Mobile Subs Soar at Orascom
The Egyptian-based holding company, which has mobile operations in seven countries, reported Sunday that its net income for the year increased 8 percent to $719 million on revenues of $4.4 billion. Earnings per share increased from $3.05 to $3.31.
EBITDA increased by 43 percent over 2005, reaching $1.95 billion. Subscriber figures were on target, but EBITDA was just off analysts' expectations of between $1.96 billion and $2 billion, according to Reuters. Orascom's shares closed the day down by 6.42 Egyptian Pounds (US$1.07), or 1.64 percent, at 385 Egyptian Pounds ($64.45).
Orascom's largest operator, Mobilink in Pakistan, doubled its customer base to 22.5 million and contributed 23 percent of the group’s total revenue, while Algerian carrier Djezzy GSM , its second largest holding, added 3.4 million users and accounted for 35 percent of its revenues. The company also operates in Egypt, Bangladesh, Iraq, Tunisia, and Zimbabwe.
Orascom expects to surpass the 70 million subscriber mark by the end of this year and is seeking to consolidate ownership in its subsidiaries by buying out minority shareholders. The company says it will buy up to 3.5 percent of the public shares in domestic subsidiary Mobinil "dependant on prevailing market conditions."
The company also laid out its strategy to "selectively enter new markets with large population, low mobile penetration with adequate risk and return profile."
Orascom is one of nine bidders for Saudi Arabia's third mobile license, one of the last telecom licenses up for grabs in the Middle East. (See Nine Bid for Saudi License.) Analysts predict Orascom and MTC-Vodafone will be the fiercest bidders for the license, which could go for as much as $4 billion. Saudi Arabia fits Orascom's criteria with its large population, a rapidly-growing mobile market, and an average revenue per user (ARPU) of $33 -- more than double that of the countries where Orascom operates.
With fewer new license opportunities in the Middle East on the horizon, Orascom is looking at acquisitions and considering entering new regions.
Orascom's coffers are brimming, thanks in part to the special dividend it's set to receive from Hutchison Telecommunications International Ltd. (NYSE: HTX) following the sale of Hutchison Essar. (See Hutch Plans Dividend.) Orascom, HTIL's second largest shareholder after Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY), holds a 19.3 percent stake in the company and will get HK$6.2 billion ($793.24 million). Orascom in February completed a $750 million bond offering that it says will be used for general corporate purposes, "which may include investments in new and existing operations."
Orascom's majority shareholder and CEO, Naguib Sawiris, recently stepped down from the board of HTIL, putting Orascom's investment and business development officer, Michael John O'Connor, in his place. (See Orascom CEO Quits HTIL Board.) The move fueled speculation that Sawiris has lost interest in the company now that it no longer has operations in India.
Orascom's 19.3 percent stake in HTIL gave it a 10 percent indirect stake in Hutchison Essar , and it had previously expressed interest in acquiring HTIL to increase that holding. When those negotiations ended, Orascom indicated it would sell as much of the stake as it could without losing its board position. (See Hutch Essar Expands, Scraps IPO.) It was also among the interested parties outbid by Vodafone for control of Hutchison Essar. (See Vodafone Wins Battle to Buy Essar.)
Sawiris has instead turned his attention to Latin America, confirming last week that Orascom has put in an offer for Brasil Telecom Participações SA (NYSE: BRP), the third largest fixed-line operator in Brazil, which also offers mobile and Internet services.
Since 2000, ownership of Brasil Telecom has been uncertain as the carrier remains at the center of legal wrangling among Citigroup , a group of local pension funds, Telecom Italia (TIM) , and Brazil's Banco Opportunity. (See TI Invests in Brasil Telecom.)
Brazil has the largest population in Latin America at 188.2 million, and a telecom penetration rate of more than 4 phones for every 100 people in the country. Brasil Telecom had 8.4 million fixed-line subscribers and 3.38 million mobile subscribers at the end of 2006.
— Nicole Willing, Reporter, Light Reading