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)