TE launches largest Egypt IPO
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Telecom Egypt (TE), the state-owned fixed-line monopoly provider, on Monday launched what will be the largest ever share offer brought to the Cairo and Alexandria stock markets.
The sale of 20 per cent of TE at a value of at least 4.5bn Egyptian pounds will also be one of the largest divestments by the state since a more free market oriented cabinet re-launched a stalled privatisation programme in 2004.
Tarik Amil, the communications minister, said the initial public offering came after “long years of work to build the TE network”.
“We want the value of the company to increase as well as an increase in bourse value and variety in an effort to attract foreign investment,” he said.
The government set the minimum bid at E£13.30 ($2.31) on 340m shares for institutions. The IPO, which will be divided into two tranches – half for small investors and half for institutions – has led a flurry of activity on the Egyptian market as retail investors have shed other stocks in anticipation that TE shares will rise steadily. The offer closes on December 7. Some of the shares will be listed in London as global depositary receipts, a company statement said.
If demand is strong enough, the Egyptian government could release an extra 2.5 per cent of the company. But the government has no immediate plans to relinquish its majority and is prohibited for now from doing so by law.
A prior attempt to privatise partially the company was scrapped in 2000 due to the global downturn in telecoms markets. This time, the IPO coincides with rapid growth of in Middle Eastern telecoms markets as well as heightened competition between the region’s burgeoning service providers.
Analysts in Cairo said the IPO followed a period of improved management, in which the company had seen steady growth in subscribers as well as impressive profits despite bloated staff numbers of over 50,000.
Telecom Egypt is the sole fixed-line provider in a country with penetration of only 14.3 per cent, low by regional standards. The brokerage arm of HSBC anticipated in a report released yesterday anticipated this would rise to 20 per cent by 2009.
The telecom sector is one of the fastest growing parts of the Egyptian economy with revenues rising from 1.8 per cent of GDP in 1998 to 3.5 per cent in 2004.
TE owns a 25 per cent stake in Vodafone Egypt, the country’s second largest mobile phone operator. As part of its regional expansion plans it recently acquired a 15-year license to build and operate a fixed line network in Algeria in a joint venture with Orascom Telecom Holding. Algeria’s fixed line penetration is currently even lower than Egypt’s.
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