CAIRO: Mobile phone operator Orascom Telecom reported lower-than-expected net income in the second quarter as growth in Pakistan and Bangladesh slowed and financing costs rose, hitting its shares. The number one Arab mobile phone operator by subscribers said on Tuesday net income in the quarter ending June 30 dropped 64 percent to $80.8 million, compared with the first quarter of the year, its first quarterly profit decline since 2007. OT reported a 4 percent decline in net income for the first half of 2008 to $276 million. Investment bank EFG-Hermes had forecast second-quarter net income of $190 million, while CI Capital had a forecast of LE 1.035 billion ($192.7 million). Pharos Securities had forecast a net profit of $198.6 million. The results are definitely below expectations, said May Khamis, a telecom analyst at HC Securities in Cairo. The quarter-on-quarter net income decline is basically due to slowdown in top-line growth in Pakistan and Bangladesh. Orascom Telecom also said it recorded a $30 million impairment of the license of its Algerian fixed-line joint venture Lacom, but gave no further details. There are still problems with the fixed-line operation in Algeria. The government said it would take a decision before the end of 2008 but OT is already writing off ($30 million), said Delilah Heakal, vice president of research at Pharos Securities. The company has long accused Algerian regulators of giving preferential treatment to state-owned operator, Algerie Telecom. Mohamed Hamdi, an associate director of research at CI Capital, said foreign exchange losses resulting from the depreciation of the Pakistani currency against the US dollar also contributed to the decline in profits. Net interest expense and effective tax rate were above our expectations, and EBITDA in Pakistan and Bangladesh were also below expectations, he said. Earnings before interest, taxation, depreciation and amortization (EBITDA) in the second quarter were down 2 percent to $572.799 million, compared to the first quarter, while revenue rose 5 percent to $1.356 billion, the company said. EBITDA in the first half rose 22 percent to $1.16 billion. Orascom Telecom said revenue rose 19 percent to $2.652 billion. Total subscribers exceeded 77 million, up 31 percent from June 2007 on a proforma basis, the group said. It added the number was calculated after excluding the subscribers of its former Iraqi subsidiary Iraqna in June 2007. OT agreed to sell Iraqna to MTC-Atheer, the Iraqi subsidiary of Kuwait s Mobile Telecommunications Co (ZAIN) for $1.2 billion in December last year. Average revenue per user (ARPU) slowed to $6.60 a month by the end of June 2008, compared to $7.10 a year ago. The decline in global ARPU was expected due to the increase in pre-paid subscribers, who spend less by nature but this is happening in the industry in general, Khamis at HC said. Shares in Orascom Telecom, which has operations in Egypt, Algeria, Tunisia, Pakistan, Bangladesh and Zimbabwe, fell 8.5 percent down to 49.85 pounds by 1048 GMT. Bloomberg quoted Lebanon s Finance Minister as saying that Orascom Telecom Holding expressed interest in acquiring one of the country s two state-owned mobile companies, MTC Touch and Alfa, which are to be auctioned off after six years of delay. Other interested bidders include Etilsalat, QTel, Saudi Telecom and Zain.
