Tuesday, Aug 16, 2011

(This item was originally published on Monday.)

--Second quarter profit drops as tourism, economic activity slows

--Company experiencing higher levels of copper cable theft

--Vodafone Egypt unit reports 4.9% increase in revenue compared with first quarter

CAIRO (Zawya Dow Jones)--State-owned Telecom Egypt (ETEL.CI), the only provider of fixed-line services in the country, posted a 15% drop in second-quarter profit Monday, as a slowdown in tourism and business activity dragged on earnings.

Telecom Egypt, in an emailed statement, said net profit in the second quarter amounted to 826.7 million Egyptian pounds ($138.6 million). The telco made a net profit of EGP971 million in the year earlier, according to Zawya Dow Jones data.

The latest quarterly result beat the EGP722 million estimate of Cairo-based investment bank Beltone Financial, but fell short of the EGP877 million result predicted by EFG Hermes.

"While the immediate effects of the Egyptian revolution started to subside during the quarter, the prevailing operating environment has yet to normalize in Egypt," Telecom Egypt's Chairman Akil Beshir said in an emailed statement. "Government curfews were fully lifted in mid June, but tourism levels and business activities remain low and we continue to experience higher levels of copper cable theft than would be the case under normal conditions."

Telecom Egypt said in late June that the impact of damages caused by political unrest in the country that put an end to President Hosni Mubarak's 30-year regime cost the operator EGP85.5 million. The damages reported included thefts of the company's copper and fiber cables that make up its domestic telephone network after security in the country deteriorated.

The telco also said that the decline in net profit was due to higher repair and maintenance costs, the start of operations in Telecom Egypt's cable business, a decline in investment income and the impact of the increase in corporation tax to 25% from 20% that came into effect March 1.

Revenue increased 8.5% quarter-on-quarter to EGP2.6 billion, Telecom Egypt said.

"The results still prove the resilience of TE fundamentals, which are supported by its diversified business model, high margin, and strong net cash position of EGP3.2 billion...we strongly believe that internet and data will be the key catalyst for top-line growth," analysts at CI Capital said in a note to clients.

Telecom Egypt said TE Data, its internet and data division, had reached 1 million subscribers by the end of June.

Vodafone Egypt, in which Telecom Egypt has a 45% stake, reported revenues of EGP2.9 billion in the three month period to June 30, a 4.9% increase on the previous quarter.

Telecom Egypt shares closed trading Sunday up 0.1% at EGP14.90.

-By Shereen El Gazzar, Dow Jones Newswires, +9714 446 1684 Shereen.elgazzar@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

16-08-11 0355GMT