By Tom Pfeiffer / Reuters
CAIRO: Landline monopoly Telecom Egypt expects to maintain its profitability this year as it presses ahead with cost cuts and business clients look again at investing after a turbulent 2011, company executives said on Thursday.
Telecom Egypt reported fourth-quarter net profit of LE584 million ($96.8 million), up 0.5 percent from a year earlier according to Reuters calculations.
Revenues, hit by slower business activity, weaker household incomes and depressed tourism, were down 3.2 percent in the full year at LE9.9 billion.
But annual earnings before interest, tax, depreciation and amortization (EBITDA) were 46 percent of sales, more than expected by analysts such as Mohamed Helmy at CIBC brokerage.
“We are positive overall on these results,” he said, rating Telecom Egypt a “buy”. “The EBITDA margin was almost flat despite higher salaries and call connection costs … Their cost optimization program has been very successful.”
The company’s shares were up 2.2 percent at 1045 GMT.
Telecom Egypt’s main fixed-line retail business has been slowing and the company is trying to keep profits growing by focusing on new broadband and wholesale services, getting more income from existing customers and a venture with Vodafone, which is Egypt’s biggest mobile operator.
It lowered non-payroll operating expenditure by LE148 million in 2011 and expects similar reductions this year and next.
Chief Executive Tarek Aboualam said business customers who suffered in 2011 when Egypt’s economy was struck by a political crisis had decided in the last quarter that they could not continue waiting for a rebound in the country’s fortunes.
“Maybe we have reached the bottom. But we cannot say that the last two months were different to the last quarter … in the business sector,” Aboualam told Reuters.
Net income in 2011 was held back by a higher corporate tax rate, but the company played down prospects for any sharp increase in profits this year.
Chief Financial Officer Hassan Helmy said management expected flat revenue in 2012 and “to still maintain our EBITDA margin within the mid-40s range and for capital expenditure we will be spending LE 1-1.2 billion”.
Capital spending in 2011 was LE689 million.
EBITDA was LE4.55 billion in 2011, down 2.4 percent from a year earlier, the company said in a statement.
The company is sitting on record amounts of cash and is looking to acquire a license to operating a virtual mobile network in Egypt, but is waiting for the industry regulator to issue the licensee terms.
“They declared they are working on it and theoretically we should see something coming out from them by the end of Q1. We will study it and follow this opportunity,” said Aboualam. –Additional reporting by Sherine El Madany.
