Show commitment to country ahead of licence award

MTC’s move to establish an office in Cairo ahead of the award of a third GSM licence at some point this year, appears to be a similar approach to the one utilised successfully by MTN in Iran.

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By  Tawanda Chihota Published  February 8, 2006

|~|Phuthuma2001.jpg|~|MTN Group CEO, Phuthuma Nhleko believes in making long-term commitments to countries in which the operator invests. |~|The ‘MTN school of licence acquisition’ appears to have received another pupil with news that Kuwait’s MTC has opened an office in Cairo, ahead of gaining any operational foothold in the North African country of over 75 million inhabitants. Last year, South African operator MTN opened an office in Tehran despite having seemingly been beaten to Iran’s second GSM licence by Turkish investor Turkcell. Rather than retreating from the market and concentrating on new opportunities, MTN not only expressed its interest in remaining in the country long-term, but backed up this position by establishing an office in the country with the intent of entrenching itself ahead of the award of a third GSM licence, scheduled for next year. MTN stood as the Iranian government’s first choice of partner when negotiations with first-placed bidder Turkcell broke down, and by the end of the year, the South African operator had replaced the Turkish operator as the foreign investor in the Irancell operation. MTC’s move to establish an office in Cairo ahead of the award of a third GSM licence at some point this year, appears to be a similar approach to the one utilised successfully by MTN in Iran. Interestingly though, MTN has also expressed an interest in acquiring the Egyptian licence, and has already partnered with two local Egyptian investors in a bid to gain greater credibility for its bid. Add to this Etisalat’s interest in the Egyptian licence, and the award process is set to be a hard-fought affair. The operator’s chairman and CEO, Mohammad Omran recently referred to his company’s ongoing efforts to secure the funding required for future similar foreign investments. The operator’s financial results for 2005 reflect the performance of an already competent player looking to do even better through foreign expansion, reflecting a 23% increase in revenues year on year to AED12.9 billion (US$3.51 billion), and net profits surging by 25% year on year to AED4.3 billion. ||**|||~||~||~|MTC has also reinforced its investment war chest, having confirmed that it is seeking a syndicated loan of up to US$5 billion to “finance the company’s expansion plans in the coming period, helping the firm’s strategic goals”. With fewer greenfield licence opportunities available in the region, there is likely to be a scarcity premium paid for any forthcoming concessions, and participation in such processes is therefore likely to be restricted only to the larger, regional players. The next significant highlight in terms of the licensing calendar in the region this year is likely to be the renewal of the three GSM licences in Iraq – concessions that offer high potential return on investment, but at the same time attract significant risk as well. The three incumbent operators – MTC Atheer, Iraqna and Asiacell – have made significant strides in connecting Iraq’s underdeveloped regions, adding over 3 million users amongst them in a little over two years of operation. The process to renew the licences, set to occur in 2H06 is likely to attract the attention of all the main regional investors, and given the incumbent operators’ desire to extend their licences beyond their current two-and-a-half year validity, will likely generate some significant cash for the Iraqi treasury. ||**||

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