The market took observers by surprise with its downturn in early trading last week, despite good news emerging from several blue chips, including Abraaj's acquisition of the market's main mover EFG- Hermes. While the move is expected to consolidate the EFG's activities, a selling spree deprived the share of its gains from last week while also putting downward pressure on the entire market. Overall transactions came to LE4.7 billion; foreigners were net sellers with a LE67 million differential. In other market related news, the Capital Market Authority granted four brokerage firms -- Delta, CIBC, EFG-Hermes and Nile One -- licences to pursue online trading activities. They join Arabia Online, the country's first online brokerage firm. RAYA HOLDING: The board of directors approved Vodafone Egypt's offer to buy 51 per cent of Raya's Telecom unit -- Raya Telecom -- for LE104 million. Negotiations are currently taking place towards a joint venture contract and shareholding agreement between the two companies; the deal is also subject to obligatory regulatory clearances. Although it posted LE37.3 million in sales during the first half of 2006, Raya's telecom unit realised loses during the same period due to continuous capital expenditures and the high depreciation of telecom equipment: depreciation expenses increased by 34.6 per cent to reach LE14.6 million, up from LE10.9 million in the corresponding period of 2005. At the same time, the unit also saw several positive developments that offset the effect of these losses. One was an 82.4 per cent increase in Internet connectivity revenues following the acquisition of Internet service provider SuperNet. Last year's agreements with British Telecom and Telecom Malaysia to provide Virtual Private Networks also boosted the unit's network connectivity sales. Its strategic alliance with British Telecom also helped Raya Telecom apply for the International Voice Gateway licences being offered by the Egyptian government. MOBINIL: Egypt's first mobile network operator agreed to stop using EDGE technology until several contentious issues related to the technology are resolved with the National Telecommunication Regulatory authority (NTRA). The decision emerged from a meeting, held at the end of last week, between MobiNil Chairman Naguib Sawiris and Communications Minister Tareq Kamel. The dispute is centred on NTRA's disapproval of MobiNil's use of EDGE technology, which it sees as a third generation application that requires special licensing. EASTERN TOBACCO COMPANY (ETC): The nation's cigarette monopoly saw 12.3 per cent growth in its net income for fiscal year 2006. The company also recorded LE508 million in net profits. The growth was supported by the new tax law, which brought down the tax rate on the company's products from 28.1 per cent to just 18. ETC dominates the Egyptian cigarette market with a 92 per cent market share; its global market share is 1.2 per cent. Increases in international tobacco prices tend to expose the company to currency risk, placing profit margins under pressure. To hedge against that kind of risk, the company imports one third of its tobacco needs duty free from COMESA countries; it has also shifted towards a more profitable product mix. The company is rumoured to be in line for privatisation. Meanwhile 36 per cent of its shares are currently floated, listed on both the Cairo and Dubai Stock exchanges. ORASCOM HOTELS AND DEVELOPMENT (OHD): The OHD-majority-owned Tamweel Company was granted a licence by the Mortgage Finance Authority to become Egypt's third mortgage company. Tamweel will target mid and high income borrowers with a minimum mortgage rate of LE100,000. The company is 97 per cent owned by OHD, with the balance distributed between Orascom Hotels Holdings (which is itself 100 per cent owned by OHD), members of Orascom's Sawiris family, and Sameh El-Torgoman, the former head of the Cairo and Alexandria Stock Exchange, and the current chairman of Tamweel. According to the mortgage law, Tamweel must increase its paid- in capital from the current LE12.5 million to LE50 million within one year. BANK OF ALEXANDRIA: The bank's long awaited privatisation is expected to take place within a few weeks; in preparation, its listing was approved by CASE with a paid-in capital of LE800 million. There have been indications that several of the six groups short-listed to bid for Bank of Alexandria -- Egypt's smallest public bank -- are reconsidering whether or not to move on with the bidding process, due to the strict regulations imposed by the privatisation committee on how some of the bank's assets have to be managed, as well as how the bank's restructuring process must proceed, and other issues related to employees' rights. The committee recently met with potential buyers ahead of the 25 September deadline for final bids. The six bidders on the short list are: Jordan-based Arab Bank Group and Saudi Arabia's Arab National Bank; Dubai-based Mashreq 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
