MobiNil 1Q profit falls 2% as competition bites in Egypt
MobiNil has released its financial results for the three months ended 31 March 2010, posting a 2% year-on-year decline in net profit for the period. The operator revealed that in the quarter net profit was EGP357 million (USD64.4 million), down from EGP366 million a year earlier, while earnings before interest, tax, depreciation and amortisation (EBIDTA) fell 12% against 1Q09 to EGP1.021 billion. Operating revenue, despite the slowing economy, harsher regulatory conditions and increased competition, remained relatively stable, climbing 2% y-o-y to EGP2.546 billion. However, first-quarter average revenue per user (ARPU) stood at EGP32, representing an 18% drop compared to a year earlier. Commenting on the results, Hassan Kabbani, MobiNil CEO said: ‘As expected 2010 is the year of reaching a high level of maturity in the Egyptian mobile market. The first quarter was affected by the economic slowdown, adverse regulatory conditions and intense competition pressuring down prices. However, we succeeded in growing our subscriber base to exceed 26 million subscribers in spite of new dials [phone number allocations] shortages, and our operating revenue growth reached 2%.’ Kabbani also claimed that new legislation could further restrict subscriber growth however, stating: ‘During the coming phase, regulatory pressures are expected to continue and even to intensify in the form of dials shortage until the new national numbering plan of eight digits is implemented by all operators, [and] new regulations regarding uncertified handsets, subscribers' activation and registration process will lead to large disconnections of customers, thus affecting the initial forecasts.’ In separate but related news, France Telecom (FT) and Egypt’s Orascom Telecom, MobiNil’s two major shareholders, have announced that the former will pay Orascom a settlement fee of USD300 million as part of the agreements between the two announced last month that ended a long-running dispute over ownership of the cellco. It is understood that the fee is part of the terms and conditions submitted by the two companies to the Egyptian Financial Supervisory Authority (EFSA). The accord between FT and Orascom will not see a change to the existing MobiNil ownership structure, with the cellco presently owned by MobiNil Telecom (51%) and Orascom (20%), with the remaining 29% publicly floated; MobiNil Telecom is owned by FT subsidiary Orange (71.2%) and Orascom (28.8%) according to TeleGeography’s GlobalComms Database. The French company will consolidate 100% of MobiNil's results as soon as the final agreement is signed, compared with approximately 70% before, while MobiNil will acquire ISP LINKdotNET Egypt and Link Egypt for USD130 million, subject to the approval of the relevant authorities. Both FT and Orascom have also agreed not to transfer each other any other shares in MobiNil Telecom, while Orascom will not raise its direct stake, with the Egyptian group being granted a put option for both its direct stake and its holding in MobiNil Telecom. Orascom does have a window in which it can sell the shares to FT – between 15 September 2012 to 15 November 2013 – while the put option can be exercised at any time until the latter date.