CI Capital upgraded, in a recent study, Mobinil (EMOB.CA) recommendation from Hold to Buy, given a 25% upside potential to our target price: the suggested EGP 202.5/share acquisition price. Mohamed Hamdy and Amr Hussein Elalfy, analysts at CI Capital, stated that news published in Al-Mal newspaper about proposed amendments to the Telecom Law was the main reason behind the selling pressure witnessed today in Mobinil shares (down almost 10% intraday, 7% for the day). According to the article, the new amendments could oblige telecom companies to keep a minimum of 20% of its capital in Egyptian hands. However, by end of today's trading session Reuters quoted an unnamed source at the Ministry of Communications & Information Technology (MCIT) as saying that the proposed amendments will be limited to new licenses only (if any). In our opinion, if the Parliament approves such amendments, we do not believe they will be applied retroactively on operating companies and, if so, may be challenged as unconstitutional. If worst comes to worst, France Telecom (FT) and Orascom Telecom Media & Technology (OTMT) may have to fine-tune their deal to comply with the new rules. That said, we see two scenarios at opposite ends of the spectrum: (1) France Telecom (FT) may decide not to acquire any additional stakes in EMOB and (2) FT can comply with the new ownership limit by listing 15% on the EGX in addition to the 5% owned by OTMT. Absent any official news, we prefer the second scenario and view today's intraday price fluctuation as speculative in nature. These data have been reported by Arab Finance.
