Mobinil profit hit as expenses double

Egypt's largest mobile operator sees Q3 income drop 8.5%, first quarterly profit decline in more than a year

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By  Will Rasmussen Published  November 1, 2007

Mobinil, Egypt's largest mobile operator by subscribers, posted its first decline in quarterly profit in more than a year as expenses almost doubled.

Mobinil said it made 472 million Egyptian pounds ($85.7 million) in the three months to the end of September, down 8.5% from the same period a year earlier and below analysts' forecasts.

On a proforma basis the company said third-quarter income had risen 8%. But its statement said last year's third quarter net income was 516 million pounds. The reason for the disparity was not immediately obvious.

Operating expenses surged 84% in the third quarter to 756.13 million pounds, according to the financial statement.

"The company has done a mass marketing campaign which has increased expenditures," said Walaa Hazim, analyst at HC Securities, which forecast a net profit of 529.87 million pounds in a Reuters survey. "This may have been the only way to add subscribers from the company's perspective."

The company said subscribers reached 13.72 million by the end of the quarter, a 69% increase from the same period a year earlier.

"By the closing of the quarter, Mobinil was cruising rapidly towards the 14 million subscriber milestone with the highest level of activation during a quarter with a comparable year over year growth to those of the first two quarters," Chief Executive Alex Shalaby said in a statement. "The 14 million subscriber figure was reached by the time of this release."

Mobinil said it had 1.82 million net additions in the third quarter.

Increased competition

Mobinil has previously said its profit and subscriber growth would slow as competitors entered the Egyptian market.

Mobinil competes with Vodafone Egypt, a subsdidiary of Vodafone Group, and Etisalat Egypt, a unit of UAE-based Emirates Telecommunications Corp. <ETEL.AD>.

France Telecom <FTE.PA> owns a 36.3 percent stake in Mobinil and regional operator Orascom Telecom has a 33% stake.

Mobinil's blended average revenue per user dropped 23% to 55 pounds, according to the statement.

The company has said it expects the figure to fall further as market penetration, which it has said could reach about 40% at the end of 2007, grows.

Third-quarter revenue increased 29% to 2.2 billion pounds, the company said. The operating margin fell 10% to 621.4 million Egyptian pounds.

"They are offering packages and promotions to make themselves more attractive to the end user," said Shrouk Diab, telecom analyst at Beltone Financial in Cairo. "This adds subscribers but has a negative effect on revenue [per user]."

Morgan Stanley had forecast in a Reuters survey Mobinil would make 556 million pounds in the third quarter. - Reuters

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