait is in negotiations for a stake in the Egyptian Gulf Bank (bt100 number 68). The deal has received Central Bank of Egypt approval.

NBK is also in negotiations for another bank — General Manager Ibrahim Dabdoub and CEO George Nasra said the company is eyeing two Egyptian banks including EGB, but did not reveal further details.

Morgan Stanley to Launch Egypt Office

As part of its expansion plans for the Middle East and North Africa, global financial services firm Morgan Stanley announced that it would be applying to the General Authority of Free Zones and Investment for a license to establish a Cairo-based office.

Morgan Stanley advised Enel on the $15.2 billion sale of Wind to Orascom Telecom Chairman Naguib Sawiris’ Weather Investments and acted as a book runner for the Egyptian government’s issue of $1.25 billion in debt.

Meanwhile, Morgan Stanley announced that it has sold its stake in HC Securities and Investment to the National Commercial Bank without disclosing the terms of the deal.

Egypt to Get More Indian Tea

Egyptian import duties on Indian tea have come a long way from the 30% before 2005 to 2% today. Major Indian tea companies are gearing up to grab as big a share as they can of Egypt’s huge tea-drinking market.

Egypt currently consumes 70 million kilograms of tea annually, 9 million of which are imported from India, which seeks to increase its exports beyond the marginal growth of 5 million kilograms it witnessed in 2006.

Up until 1998, India exported an estimated 15 million kilograms of tea to Egypt annually, but with the inking of the Common Market for Eastern and Southern Africa agreement in 1999, Egypt imposed a 30% import duty on Indian tea in favor of COMESA members Uganda and Kenya.

Indian tea exports to Egypt significantly dropped in light of the high duty until Egypt slashed the duty to 5% in 2005. While exports to Egypt have increased, there is growing focus on further increasing export figures. India’s Union Commerce Ministry is setting up a tea center in Egypt to boost Indian tea exports. The tea center will be set up as a private-public partnership (PPP). Some leading producers will team up with the central government to set it up.

The Center will be a PPP with the Indian Tea Board and the industry sharing the rentals. The Tea Board, under its market-access initiative plan, will contribute 75% of the rentals in the first year, which will gradually be tapered off to 50% in the second year and 33.3% in the third year.

Kazakh Wheat to Top Import List

As Kazakh President Nursultan Nazarbayev visited Cairo last month, an agreement was signed to import 14 million tons of wheat at LE 1,195 per ton, LE 35 cheaper than American wheat.

The government is aiming to put Kazakhstan on the top of the list of wheat providers to Egypt. Mohammed Abdel Fadil, head of the Egyptian-Kazakh Business Council, clarified that Egypt would not depend on just one country for its supply of wheat.

Egypt imports 5.3 million tons and produces 2.8 million tons of wheat per year, bringing the country’s total consumption to a little more than 8 million tons, mainly imported from the US, France and Russia.

Indian Investments to Increase to $1.2 billion

India’s Ambassador to Egypt A. Gopinathan expects Indian investments in Egypt to reach $1.2 billion within the next two years.

The ambassador added that India is the twelfth-largest foreign direct investor in Egypt, with investments worth $450 million invested across 40 projects. The largest of these is a phosphoric acid factory in upper Egypt with investments worth $350 million by the Indian Fertilizer Company, which holds 76% of the factory, with the remaining 34% held by Nasr Metallurgy.

Indian-Egyptian trade has been growing significantly over the last two years. Egypt ranked among the top exporters to India and India ranked fourteenth to Egypt, up from twentieth in 2005.

Emaar Misr Listing Request Denied

At the beginning of March, Emaar Misr put in an official request to the Capital Market Authority (CMA) and Misr Clearing, Settlement and Depository (MCSD) to list its shares on the Cairo and Alexandria Stock Exchange (CASE)

On March 25, Arabic financial daily, Al-Alam Al-Youm, reported that the request had been refused by the CASE Listing Committee, which refused to list the company’s shares on the unofficial list stating that Emaar Misr had not filed its financials for the last year.

The Committee added that the company’s profit was not generated as a result of its operations and therefore does not meet the listing requirements which state that at least 1% of the company’s profits be generated by its operations and that it has to file for at least one year. The Committee did not divulge any further information as to the source of Emaar Misr’s profits.

Emaar Misr sources denied the violations stated by the listing committee, insisting that they had handed in their financials, that the company had been operating for at least a year, and that it had held its AGM which reviewed its financials and showed that 1% of its profits were the direct result of its operations.

Disagreements had erupted between Dubai-based Emaar and its local partner, investment and development group, ARTOC Egypt, headed by Shafiq Gabr late last February. Emaar accused ARTOC’s Gabr of compromising on quality and claiming that it would raise its share in the partnership to take control of management. Gabr had retorted by saying that ARTOC would more likely buy Emaar’s share than vice versa.

At press time, the business community was waiting for a team from Emaar to arrive in Cairo to finalize the deal in which they would buy out ARTOC’s 60% share in Emaar Misr for an estimated $162 million. Company officials were not available to comment on the issue.

ETA Launches Website’s Phase II

The Egyptian Tourism Authority (ETA) has launched the second phase of its website, www.egypt.travel, which has received 2.2 million visitors since it launched last June. The second phase provides tourists with advice and resources to help them make the most of their trip.

With the aim of providing tourists with a one-stop online shop, Ahmed El-Khadem, chairman of the Egyptian Tourism Authority, said that the revamped portal provides useful information with an improved layout, more detailed content and innovative features such as an online audio-enhanced Arabic lexicon which enables tourists to learn some basic phrases to get around during their visit. It also features travel information such as visa requirements and contact information that would be useful to tourists. The website, launched in March of last year, is available in six languages and will soon add three more.

Egypt was the first international tourist board to register on the new ‘.travel’ top-level domain. An integrated marketing campaign entitled ‘Gift of the Sun’ is designed to double global visitor numbers from eight million in 2004 to 16 million by 2014.

OHD and Kharafi Group Seek Lake Qaroon Project Ownership

Orascom Hotels and Development (bt100 number 32) and Kuwait-based Il-Kharafi Group have asked the Ministry of Tourism to allow them to gain ownership of the proposed tourism project on the northern shore of Lake Qaroon in Fayoum.

The ministry is offering a plot of land for development on the north shore of Lake Qaroon under a 25-year lease.

OHD and Il-Kharafi were concerned that it would not be easy to convince investors to invest billions into a project that they would not be able to reap profits from if the company were only to lease the land for 25 years. Along with Al-Kharafi Group, OHD is negotiating with the Ministry of Investment to convince the Ministry of Tourism to adopt the same requirements set by the Tourism Development Authority, which allow investors to own their projects in the tourist areas.

The plan for Lake Qaroon includes 28,000 hotel rooms built on 6,000 feddans, with investments worth LE 55 billion.

Americana Buys Se?orita

Kuwait Food Company (Americana) Chairman Moataz El-Alfy revealed plans to buy the remaining 20% of chips and sweets producer Se?orita. Americana had bought 80% of the company in 2005 in a plan to expand and acquire other companies operating in the food industry that would help it raise its exports and supply its restaurants.

Se?orita encompasses three businesses: May Misr, Leader and Se?orita. Americana’s portfolio includes frozen french-fry maker Farm Frites, dairy producer Greenland, Americana Canned Goods and Egypt Starch and Glucose.

Pharos Bids for PACHIN

Pharos Holding for Financial Investment’s Middle East Paints has put in an offer to fully acquire Paints and Chemicals Industries (PACHIN, bt100 number 53) offering LE 53 per share.

Middle East Paints was established by Pharos specifically for the acquisition, and is banking on an increase in local demand and the potential for regional expansion in order to make the deal worthwhile, according to Pharos Chairman Elwy Taymour.

Pharos is part of a consortium of Arab and Egyptian investors including Amwal Al-Khaleej, Al-Rajhi, the Overseas Direct Investment Fund and the Grand View Direct Investment Fund.

The total value of the deal is LE 1.06 billion with Pharos requiring a minimum 50% +1 of the company’s shares. The offering price is higher than Pachin’s six-month average price of LE 40.99 by 30%.

New Building Law

Minister of Trade and Industry Rachid Mohamed Rachid reaffirmed that the construction and real-estate investment sectors need a unified policy and framework over the next 15 years to achieve urban development in Egypt.

Rachid added that an agreement has been reached with Housing Minister Ahmed El-Maghrabi to set prices for the land needed for industrial services such as storage and markets at the same price as industrial land.

The announcements came at a meeting with members of the General Chamber for Real Estate Investment in the Commercial Chamber, headed by Hisham Talaat Mostafa, chairman of the Talaat Mostafa Group. Rachid added that the government is keen to offer extensive support to the construction and building sector and real-estate investors, pointing out that the government has drafted the unified building law which will soon be presented to the Shura Council and People’s Assembly.

The law will include clauses on urban planning to build harmonized communities by eradicating the phenomenon of slums and squatter settlements.

Kharafi Granted Permission for Fayoum Chemical Plant

The Ministry of State for Environmental Affairs has finally approved a license for Kuwait-based Al-Kharafi group to set up a chemical-industries compound in the Lake Qaroon area in Fayoum.

The project will be built on a total area of 4,000 feddans and executed in two phases with total investments worth $620 million and will create 5,000 new jobs.

Environmental authorities had been accused of hindering the licensing process. The MSEA clarified that EMAC, Al-Kharafi’s information systems subsidiary, hadn’t submitted its environmental plan regarding the extraction of salts from the area so as not to affect the area’s natural biodiversity. The Qaroon lake is a protected area.

The first phase of the project will set up a plant producing sodium carbonate at a capacity of 220,000 tons per year, sodium chloride at 250,000 tons per year in addition to a hydrochloric-acid production facility with a capacity of 30,000 tons per year.

The second phase will add a plant producing calcium chloride at a capacity of 232,000 tons per year, magnesium at 150,000 tons per year and a cement facility with a capacity of 32,000 tons per year. A large part of the project’s output will be for export.

China’s Sinochem Bids for US Assets in Egypt

Amid declining reserves at home, official statistics showed that energy-hungry China imported 47% of its oil requirements in 2006, an increase of 4.1 percentage points compared to the previous year.

As it tries to secure energy sources abroad, China’s largest oil-product trader, Sinochem Corporation, has been buying up oil assets around the world. In February, Sinochem’s Cayman-based unit, Sinochem Petroleum, acquired 100% of US-based New XCL for $218 million. At the beginning of March, the company announced plans to bid for Devon Energy Corporation’s Egyptian oil assets, adding to its overall global oil and natural gas reserves of roughly 100 million barrels of petroleum equivalent.

Sinochem also has oil-exploration projects in Tunisia, the United Arab Emirates and Ecuador. The report on Sinochem came as China’s key economic planning body announced that energy industries in nine oil-producing countries were on a short list of “suitable” countries for Chinese investment. Among the countries were Kuwait, Qatar, Jordan, Morocco, Libya, Nigeria, Norway, Ecuador and Bolivia.

Although apparently not on the official list issued by the National Development and Reform Commission, Chinese oil companies also do business with some of Africa’s more unsavory regimes. China has major investments in energy resources in Sudan and Angola, sparking criticism from the West that Beijing is only interested in plundering the continent’s vast natural resources and ignores human-rights issues.

Corrections and Clarifications

For our February 2007 story “A Bargainer’s Dream, a Brander’s Nightmare” (page 54) we accepted multiple interviews with NileStock partners Ibrahim Kamal and Mai El-Sherif.

Although the story in question did not claim any wrongdoing on the part of Kamal, El-Sherif or NileStock, it did take a critical look at the industry in which they do business.

“We do not sell illegal or smuggled goods,” says Kamal, whose family has a long history in the textiles and garment industry. “We have agreements with local manufacturers of a number of major global brands to sell surplus production in our outlets. Our business is to sell durable and fashionable goods at reasonable prices.”

The story did not intend to present NileStock, Kamal or El-Sherif in a negative light. We regret the inference.

Also, El-Sherif notes that in one instance, she drew an analogy on pricing that does not necessarily reflect the true cost of items in her stores or in other retail outlets.

In our March 2007 story “Credit Where Credit Is Due” (page 94) we incorrectly noted the composition of the Egyptian Credit Bureau (iScore)’s board of directors. The full board includes: Mohamed Ahmed Abd El-Salam Kafafi (Banque Misr, chairman), Mahmoud Abd El-Aziz (vice chairman), Mohamed Refaat Al-Houshy (managing director), Tarek Raouf Faek, Mohamed Nageeb Aly Ahmed (National Bank of Egypt), Mohamed Mashour (Banque du Caire), Hesham Hamdy (Bank of Alexandria), Sahar El Damaty (HSBC), Azza Ahmed Radwan (Commercial International Bank–Egypt), Adel Ezzat (Piraeus Bank) and Yehya Mohamed El-Said El-Agami (Social Fund for Development)
 

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