Monday, Jan 30, 2012
DUBAI (Zawya Dow Jones)--Shares of state-owned Telecom Egypt (ETEL.CI) tumbled Monday after the only landline provider in Egypt said a salary increase for 44,000 of its employees had been approved, a move that could squeeze the company's profit margins, say analysts.
"The salary increase will be effective by the end of January," said Ahmed Labib, general manager of investment at Telecom Egypt, adding that the pay hike comes at a total annual cost of 201 million Egyptian pounds ($33.4 million).
Telecom Egypt shares last traded down 3.9% at EGP14.61 in a broadly lower overall market.
Some Telecom Egypt employees went on strike in October demanding an increase in pay and even briefly held Mohamed Abdel Rahim, the telco's former chief executive officer, hostage in an effort to force Telecom Egypt into making concessions.
Mohamed Hamdy, a telecoms analyst at Cairo-based investment bank CI Capital, said the salary increases could cause Telecom Egypt's earnings before interest, taxes, depreciation, and amortization margin to decline in 2012.
Separately, Telecom Egypt approved late Sunday a dividend payout of EGP0.30 per share to be financed from the retained earnings of 2010.
"This would bring the total dividends paid for the year to EGP1.60, equivalent to a payout ratio of 94% and a dividend yield of 10.5%," said Cairo-based investment bank Beltone Financial in a note to clients. "This move comes early in 2012, as the Egyptian government's dire and timely need for cash prompts it to put pressure on cash-rich state-owned companies, such as Telecom Egypt, in order to upstream the cash to itself," it added.
-By Shereen El Gazzar, Dow Jones Newswires; +971 444 61684; Shereen.elgazzar@dowjones.com
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
30-01-12 0955GMT
