Orascom on the up, but challenges remain

It has managed to pay off a large debt and its subscriber base is growing, but the Egyptian GSM group still faces challenges.

  • E-Mail
By  David Ingham Published  April 29, 2003

Orascom Telecom appears to be largely out of the soup, but still faces some fairly pressing challenges. That’s the gist of a recent report from Pyramid Research on the once huge, but now considerably slimmed down, Egyptian GSM operator.

The analyst house notes that the company has cleared much of its debt by selling off many of its holdings and refocusing on four markets with growth potential: Algeria, Egypt, Pakistan and Tunisia. On the other hand, Pyramid believes that the company urgently needs to sell off its stake in Telecel, an operator in sub-Saharan Africa.

Recent plusses for Orascom were the sale in January of Jordan’s Fastlink to MTC of Kuwait in a $424 million deal, most of which was cash. That enabled it to complete the repayment of a $187 million debt to Alcatel and Siemens.

On the subscriber front, the news was largely positive too. Growth in subscribers at Orascom’s Pakistani and Algerian operations was substantial in 2002, although Egypt’s performance was a disappointment. Tunisia’s Tunisiana, in which Orascom holds 50%, is believed to be nearing the 200,000 subscriber mark, despite only launching in December 2002.

“Each of the four countries… host large populations with low mobile penetration rates relative to other markets in the region,” notes Joseph Braude, senior analyst at Pyramid Research. “Thus, long term prospects for profits are strong.”

The major challenge for the company, Pyramid argues, is to offload Telecel. Telecel is described by the analyst as a “maverick investor” that is suffering from political chaos in two of its former crown jewels, Ivory Coast and Zimbabwe.

There seems little chance of recouping the $413 million paid for the company. “Ultimately, shedding this strategic liability is a goal worth pressing for, despite the likely capital loss,” says Braude.

Another potential challenge is the imminent entry of Egypt Telecom as a third mobile operator in Egypt. Osman Sultan, president of Mobinil, claims to be unfazed by the prospect, however.

“Since we started, all our business plans have taken into account the possibility of a third entrant when the duopoly period ended,” he says. “Ultimately, there is a very simple recipe. If you make [customers] happy, there is no reason that they will seek another operator for mobile services.”

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code