CAIRO: Laying rumors to rest, Telecom Egypt (TE) has officially revealed that the company will bid for the third mobile license that is expected to be offered during the next two weeks.
“We will definitely bid for the third operator, confirmed Tarek Tantawy, general manager for Investor Relations, Investments, and Financial Planning at TE to The Daily Star Egypt.
While for those who have been keeping tabs on the fate of a third mobile operator TE’s announcement comes as no surprise, the company’s bold affirmation does make for a change from the guarded, if outright hedgy position maintained during TE’s debut at the stock market in December 2005.
In the past, TE Chairman Akil Beshir was seemingly averse to the idea of entering into the bidding for a third operator. In retrospect, Beshir’s reasoning, albeit logical, seems to have been more of a smoke screen used by the company as they mulled over the decision in private. After all, the National Telecommunication Regulatory Authority (NTRA), which is in charge of fine tuning the license conditions as well as selecting the bid winner, has not publicized the conditions, and yet TE is already declaring their intention to bid.
“We are waiting for NTRA’s conditions to come out, but we are definitely interested, says Tantawy.
While the NTRA’s full conditions have not been announced, NTRA has revealed that bidders cannot have a stake in another mobile operator. This puts TE in a tight spot, as the company has a 25.5 percent stake in Vodafone Egypt.
Yet TE seems to have made its mind up, making its intentions to bid quite clear.
Beshir announced today that TE might study selling its 25.5 percent stake in Vodafone in order to be able to bid for the third license.
“If we have to sell our stake in Vodafone for a third operator, then of course we will, said Tantawy. “When it comes to bidding, we will bid with our stake, unless NTRA says we can’t. Also, should we be allowed to bid with our stake, but have to sell it if we win, then we will definitely give it up at that time.
TE’s announcement has led Vodafone Group to start negotiations with NTRA after NTRA revealed one condition that will find it necessary for TE to divest its stake in the company.
Ironically enough, TE decided to forgo building their own mobile network in favor of a stake in Vodafone Egypt a few years ago.
However, as profitable as their stake in Vodafone is, TE has now decided that a shot at a third license is too appealing to pass on. Earnings before interest, tax, depreciation and amortization (EBITDA) margins between the existing operators are still high when you take into account more than seven years worth of competition.
Furthermore, subscriber growth has arguably been sluggish and operator profit margins are seen as an additional indication of weak competition and large unexploited growth opportunities.
Thus, a third operator will not only spice things up by rousing competition, it will also aid in pushing the market out of stagnation and into a possible price war.
The stock market already felt the weight of the bears yesterday as news of TE’s intentions to bid for the third mobile operator became official.
Telecom Egypt turnover of LE 161.21 million yesterday made it the market s second most active stock for the day, gaining 6.75 percent to close at LE 18.65 a share, making it CASE s top performer.
This came contrary to sluggish performance from the telecom sector; while OT s turnover of LE 76.19 million yesterday made it the market s fifth most active stock for the day, it still slipped from slipped from 3.37 percent to close at LE 364.39 per share.
Dr. Tarek Kamel, minister of communication, announced yesterday that NTRA will offer the third mobile license bid before Feb. 15, 2006.
Meanwhile, Kuwaiti MTC has officially announced its intention to bid for Egypt’s third mobile license, establishing an office in Cairo to prove its seriousness in trying to win the bid. This makes MTC the fifth official announcer after Raya Holdings – MTN Consortium, Etisalat, Telecom Egypt and BATELCO. In addition, Saudi Telecommunication Company (STC) announced that they are still looking into the opportunity.
While TE will have the support of a consortium of telecom companies in their bid for the license, which they are currently planning, they will have stiff competition as their regional counterparts grapple for the entire third operator pie.
