The Commissioners Body of the State Council recommended on Saturday that the sale of 20% of Telecom Egypt (TE) shares that took place nine years ago be nullified as Egypt attempts to restore trust in its economy. These efforts currently take the form of settling investment disputes in order to mobilise local and foreign investments to mitigate growing unemployment rates.
The commissioners’ decision is considered advice only and is not binding for the Administrative Court. The government approved legislation protecting state contracts against appeals in order to protect government contracting and investors’ rights against third party cases, meaning that the recommendation to nullify the sale, if it becomes a reality, would clash with the law.
The recommendation to nullify the sale of 20% of the company will undermine government efforts to restore trust in economy, said Mohamed Farid, CEO of Dcode Economic and Financial Consulting. Farid added that this reveals the continuous investment risks as a result of financial lawsuits that take place outside of economic courts, noting that this raises business community concerns regarding the government’s seriousness surrounding public private partnership projects.
Policies of tampering with investments must end, said Farid, adding that the Egyptian Exchange has suffered for years from decisions and verdicts that can’t be implemented or were made without proper study, exerting a negative impact on the market. Trade and investment disputes, especially those that reach advanced stages in courts, can affect the business and investment climate, said Farid.
The Commissioners Body report said that the prospectus has wasted a lot of public money, caused damage to the national economy, and harmed investors and stock traders.
The report also said that procedures associated with the sale of 20% of TE entailed major violations of regulations for evaluating assets during the tender, violations in evaluating the shares to be sold, and violations of standards and rules for broadening the private-sector ownership base within the public sector (privatisation). Violations of Law No. 159 of 1981 pertaining to joint-stock and limited-liability companies and Capital Market Law No. 95 of 1992 were also identified.
“There is no intention to suspend trading for Telecom Egypt shares on the Egyptian Exchange in light of a report issued by the Commissioners Body suggesting that a tender for 20% of company shares on the Exchange that took place in 2005 be nullified,” said Mohammad Omran, Chairman of the Egyptian Exchange.
He continued: “The Commissioners Body report was only a recommendation and is non-binding. Trading of a company’s shares will not be stopped because of it,” he said, pointing out that this measure would be taken only through judicial rulings as occurred when trading for Nile Cotton Ginning shares was suspended.
TE offered 20% of its shares to an IPO in 2005 while 340m shares were offered at a value of EGP 10 each.
The Commissioners’ Body report stated that the prospectus issued by the company was approved by the Capital Market Authority under number 2926 of 28 November 2001 and was announced beginning from 29 November 2005.
But TE said in a statement made to the Disclosure Department at the Exchange on Sunday that it was not informed of any decision by the Commissioners Body regarding the suggestion to nullify a tender for 20% of its shares.
The company explained that Commissioner Body reports merely form recommendations and are non-binding, adding that the indicated issue remains under review by the Administrative Court, but adjudication on the case has yet to take place.
