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AmerCable Incorporated

Egypt's Economy in the Eyes of the World bank

World Bank to Egypt: You Stink

Bt Business Today - Egypt

By Fatima El-Saadani, Andrew Bossone, Hania Moheeb and Dan Reese

Out of the 175 economies reviewed by World Bank Group’s Doing Business Index, Egypt is ranked 165, putting it ahead of only poverty-stricken countries such as Sierra Leone and Eritrea, many of them with active civil wars.

The index ranks the economies based on the ease of doing business. Using 10 equally-weighted indicators developed by the World Bank Group’s finance and private sector vice presidency, economies are assessed in various categories, from the ease of starting a business and hiring employees, to the degree of investor protection.

While the rankings are based on studies of existent laws and regulations, interviews with regulators or private-sector professionals, and cooperative arrangements with other departments of the World Bank and other donor agencies, the index is still limited in scope, as admitted by the index methodology documents.

The index fails to take into account every country’s location and proximity to markets, the quality of its infrastructure services, property security from theft, macro-economic conditions or the strength of underlying institutions.

The 175 economies covered by the survey for the 2007 report include 22 high-income Organization for Economic Cooperation and Development economies as benchmarks, 28 economies from Europe and Central Asia, 45 from Africa, eight from South Asia, 31 from Latin America, 17 from the Middle East and North Africa and 24 from the East Asia and the Pacific region.

Among the 155 countries surveyed for 2005 and 2006, Egypt dropped from number 141 in 2005 to 146 in 2006. While indicators on starting a business have improved (from 115 to 113), licensing a business has become harder according to the survey, bringing Egypt down from 146 to 149.

The report claims that even closing a business has become more challenging (from 106 to 113) and despite the changes to the tax law, paying taxes has become more difficult in the opinion of the World Bank.

On the bright side, Egypt can congratulate itself on the increasing ease of hiring labor (from 140 to 128) and registering property (from 129 to 125).

By comparison, the World Economic Forum’s Global Competitiveness Index for 2006, released last year, Egypt ranks sixty-third — down 11 places from 52nd in 2005. The Index ranks Switzerland and Scandinavian countries as the most competitive economies in the world, proving that competent macro-economic management, world-class education and a focus on technology are the key to competitiveness. Egypt finished one place behind Russia on the WEF index.

Egypt Revives Nuclear Power Program

Just before Ramadan, Egyptian officials announced plans to revive the country’s civilian nuclear power program that had been frozen 20 years ago after the Chernobyl nuclear disaster in the former Soviet Union.

A fully functioning nuclear power plant will be built in the Mediterranean city of El-Dabaa within 10 years’ time to meet demand for electricity, which increases about 7% per year, threatening the country with upcoming shortages.

The plant is expected to cost an estimated $1.5 billion and the government says it will seek foreign investment for the project.

The plan for nuclear power was revealed by Gamal Mubarak at the National Democratic Party’s annual meeting. Political commentators see the meeting as preparation for Gamal’s succession to the presidency. Meanwhile, Minister of Foreign Affairs Ahmed Abul-Gheit welcomed the International Atomic Energy Agency endorsement of Egypt’s proposal to apply the safeguards system of the IAEA to all nuclear activities and installations in Middle East countries, including Israel.

Arab countries accuse Israel of ignoring its IAEA obligations.

Indian Giant Buys Finacée Hair Care

Indian beauty-products maker Marico has acquired Fiancée, the Egyptian market leader in hair care products. Fiancée, which controls about 20% of the estimated LE 215 million market, manufactured and marketed its products under the Ready Group brand for 15 years. Financial details of the deal were not disclosed.

According to Indian news sources, this is Marico’s fifth acquisition in 18 months. International sales have contributed to about 10% of the Indian company’s revenues.

“This footprint in Egypt will help us widen our strides in the international haircare market,” Marico Chairman Harsh Mariwala said in a company statement.

Marico has made the first of its payments, which will continue through the next six months using a short-term loan. Ernst & Young India advised Marico on this transaction. The Ready Group was advised by HC Securities & Investment, Cairo, Egypt.

Vinci Group Tops Leader Board for Metro

The financial bids for Cairo’s third Metro line revealed France’s VINCI Construction Group to be in the lead with the lowest offer, just undercutting competition from Spain’s Obrascón, Huarte and Lain. The project’s civil works budget is estimated at 300 million (LE 2.2 billion).

The third line will connect urban centers from northwest Cairo in Imbaba to the northeast in Heliopolis, eventually extending to serve Cairo International Airport. The third line will cross the Nile and extend for an approximate total length 30 kilometer, most of which will be underground.

The French company offered the bid in partnership with Arabco, Bouygues and Orascom Construction Industries (bt100 number 2).

VINCI has also undertaken projects such as the Athens metro and the Budapest and St. Petersburg railways.

Industrial Exports Rise

Minister of Finance Youssef Boutros-Ghali announced that recent GDP growth has been fueled by a 25% increase in export revenues during the last year, in addition to increased private sector investment.

A 30% increase in industrial exports indicates that Egyptian products are becoming more competitive in the global market. The recent changes seen in the economy are promising, especially as the government strives to regain investors’ trust.

Speaking at the Euromoney conference held on September 11, Boutros-Ghali said there were expectations of a 12% decrease in tax revenues during the first year of the new tax law, and 5% during the second, with increases expected only three years after its introduction. Collection figures since the new tax law came into effect, however, show a 17% increase in revenues.

The minister added that the distribution of subsidies should be revised to reallocate the current LE 40 billion in energy subsidies and LE 30 billion in educational subsidies to services that the public would rather have, to be determined by a national poll.

Tea for Two

The Tea Board of Kenya says Egypt is the largest market for Kenyan tea, overtaking Pakistan as its top importer.

Tea is increasingly becoming one of the more important import goods for the country. From 1994 to 2003, imports rose by 38%, and national consumption by nearly 36%, according to the Food and Agriculture Organization of the United Nations.

Under the Common Market for Eastern and Southern Africa, Kenya has had a competitive advantage since 1998 with only a 3% tax, which has helped it overtake Sri Lanka as the biggest tea exporter to Egypt.

In March, the Ministry of Investment also opened the market from India by reducing its tea import tax from 30% to 5%. India is the world’s largest producer, and could take advantage of a drought in Kenya that has reduced its exports by 16% from last year.

Naeem Holding to List on CASE?

Naeem Holding has asked list its shares on the Cairo and Alexandria Stock Exchange, with a capital of $240 million distributed among 240 million shares at a par value of $1 per share.

The CASE administration has since announced that the listing committee might decide to list the shares as unofficial schedule 2.

Naeem Holding is an Egyptian company with majority stakes held by Saudi Arabia-based Naeem that has taken over several other Egyptian companies operating in the field of investments and securities.

Benefits from Deficit

Egypt now has a trade surplus of $395 million through the first three quarters of 2006, a shift of more than $1 billion from the end of the previous year’s deficit of $700 million.

Although a free trade agreement with America is still on the shelf, Egypt is certainly benefiting from the Qualified Industrial Zones agreement, particularly in textile exports, which rose to $252 million during the first four months of 2006, according to the Ministry of Trade and Industry.

Meanwhile, the US trade deficit has exploded under President George W. Bush. The US Department of Commerce reports it has risen to $218.4 billion through June of this year. Although the US has been one of Egypt’s strongest trade partners, Minister of Trade and Industry Rachid Mohammed Rachid said China will likely supplant America in a few years.

Crédit Agricole Egypt ups EHFC Stake

Crédit Agricole Egypt has upped its stake in the Egyptian Housing Finance Company from 40% to 50%, buying up the Bank of Alexandria’s stake. Crédit Agricole Egypt President Yassin Mansour had announced that real estate financing was one of the two sectors the bank is considering expanding into.

EHFC was established in 2004 and began operations in 4Q04. The company has a paid-in capital of LE 50 million and an authorized capital of LE 100 million. The company is 50% held by Crédit Agricole Egypt, 20% by the International Finance Corporation, 20% by the OPEC Fund for International Development and 10% by India’s Housing Development Finance Corporation.

EFG-Hermes ReceivesEgyptian Online Trading License

Late in September, Egypt’s Capital Market Authority granted EFG-Hermes (EFG, bt100 number 26) a license to provide online trading services in the country.

EFG launched online trading services in the UAE last May, after which the company’s trading volumes grew tenfold in a market where online trading accounts for more than 15% of activity. In the Saudi Arabian market, online trading accounts for more than 50% of traded volume.

EFG, established in 1984, is a regional investment bank and market leader in securities brokerage, asset management and private equity with a market capitalization in excess of $2 billion. Besides its regional investment banking operations, EFG recently acquired a leading stake in Lebanon’s Bank Audi.

In the UAE, EFG recently inaugurated its Brokerage Contact Center — a hub for more than 600 IP-based phones in the region — allowing EFG-Hermes clients to buy or sell UAE securities and access stock and cash-position information by telephone.

UAE Bank Eyes NBD

The National Bank for Development announced that an as-yet-unnamed UAE-based bank has received approval from the Central Bank of Egypt to conduct due diligence on NBD, a preliminary step towards its acquisition.

NBD was up for grabs before, when Commercial International Bank completed its due diligence, but dropped its bid in February 2006, setting its sights instead on newly on-the-market Bank of Alexandria.

While officials have denied that Union National Bank, National Bank of Abu Dhabi and Mashreq Bank are bidding for NBD, there are further rumors that Dubai Islamic Bank is a possible candidate, aiming to grab NBD’s 20 Islamic banking branches.

Selling NBD has been one of the suggested alternatives to increasing the banks’ LE 286-million capital to meet CBE minimum requirements of LE 500 million. NBD has recorded consecutive losses since 2002 as it has upped its provisions to cover non-performing loans. For 1H06, NBD announced net losses worth LE 50.7 million.

NBE Expands Regionally

The National Bank of Egypt opened three representative offices last month, one each in Dubai, Abu Dhabi and Sharjah, in a bid to expand its business across the Arab world.

A high-level delegation led by NBE Chairman Hussein Abdul Aziz also signed a partnership protocol with UAE’s Al-Fardan Financial Services Company to provide services to investors interested in the Egyptian privatization program and stock market.

The three UAE branches mark the first step towards regional expansion after the NBE’s earlier ventures into London, New York, South Africa and China.

Banque Misr’s assets top LE 160 billion

Banque Misr Chairman Mohamed Barakat announced that the merging of Banque Misr and Banque du Caire will be complete by the end of 2006, creating a strong new bank with assets worth LE 160 billion.

The new bank will operate under the Banque Misr name and should be able to compete against the new foreign banks that are entering the Egyptian market. The decision to merge the two banks was announced on September 25, 2005.

CIB Leads Suez Cement Refinancing

CIB arranged a LE 1.5 billion bridge facility for Suez Cement along with mandated lead arrangers Banque Misr, Bank of Alexandria, BNP Paribas, NSGB (bt100 number 23), Crédit Agricole Egypt, HSBC, Barclays Bank Egypt and Arab African International Bank.

The facility is a refinancing package originally extended to finance part of Suez Cement’s acquisition of ASEC Cement for a total LE 1.2 billion.

ASEC Cement (previously Helwan Cement) was sold for LE 4.6 billion in total, LE 3.4 billion of which was the value of the company’s shares. The remaining LE 1.2 billion has been financed by a medium-term loan granted when the sale was concluded last year.

The refinancing package covers both a four-year medium-term loan for LE 900 million and a revolving working-capital facility for LE 300 million.

Mobinil Loses its EDGE

The National Telecommunication Regulatory Authority reports it has ordered Mobinil to cease its EDGE service, which allows mobile users to view streaming video. The telecom regulator considers EDGE a third-generation (3G) technology that sends non-voice data transmission at three to five times faster than GPRS, which Mobinil currently operates using a 2G license.

An official from NTRA gave the mobile operator two weeks to discontinue EDGE, but Mobinil was not available to comment on the decision. Mobinil had previously said it believed EDGE was a 2G technology.

The current price for 3G license for both Mobinil and Vodafone is $580 million, higher than expected because of Etisalat’s $2.9 billion offer for its new license. Both companies refused to buy the 3G license.

Etisalat Prepares for 1Q07 Launch

After months of anticipation, Egypt’s third mobile license was awarded to the Etisalat-led consortium, which includes the National Bank of Egypt, the Commercial International Bank and the Egypt Post. The new operator, to be called Nile Telecom, will be 10% owned by NBE and 66% by Etisalat. Information on the division of the remaining shares was undeclared at press time.

As the consortium paid the LE 16.7 billion license fee and appointed its CEO, Saleh El-Abdouli, Etisalat revealed plans to grab 30% of the Egyptian mobile phone market within five years by offering a combination of new technologies, better tariffs and a raft of new services.

El-Abdouli’s appointment emerged amid ongoing rumors that Gamal El-Sadat, CEO of Mashreq Telecom, would be named chairman of the company.

El-Abdouli has chosen Sweden’s Ericsson and China’s Huawei to build Egypt’s third mobile network for a total $1.2 billion, preparing Etisalat for operations by the beginning of 2007.

The first stage of operations will include Cairo, Alexandria, Sharm El-Sheikh and Hurghada and might be extended to cover other zones to reach as many people as possible.

El-Abdouli said that the third operator has the right to bid for an international services portal, which would be a big boost for the new company. The country’s current operators have more than 15 million subscribers — a tele-density of less than 20%, which is expected to increase to 35% in the next three years.

Etisalat plans to list 30% of Nile Telecom on the CASE in line with Egyptian financial laws, as well as on the UAE markets after meeting regulatory requirements, generating more exposure for the company with the dual listing.

The consortium’s partners will be represented in the board according to the size of their shares. At press time, the board was scheduled to hold its first meeting by the end of September.

Menatel-EgyNet Merger

The National Telecommunications Company revealed that Menatel and EgyNet investors have agreed to merge the two companies to expand the scale of their operations in the market.

Menatel operates payphones and EgyNet builds digital infrastructure.

The financial weekly Al-Mal indicated that the merger comes in preparation for the upcoming international telecommunications license that the National Telecommunication Regulatory Authority will soon offer to the market.

The National Bank of Egypt and NTC each hold a 36% stake in Menatel, with 15% held by Edcom — a telecom network equipment provider — and 4% by small investors. EgyNet investors include the NBE, US-based Quantum Fund, Commercial International Investment Company and the National Company for Investment and Development, to name a few.

Raya Does Oracle Project for OCI

Orascom Construction Industries (bt100 number 2), one of the world’s top 100 construction companies and a leading global cement producer, has contracted Raya Holding’s (bt100 number 17) IT subsidiary, Oratech, to implement Oracle HRMS HR-automation package.

OCI has undertaken massive expansion with new investments in the UAE, Algeria, Northern Iraq, Pakistan, Turkey, Nigeria, and Spain, which have created a 30-million-ton increase in annual production capacity, necessitating advanced data-handling systems such as the Oracle HRMS, company officials say.

Raya’s Oratech will implement I-recruitment, a self-service interface that acts as human resources intelligence to manage all aspects of the hiring process. These applications will be extended to learning management and time and labor systems.

WD Opens Service Center in Egypt

Western Digital opened a new service center in Egypt to cater to customers in North Africa.

WD is a leading data-storage and hard-disk maker, supplying both PCs and gaming consoles. Its Egypt-based service center will receive malfunctioning drives and send them to the distributors, who in turn will get credit or replacement.

Recognizing the importance of the North African markets and identifying Egypt as the regional technology hub brought WD to set up its regional service center in the country, offering the best value proposition in terms of after-sales service. The Egypt-based center complements another in Dubai’s Jebel Ali, with estimated turnaround time for product replacement of less than a week.

The new center will particularly benefit Egyptian customers with data-sensitive applications, as malfunctioning drives will not need to be shipped out of the country.

LinkdotNet Ushers in Online Gaming

LinkdotNet, Orascom Telecom’s, (bt100 number 1) IT service and solutions provider in Egypt and the Middle East, finalized a partnership agreement last month with Boomtown, a leading developer and online game provider.

The service — available to LinkdotNet’s ADSL subscribers — will provide news of active, multiplayer online games such as Counter Strike, Medal of Honor: Allied Assault and Battlefield 2.

Boomtown services in Scandinavia are provided through internet café franchises as well as a website portal.

Boomtown CEO for the Middle East and Africa Ashraf Iskandar says 43% of all internet-connected households in Western Europe play online games at least once a week, and says no less is expected for the Middle East.

ARINC Executes Terminal 3 IT Project

ARINC Incorporated has been selected to provide advanced passenger check-in systems and related technologies for the new Cairo International Airport Terminal 3.

The Cairo Airport Company has launched a $400-million project which includes construction of Terminal 3 and other improvements, partially financed by the World Bank.

ARINC will provide CAC with $22 million worth of design, project management and installation of 14 mission-critical airport IT systems, from passenger check-ins and displays to biometric gates and ramp control for the terminal scheduled to open in 2008.

The project will feature the first context-aware platform for airport ramp management in the world, automatically switching IT applications according to user profiles, the first common use self-service installation in the Middle East to speed passengers through check-in, and the first custom Biometric Immigration Gate system in Egypt. Biometric systems measure an individual’s unique characteristics, such as fingerprints or retinas, and provide for streamlined emigration and immigration control.

El-Hanash Debacle Continues

Minister of Investment Mahmoud Mohieldin said last month that plans to sell Omar Effendi, the largest state-owned retailer, to Anwal would continue despite the recent debacle caused by Egyptian-born, Saudi Arabia-based investor Saeed El-Hanash.

The strangest chapter yet in the convoluted, decade-old privatization process unfolded during the first weekend of September as the Holding Company for Trade and ministerial officials waited for El-Hanash to send in a $40 million letter of credit or meet with officials at the Holding Company headquarters in Cairo. El-Hanash failed to appear.

After having sent in a LE 2 billion offer for Omar Effendi — double the LE 1 billion offer by Saudi Arabia-based Anwal — El-Hanash asked to pay for Omar Effendi in installments with a LE 50 million down payment, with the remainder to be paid over two years.

Accusations had been made against Anwal that it had employed El-Hanash to top their offer with a bogus proposition and then withdraw, making Anwal’s offer seem more attractive. Anwal’s Cairo representative, Magdy Tolba denied any of this was true.

At press time, the Ministry of Investment released a statement announcing that the deal with Anwal would go through.

China’s Citic to Build Smelter in Egypt

Citic Group, China’s biggest state-run company, plans to build an $800 million (LE 4.6 billion) aluminum smelter in Egypt. The smelter will be built by a consortium in which Citic will hold an 85% stake, with the balance held by a group of Egyptian banks. Citic was established in 1979 and currently owns 44 subsidiaries operating in various industries.

With China recording 11.3% growth in 2Q06, the country aims to tap into more commodity supplies overseas to feed its booming economy, especially as its demand for aluminum is estimated to grow almost 20% per annum through 2010.

Initial investments for the smelter amount to $300-350 million (LE 1.7-2 billion) and will reach full capacity of 270,000 tons of aluminum bars per year in five years. It is not clear yet how much will be exported to China and how much exported to global markets, but sources revealed that the plant will be powered by natural gas, thereby cutting production costs.

The deal was announced at the end of Minister of Trade and Industry Rachid Mohamed Rachid’s first official visit to China, during which he declared China was on its way to becoming Egypt’s top trade partner. (See related story page 46.)

Ataqa Grabs Suez Steel

Misr National Steel (Ataqa) won the bid for the 82.13% public stake in Suez Steel with an offer of LE 246.5 per share for a total of LE 1.1 billion.

The public stake is 78.40% held by Banque du Caire and 3.73% by Misr Insurance. Ataqa will have to also buy the remaining 17.87% private stake for the same price. An offer by Al-Tuwairqi group missed Ataqa’s by LE 1 per share.

Ataqa will pay LE 300 million of the total deal value to settle debts owed by Suez Steel to Banque du Caire. The remaining LE 500 million in debt will be repaid in installments.

Suez Steel was established in 1997 with an authorized capital of LE 600 million with a total 1.36 million shares worth LE 100 each and a paid-in capital worth LE 136.5 million. Industry sources expect Ataqa to invest $100-150 million to set up a billet (raw material for re-rolling steel) unit at Suez Steel — a 600,000-ton billet company situated five kilometers south of Suez.

Five contenders vied for the stake, including Amwal Al-Khaleej Commercial Investment Company, Rajhi Steel and the Essar Group.

Amwal Earmarks Funds for Acquisitions

Amwal Arab Holding Company has set aside LE 600 million to acquire a number of companies, including 100% of Nile Modern Cotton Company at LE 345 per share, AAHC CEO Hany Alama announced last month.

AAHC is 43% held by Arabia Cotton Ginning Company (bt100 number 75), 43% by Amwal Al-Khaleej, 1.5% by Arab Polvara Spinning and Weaving (bt100 number 58) and 2% by the Agricultural Cooperative for Land Reform and Development. Individuals hold the remaining 10.5%.

AAHC had injected LE 50 million into the subsidiary Egyptian Company for Spinning and Weaving to raise its capital to LE 100 million as a first step, and it will also inject another LE 60 million to further increase capital to facilitate the installation of new machines, raising the number from 48,000 to 160,000.

The deal, worth LE 248 million, will result in profits of LE 105 million for Arabia Cotton Ginning Company. AAHC will also buy 50% of the Egyptian Company for Spinning and Weaving, which started production in March 2006.

(For more on the Egyptian textile industry, including the first news of the Amwal deal, see our August 2006 story “Spinnin’ ‘n Weaving.”)

Rashpetco Receives BG Innovation Award

Rashid Petroleum Company was awarded BG Group’s Chief Executive Innovation Award for General Technology Applications for 2006.

Rashpetco, established in 1997, conducts development and exploration operations and produces gas and condensates on behalf of Rosetta concession holders.

The company — 20% held by BG International Limited, 20% by Shell Egypt and Shell Austria, 10% by Edison Gas and 50% by the Egyptian General Petroleum Company — initially produced around 100 million standard cubic feet of gas per day.

Rashpetco won the General Technology Application award for the success of its ‘From Toxic Waste to a Safe Commodity’ project. This project overcame the environmental and operational challenges posed by a hazardous salt-waste by-product from the Burullus gas processing plant, incinerating the waste in the high-temperature cement kilns of the Egyptian Cement Company, a process that has since been approved by the Egyptian Environmental Affairs Authority.

TRAVCO Partners With ADNH

Travco, with 10% market share of Egypt’s inbound travel market, is expanding its regional presence through its Dubai office and branch offices in Oman and Abu Dhabi. It has partnered with Abu Dhabi National Hotels Company to create a new tourism investment company focused on the UAE market.

At press time, Travco and ADNH had not announced the name for the new company.

Travco has launched its first resort in Dubai, the $44-million Iberotel Royal Miramar Fujairah Hotel, with plans for a $154-million expansion to begin in 2007. It also has plans to build four new hotels in cooperation with the government of Oman, starting with a $55-million project in Muscat.

Closer to home, Travco has launched a new hospitality brand under the name Jaz, with a brand’s portfolio to eventually cover resorts, hotels and cruises. The first Jaz resort, Jaz Mirabel Beach in Nabq Bay, Sharm El-Sheikh, is scheduled to open its doors in October. Travco will re-brand several of its Sol Y Mar resorts under the Jaz name, the first being the Sol y Mar Makadi Star in Makadi City, which will be called the Jaz Makadi Star. The Jaz Almaza in Marsa Matrouh, a newly built property, is set to open in the coming months.

Travco has also signed an agreement making it the official Egypt partner of Dutch-owned BCD Travel, the third-largest travel management company worldwide with operations in 96 countries. Travco hopes to benefit from BCD’s technological expertise, particularly its integrated database services available throughout their coverage area, which allow their clients to track all the elements of a traveler’s trips and associated costs.

Emaar Unveils Marassi Plans

After winning the bid for the 6.2-million-square-meter Sidi Abdel Rahman tract in July for a total LE 1.04 billion, Emaar Egypt unveiled plans for the development of its North Coast resort, Marassi.

  The LE 9.9 billion mixed-use project brings Emaar Egypt’s total projected investments in Uptown Cairo and Marassi to LE 33.6 billion. Marassi will stretch across seven kilometers of beachfront in Sidi Abdel Rahman on the North Coast. The resort is scheduled to be completed within five and a half years of the company receiving the land and will offer up to 3,000 hotel rooms, a marina, golf course, hospital, healthcare facilities and total township development.

Emaar is also responsible for other mixed-use community projects including Cairo Heights, Uptown Cairo, Smart Village and Bibliotheca Alexandria. Construction has already commenced on the LE 22 billion Uptown Cairo residential compound in Moqattam.

Vodafone Egypt

On September 19, Telecom Egypt’s (bt100 number 3) Investment Committee approved a tender offer to acquire up to 24.4% of Vodafone Egypt (bt100 number 5) at a 19% premium (LE 16 above the previous day’s closing price of LE 84).

TE already holds a 25.5% stake in the local GSM network operator and is the second largest shareholder after Vodafone Egypt’s parent company Vodafone Plc (50.1%). The stake TE is eyeing is held by Mohammed Nosseir’s Alkan (5%) and Banque du Caire (3.4%), with the balance being in free float on the Cairo and Alexandria Stock Exchange.

If the deal goes through, it could mean the de-listing of Vodafone Egypt from the CASE.

The offer of LE 100 per share raised discontented responses from international institutional investors, who considered the premium relatively low in light of the company’s inherent value and future prospects.

“TE can afford to up the price if it really wants the stake,” says Angus Blair of Beltone Financial. “It’s a state-run company with a good cash flow. It might not want to raise the price, but it could.”

Beltone Financial recently reported that it plans to upgrade its outlook on Vodafone and downgrade Mobinil (bt100 number 6) in light of Vodafone’s assertive management and new strategy of expanding its operations beyond the mobile market. Vodafone recently expanded its telecommunications service platform with its LE 104 million acquisition of 51% of Raya Telecom (see related story page 36).

Vodafone’s plans to expand included bidding for an international gateway license, one of the various licenses the National Telecommunication Regulatory Authority and the Ministry of Communication and Information Technology plan to offer in an attempt to further liberalize the telecom market. Licenses coming up for sale also include three WiMax permit.

“Unlike Gulf markets, where there are massive restrictions on the telecom sector, Egypt can flourish because it isn’t that strict and there is room for greater investments and ultimately greater usage,” Blair says.

As the sector is further liberalized, mergers are a more common means tapping into the lucrative future of the sector. Egypt has several companies serving the market, few of which were of considerable value on their own, preventing them from venturing into new operations and bidding for licenses such as the upcoming WiMax and international gateway alone.

TE had bid for Egypt’s third mobile license in partnership with Mobile Italia, ultimately losing to Etisalat. When the winner was announced, TE pledged to its investors that it would expand in fixed-line systems while exploring new revenue generation streams.




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