Egypt's Mobinil net income tumbles on political turmoil

Investors see mobile operator's disappointing results as a major indicator of how unrest will affect company earnings

Egyptian mobile phone operator Mobinil said political turmoil and economic uncertainty hurt its first-quarter results, sending net income tumbling 93.6 per cent year-on-year.
Investors had awaited Mobinil's results for the first major indication of how the political unrest that toppled Egypt's president and brought much of the economy to a halt would affect company earnings.
"The first quarter of 2011 was unusual for Mobinil and for the whole country," Mobinil Chief Executive Hassan Kabbani said in the earnings statement. "Egypt entered into exceptional turmoil that affected strongly the economic environment in general and the telecommunication business in particular.
"Mobinil had to cope with a forced shutdown of several telecommunication services, the lack of public security, the freezing of business activity and a general economic slowdown."
Voice and Internet data were cut off in Egypt for several days during the 18-day uprising that ended the 30-year rule of President Hosni Mubarak.
Mobinil said first-quarter net income fell to 22.7 million Egyptian pounds, missing analysts' forecasts, from LE353.6m in the same quarter of 2010.
Six analysts polled by Reuters forecast, on average, that Mobinil would post net income of LE243m. Estimates ranged from LE204m to LE271m.
A note from Egyptian analysts Beltone Financial, which predicted income of over LE200m, said Mobinil's results "imply that 2011 is going to be much worse than we had expected in terms of operations and profitability".
Mobinil shares fell 0.9 per cent on Wednesday, while Egypt's benchmark index was down 0.3 per cent.
Mobinil is considered one of the more fortunate of Egypt's companies, since people continued to use telephones and Internet services during the turmoil, analysts said.
Kabbani said he saw improvement starting in the second half of March, as well as an increase in demand for smart phones and connected devices.
"Data appetite is exploding, as demonstrated during the past period, where social networking, particularly via mobile, has been playing a critical role in political mobilisation," he said.
"We see an improving trend starting in the second half of March. We anticipate that the after-effects of the political turmoil and economic slowdown are likely to continue throughout 2011, but that the impact on our business will lessen as consumers gain more confidence."
Mobinil said in February it had lost LE80m to LE100m during the political turmoil due to "breakage and destruction of mobile stations and some of the company's shops, and delays in Internet services and short message service (SMS)."
A collapse in tourism following the political turmoil also weighed on Mobinil's roaming fee revenue.
The firm's first-quarter revenue fell 4.5 per cent to LE2.43 billion. Earnings before interest, taxes, depreciation and amoritisation (EBITDA) declined 16.9 per cent to LE846m. Blended average revenue per user (ARPU) dipped 21.8 per cent from a year earlier to LE25 per month.
The firm said it had limited growth in its mobile subscriber base due to a slowdown in sales activity and a shutdown of some of its shops.
Its total subscribers in the quarter increased 16.2 per cent year-on-year to a total of LE30.358m.