CAIRO: Landline monopoly Telecom Egypt plans to use its new submarine cable to boost its internet offering and is also seeking to enter the competitive mobile market which has drained its traditional retail revenues.
First-quarter net profit rose 3 percent to LE 992 million ($177 million), beating forecasts after the company booked $160 million of sales for its soon-to-launch TE North cable.
Chief executive Tarek Tantawy told Reuters on Thursday he was "very optimistic" about the firm’s numbers, but was not ready to alter guidance that 2010 revenue would be flat to 2 percent lower.
"My expectation is that sanity and rational competition will return, but will this happen in Q2 or Q3 or Q4 of this year? This is yet to be seen," Tantawy said.
"Once I see more stability in the market I will be in a position to either upgrade or maintain the guidance," he said.
The company expects to begin operating the TE North cable between Egypt and France by mid-year, the main part of a cable business it sees adding revenue of LE 700 million to LE 800 million in 2010.
Entering mobile jungle
It also plans to become Egypt’s fourth mobile operator — and sharply cut its usual hefty dividend to raise cash for the purpose last quarter — but has yet to work out how to do this.
"We positively view all these expansions because they partly offset the drop in the retail line of business," said Nemat Choucri from HC Securities.
Retail revenue has been hit by intense competition from the three mobile network operators, but Telecom Egypt also gains via its 45 percent stake in Vodafone’s Egyptian unit.
Tantawy said the firm was weighing how it would enter Egypt’s mobile market for itself, but declined to give details.
The new TE North cable will boost margins by reducing bandwidth costs and will allow the firm to provide higher-speed internet, Tantawy said.
"The trend going forward is for more bandwidth-intensive applications," he added, echoing a government aim of fourfold growth in broadband in the next three to five years.
Revenue from internet and data, mostly from TE Data, was LE 189 million in the quarter.
The company’s first quarter revenue eased to LE 2.50 billion from LE 2.53 billion a year earlier. Earnings before interest, taxation, depreciation and amortization (EBITDA) rose to LE 1.44 billion from LE 1.32 billion.
Eight analysts polled by Reuters had seen profit at LE 668 million on revenue of LE 2.32 billion.
Telecom Egypt said it had 9.3 million fixed-line subscribers at end-March, compared with 11.5 million a year earlier. It tightened its credit policy last year, cutting off around 2 million subscribers.
The firm, in which the Egyptian government retains an 80 percent stake, said income from investments including its 45 percent stake in Vodafone’s Egyptian unit was LE 300 million. –Additional reporting by Alexander Dziadosz
