With strong economic fundamentals and sound financial results of the traded companies, the market has two thirds of what it needs to give it a jump-start. Telecom Egypt's tender offer to buy 24 per cent of Vodafone was the spark that ignited interest in the telecom sector, pushing the whole market upwards through the week ending 21 September. The market's main index CASE30 closed up two points amid an increased interest by foreigners who became net buyers, and counted for 31 per cent of the overall market turnover. The week's transactions came to LE4.8 billion. Market observers expect the market will maintain a strong performance during the coming weeks, with big privatisation deals about to be concluded including those of Bank of Alexandria and AMOC. Another factor that feeds these expectations is the decision by the US Federal Open Market Committee (FOMC) to maintain the Federal funds target rate at 5.25 per cent. This increases the possibility that the Egyptian monetary authorities will keep interest rates at their current level when they meet on 5 October. This is certain to increase the appeal of stock market investments. In a move welcomed by market observers, the Capital Market Authority (CMA) announced that starting January, companies listed on the Egyptian stock will have to follow International Financial Reporting Standards (IFRS) as part of a plan to increase investor confidence and attract foreign investment. The CMA will also soon issue the first draft of a corporate governance guide that contains rules and definitions for listing and disclosures. TELECOM EGYPT (TE) took the market by surprise by the end of the week with an offer to acquire a 24.4 per cent additional stake in Vodafone Egypt (VFE) for LE100 per share, bringing its stake in VFE to 49.9 per cent. While the targeted stake comprises 58.5 million shares, TE said the least number of shares it would buy is 24 million which is equivalent to 10 per cent of VFE's capital. VFE shares are traded at LE97.5. This offer was followed by another surprising statement from VFE's Chairman Mohamed Nosair who owns five per cent of VFE through his Alkan Group. Nosair said that he intends to gather a group of shareholders to buy VFE shares at a higher price than LE100, which he believes understates VFE's value which he put at LE120 per share. VFE is 51 per cent owned by Vodafone Group, the world's second largest operator in terms of its 196 million subscribers. The balance is distributed among TE (25.5 per cent), Banque Du Caire (3.4 per cent), Alkan group (five per cent) and free float (16 per cent). Vodafone Group has recently ruled out the possibility of selling a part of its stake in VFE. Akil Bashir, head of TE stressed that the decision to increase its stake in VFE stems from its plan to have a strong foothold in the local mobile market, after it lost the bid to acquire the third mobile licence. It is worth mentioning that TE was planning to sell its stake in VFE had it won the third mobile licence, according to the regulations of the National Telecommunication Regulatory Authority. In a related note, a number of market observers hinted that the news of T's offer leaked before the Capital Market Authority was informed of it, as demonstrated by the unjustifiably high demand on shares of Vodafone Egypt which recorded LE60 million in transactions on the day preceding TE's expressing interest in VFE. This is compared to only LE55,413 worth of transaction on the previous day. However, CASE authorities stressed that there were no unusual transactions on the shares. ORASCOM TELECOM'S (OT) Algerian joint venture with TE Algérien de Télécommunication, commercially known as Lacom, is in the final phase of negotiations to acquire a loan from the Commercial International Bank (CIB). Lacom, which is equally owned by OT and TE, is to get a $100 million loan with a three year tenor. The venture began operating Algeria's second fixed line network in February, after securing a 15-year licence at a cost of $65 million. OT already has a strong presence in the Algerian telecommunication market through its cellular phone network Djezzy, which has a 32 per cent market share and is planning to increase this stake to 71 per cent by the end of 2010. OLYMPIC GROUP (OG), the consumer durables company, announced its results for the first half of 2006, where it posted a whopping 109 per cent increase in its income. A research note on the company's performance issued by EFG-Hermes stated that the consumption of white goods will continue to be strong. This is fuelled by strong economic conditions and higher consumer spending, and will grow by an annual rate of 14 per cent over the coming two years. This will help OG to maintain its market share for most of its products and to increase its market share for cookers from the current 14 per cent to 17 per cent by 2009. While EFG said the recent increase in energy prices in Egypt and an expected increase in raw material costs will put pressure on costs in the second half of the year, it upgraded its share value of OG by seven per cent to LE59.7, implying an upside potential of 27 per cent above the current share price. SIDI KERIR PETROCHEMICALS (SIDPEC), Egypt's largest petrochemical company, recorded a 19.1 per cent increase in its net income for the first half of 2006. More significantly, SIDPEC's revenues increased by 11.3 per cent to LE909.5 million. According to HC Securities, the growth in revenue was due to two factors. First, the increase in polyethylene prices globally from an average of $1,022 per tonne during the first half of 2005 to $1,264 per tonne during the first half of 2006. Second, the company produced 12 per cent more ethylene and seven per cent more polyethylene than in the previous half. BANK OF ALEXANDRIA: The six international consortia shortlisted for bidding on 75-80 per cent of Egypt's smallest public sector bank started to submit their financial offers this week. Rumours had it that the privatisation committee plans to base its selection of the winning bid on the value of the offer, a fact that would place the Gulf consortia in a better position. The six bidders on the shortlist are the Jordan-based Arab Bank Group and Saudi Arabia's Arab National Bank, the Dubai-based Masher Bank and Dubai Investment Group, Egypt's Commercial International Bank, France's BNP Paribas; Italy's Sanpaolo IMI, and Greece's EFG Eurobank. Compiled by Sherine Abdel-Razek
