The market is in the red these days. Despite the EGX30 surpassing the 7,000 points threshold twice since the beginning of February, it failed to resist the downward pressure of a mixture of profit taking as well as scarcity of liquidity. The latter was partly caused by subscriptions in the LE5 billion capital increase in Orascom Telecom Holding. The negative news concerning the company's position in Algeria, according to many observers, weighed down on the market since last week. Meanwhile, balance of payment figures for the second quarter of fiscal year 2009- 2010 registered a surplus of $600 million compared to a deficit of $1 billion in the same period of the previous year. "The improvement reflects a slight increase in exports growth, continued weakness in private sector imports, compared to resilience of consumer goods imports, the gradual improvement in service receipts from tourism and the Suez Canal, compared to a weaker performance from foreign direct investment," reported Beltone. Net foreign direct investment flowing to Egypt declined to $895 million in the second quarter compared to $2.4 billion in the same quarter of 2008/2009 and $1.7 billion in the first quarter of 2009/2010. CITADEL CAPITAL: Egypt's largest private equity firm acquired a 49 per cent stake in Sheltam Railways, the main shareholder in a company with a 25-year concession to operate the Kenyan and Ugandan railway network. "Citadel Capital will look to inject more than $150 million in Kenya and Uganda railways over the coming five years," said Citadel Capital Managing Director Karim Sadek in a statement. The announcement comes as a part of the private equity firm's plan to inject $200-$400 million in East Africa. On a different note, Gozour, Citadel Capital's food unit, said it is in advanced talks to buy an Ethiopian food firm. "The Ethiopian market is a perfect fit for us," the company's head, Mohamed El-Rashidi, told Reuters. "There are 80.7 million people in Ethiopia, with a heavy consuming base and 60 per cent of the country's GDP [gross domestic product] is from food." According to Reuters, the purchase would mean Gozour could start "contract farming" in Ethiopia, which El-Rashidi said involved financing farmers and in return reaching an agreement to use the produce in factories in Egypt and eventually plants in Ethiopia. EGYPTIAN KUWAITI HOLDING (EKH): The company posted a net profit of $158 million during 2009, representing an increase of 1.4 per cent compared to a net profit of $156 million in the previous year. An EKH senior official told the local press that 72 per cent of its profits came from foreign investments, especially in the oil industry in Africa. EKH is studying a number of projects in petrochemicals in Algeria, Sudan, Syria, Kuwait and some other African countries. ORASCOM TELECOM HOLDING (OTH): The company remained in focus this week, but not because of its lengthy dispute with France Telecom over Mobinil. Its Algerian investments took the attention this time. Reuters quoted unnamed Algerian state officials as saying that the Algerian government wants OTH to relinquish ownership of mobile phone operator Djezzy, a main player in the Algerian market. OTH did not comment on the news, which sustained the speculation of analysts. Unease between the Algerian authorities and OTH dates back to 2008 when Orascom Construction Industries, led by the brother of the chairman of OTH, sold its Algerian cement business to France's Lafarge. Algeria has strained ties with its former colonial ruler and officials felt they should have been consulted. "Orascom is no longer welcome in Algeria," Abdel-Wahab Djakoun, editor of the pro- government La Nouvelle Republique newspaper told Reuters. "It has betrayed us by allowing the French Lafarge to enter our market." Analysts expect the Algerians to start making OTH's operations in Algeria uncomfortable. The Algerian tax authority recently asked OTH to pay $596 million in back tax and penalties. OTH is appealing the case but is also in the process of raising $800 million via a rights issue to cover any cash shortfall. In addition to the direct attack on Djezzy headquarters in Algeria after the Egypt-Algeria soccer dispute, Algerian newspapers have fanned anti-Orascom sentiment with critical reporting on the company and its executive chairman, Naguib Sawiris, according to Reuters. "Hardline Salafist Muslims, an influential minority in Algeria, have launched a campaign to encourage people to scrap their Djezzy subscriptions. That could dent subscriber numbers," a dispatch of the news agency noted. State firms and branches of the civil service could also choose to cancel contracts with Djezzy and switch to rivals. If Orascom chooses to leave, it could secure $6-7 billion in sale value, but according to Beltone Financial, "We are concerned about the interference of the Algerian government in the selling process [if OTH was to sell Djezzy], regarding the price at which OT would sell the asset." Orascom had a net debt position of $5.2 billion, as of September 2009, Beltone Financial said. Selling Djezzy would likely turn that debt into a net cash position in one shot. But that would leave Orascom with a cash pile in a market that Beltone said offered scarce acquisition opportunities. And it would leave a large revenue hole, as the Algerian unit accounted for 37 per cent of OTH's revenues in the third quarter. Compiled by Sherine Abdel-Razek
