11 April 2012
The Egyptian government's stated intention to take a stake in telecommunications companies operating in the North African country has provoked a sharp reaction from stock investors as well as industry players and puts under threat France Telecom's plans to acquire Orascom Telecom.
Egypt's communications and information technology minister Dr. Mohamed Salem said the ministry is preparing a law mandating the government to be a partner in mobile phone operators and major communications companies. The law will be presented to parliament, he said.
There was intense selling pressure on Mobinil shares on Tuesday, which shed 10% intraday and 7% at the end of trading.
Hatem Dowidar, chief executive of Vodafone Egypt, said Salem's statement may spread confusion in the market, and it violates free-market norms. Dowidar is also concerned that foreign investment that is looking to come into Egypt as stability returns after the 25 January Revolution would shy away if such measures are implemented.
The state already has a 45% stake in Vodafone Egypt through Telecom Egypt. The state also held about 20% of Etisalat Misr through National Post Authority, which was later increased to 34%.
Ownership structure of Egypt's three mobile operators
An official source at the ministry of communications and information technology told Zawya "there will be no retreat from free-market economics" in the Egyptian telecommunications sector. The law to amend ownership of telecoms companies "does not mean any minimization" of the private sector's role, the person said.
Financial analyst Wael Enabah said that the proposed amendment, if approved, would grant the Egyptian government the right to participate in the fourth license or intervene through preemptive right, if one of the companies is willing to sell its stake, as the Algerian government did in the case of Djezzy.
According to Enabah, the recent government statement may affect France Telecom, which is seeking to acquire more than 90% of the Egyptian Company for Mobile Services (Mobinil) from Orascom Telecom Media. However, Enabah ruled out the government's interference to purchase Mobinil, because the share price was already valued at EGP 202.5 and the state is suffering from a liquidity crisis.
Khaled Bichara, chief executive of Orascom Telecom, said that if his company sold its stake in Mobinil to France Telecom, it would retain the right a voting bloc of up to 30% of the number of board seats in addition to retaining a stake of 5% of the shares of the company. This would ensure clear Egyptian representation in Mobinil.
According to an analyst who wished to remain anonymous, if parliament approves the proposed law, it is unlikely to be applied retroactively on operating companies. "If that happens, it may be challenged in court as being unconstitutional," he said.
Zawya 2012
The Egyptian government's stated intention to take a stake in telecommunications companies operating in the North African country has provoked a sharp reaction from stock investors as well as industry players and puts under threat France Telecom's plans to acquire Orascom Telecom.
Egypt's communications and information technology minister Dr. Mohamed Salem said the ministry is preparing a law mandating the government to be a partner in mobile phone operators and major communications companies. The law will be presented to parliament, he said.
There was intense selling pressure on Mobinil shares on Tuesday, which shed 10% intraday and 7% at the end of trading.
Hatem Dowidar, chief executive of Vodafone Egypt, said Salem's statement may spread confusion in the market, and it violates free-market norms. Dowidar is also concerned that foreign investment that is looking to come into Egypt as stability returns after the 25 January Revolution would shy away if such measures are implemented.
The state already has a 45% stake in Vodafone Egypt through Telecom Egypt. The state also held about 20% of Etisalat Misr through National Post Authority, which was later increased to 34%.
Ownership structure of Egypt's three mobile operators
An official source at the ministry of communications and information technology told Zawya "there will be no retreat from free-market economics" in the Egyptian telecommunications sector. The law to amend ownership of telecoms companies "does not mean any minimization" of the private sector's role, the person said.
Financial analyst Wael Enabah said that the proposed amendment, if approved, would grant the Egyptian government the right to participate in the fourth license or intervene through preemptive right, if one of the companies is willing to sell its stake, as the Algerian government did in the case of Djezzy.
According to Enabah, the recent government statement may affect France Telecom, which is seeking to acquire more than 90% of the Egyptian Company for Mobile Services (Mobinil) from Orascom Telecom Media. However, Enabah ruled out the government's interference to purchase Mobinil, because the share price was already valued at EGP 202.5 and the state is suffering from a liquidity crisis.
Khaled Bichara, chief executive of Orascom Telecom, said that if his company sold its stake in Mobinil to France Telecom, it would retain the right a voting bloc of up to 30% of the number of board seats in addition to retaining a stake of 5% of the shares of the company. This would ensure clear Egyptian representation in Mobinil.
According to an analyst who wished to remain anonymous, if parliament approves the proposed law, it is unlikely to be applied retroactively on operating companies. "If that happens, it may be challenged in court as being unconstitutional," he said.
Zawya 2012
