Telecom Egypt eyes acquisition targets

Telecom Egypt chief remains bullish about acquisition prospects amid economic downturn

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By  Roger Field Published  February 8, 2009

Egypt’s incumbent operator, Telecom Egypt, is actively looking to make acquisitions in 2009 in a bid to expand its geographical footprint, the company’s chairman and CEO, Akil Beshir, told CommsMEA.

“We are looking for opportunities to expand geographically and once we have the right opportunity we will jump on it. Our preference, and this is not conditional, is the MENA region, an integrated fixed and mobile operator, and an existing operation rather than green field,” Beshir said.

He added that the company would also consider opportunities throughout Africa, and would not rule out buying a green field licence or a “purely fixed line” operation.

Telecom Egypt appears well-placed to benefit from any bargain acquisition targets that arise as a result of the financial crisis, with a low debt-to-equity ratio giving the company sufficient funds to buy assets, according to Beshir.

“More assets will be available at more attractive prices. With the current situation, less people are willing to overpay and our advantage is we have the cash. We are cash rich. Our debt equity ratio is less than 20% so we have the privilege of having the cash to finance an acquisition,” he said.

But Beshir also conceded that in the short term, certain acquisition targets may remain overpriced or out of the market, as vendors are reluctant to sell assets at depressed valuations. He confirmed that Telecom Egypt had recently been in negotiations with an operator that was for sale, but the owner decided against a sale because it would have been unable to get the price it wanted. “We would never overpay for an asset,” Beshir added.

Ghassan Hasbani, a partner with analysts Booz & Co, said he expects to see “some big acquisitions” in the Middle East and Africa’s telecom sector before the end of the second quarter of 2009. More realistic premiums could lead to increased M&A activity, most likely with some of the region’s heavyweight operators buying smaller players in the region, or in Asia, according to Hasbani.

“A transaction is bound to happen. Sellers have been more reluctant than the buyers at this stage. There are a few companies with good cash positions able to buy – the question is whether the seller is ready to sell at a lower cash premium than they are used to,” he said. “It is going to take one to break that psychological barrier for many to follow. One of two acquisitions will set the new premiums and many will follow.”

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