Orascom Telecom has managed to break local stock records, as well as the barriers of global trade. Wael Gamal wonders whether the company's future will be just as rosy Orascom Telecom (OT) released its mid-year results last week. The company's net profit rose by a whopping 743 per cent to LE1.15 billion in the first six months of 2004, at least LE100 million above expectations. Revenues topped LE5.4 billion -- 106 per cent over June 2003, and 11 per cent over the last quarter. While these numbers don't quite make Orascom a multinational telecommunications giant, they are huge by Egyptian standards. ABN- AMRO Delta Chairperson and Managing Director Nevine El-Tahri called OT "the stock that doesn't take a break". Actually, OT stock was already rising; after the announcement, it shot up even more, hitting a high of LE142.99 before coming back to LE139.5, a gain of 1.8 per cent. El-Tahri said the company's "profits are mainly coming from areas outside Egypt, and there is still room for further growth. A lot of fundamental work was done over the past two years concerning the debt structure, which makes the stock cheap to buy." In fact, in less than five years, OT has grown from a stakeholder in a local GSM operation into a regional cellular powerhouse, with operations in 10 countries, and market leadership in most of its markets. It has operations in the Middle East, North Africa, Sub-Saharan Africa and Pakistan. In 2002, it underwent a strategy turnaround -- from aggressive debt-financed acquisitions towards balance sheet restructuring, triggered by both high debt levels and continuing losses in certain subsidiaries. By the end of 2002, the company had brought down its consolidated net debt by 33 per cent to LE4.6 billion, via the sale of its Jordanian operation (Fastlink), as well as SabaFone in Yemen and six Telecel subsidiaries in Africa. On 12 August, the company signed an agreement with three major Egyptian public banks (National, Misr and Alexandria) to fully underwrite an upcoming bond issue to the amounts of LE700 million and $150 million. The finances, as described by the company's press release, will be used to deal with existing bank debt and to strengthen OT's financial flexibility. This went together with the purchase of Sheba Telecom, the local operator in Bangladesh as well as new expansion bids and plans in Iran and Saudi Arabia. How OT was able to accomplish what other Egyptian companies, and the Egyptian economy as a whole, have not -- namely, to work and compete on a global scale -- remains a matter of debate. According to OT Chairman and CEO Naguib Sawiris, the key was "world class personnel in high rank management... We got them from everywhere, [at] whatever the cost. This helped us to have dynamic, efficient and transparent management. What also makes us successful is working in a lot of places, which gives us the advantage of risk diversification." Ahmed Ghoneim, vice-president of Cairo University's Centre for Economic Research, said it probably had more to do with the sector's peculiarities. "Telecommunications is a high-level productivity and low-cost sector. The advantages were that, on the supply side, the company had the resources: skilled, cheap bilingual labour. On the demand side, it was able to choose the right markets: mainly in the region, too small for the big multinationals, and too big for the small local companies. That's how it was able to win markets and get bigger." The company's success, however, has occasionally been overshadowed by its largest subsidiaries' problems. Its MobiNil subsidiary in Egypt has been accused of monopolising the market, while its operation in Iraq has been attacked in the press for supposedly using fraudulent tactics to win the deal.
