CAIRO: Landline monopoly Telecom Egypt posted second-quarter net profit at the top end of analyst forecasts on Thursday as growing internet and data revenue offset weakness in its fixed-line voice business.
Net income was LE 971 million ($171 million), the company said in a statement, up 23 percent from the second quarter of 2009 and above the consensus estimate of LE 820.6 million.
"Its results show the resilience of its fundamentals," said Mohamed Hamdy, an analyst at CI Capital Research. "The company is growing despite the fierce competition in the market, particularly among mobile users."
While voice revenue for the first half tipped lower, internet and data revenue grew 24 percent to LE 393 million.
Internet and data arm TE Data "has made significant progress during the first half, increasing its customer base by 49 percent in comparison with the same period in 2009," the company’s statement said.
Voice revenue
Telecom Egypt’s retail voice revenue has been drained by intense competition in the mobile market. Egypt’s three mobile operators have cut prices to garner market share, leading many consumers to use landlines less or discard them altogether.
Mobile substitutions led voice revenue to drop 21 percent to LE 1.12 billion in the first six month of 2010, although the second quarter improved 8 percent from the first.
Telecom Egypt said it had 9.4 million fixed-line subscribers at the end of June, 110,000 more than at the end of March.
Analysts said it was the first net growth in fixed-line subscribers since 2008 and came after the company stepped up promotions.
"Overall the results are better than expected and that is mainly dependant on the new kinds of promotions which Telecom Egypt is focusing on," said Ahmed Adel of Naeem Holding.
Telecom Egypt, owned 80 percent by the Egyptian government, is looking to boost its presence in faster-growing mobile services.
Mobile subscriptions are growing by roughly 1 million per month and number nearly 59 million in a country of 78 million.
Vodafone and Mobinil dominate the market, with newer entrant Etisalat Misr trailing.
Telecom Egypt ended talks to increase its 45 percent stake in Vodafone’s Egyptian unit in June but has reiterated its interest in the mobile market.
"The mobile segment continues to represent a significant opportunity," Chief Executive Tarek Tantawy said in the statement.
The company said its profit margin expanded due to cost controls and its stake in mobile phone affiliate Vodafone Egypt.
Revenue was LE 2.71 billion, up 1.1 percent, and earnings before interest, taxation, depreciation and amortization (EBITDA) before provisions were LE 1.4 billion, down 3.8 percent.
