Q1 figures out this week from Orascom Telecom, North Africa’s biggest mobile phone operator and one of Egypt’s largest companies.

At first glance – the company, which saw pre-tax profit for the three months to March 31 more than double to $128.9m, compared to the same period the year before – appeared to have ridden out the turmoil rocking the region in fairly good shape. Revenues rose 5 per cent to $949.2m while subscribers increased 16 per cent to over 104m.

Yet behind the headline figures is a more sobering reality.

Profit before tax was boosted primarily by the sale of its 50 per cent stake its Tunisian business, Orascom Telecom Tunisia, in January. The company said it booked a $754m gain on the transaction, contributing almost all the $821.8m net profit. Net prtofits from operations was $67.3m.

Orascom did not give a specific revenue and profit breakdown of Mobinil – its Egyptian operation which accounted for nearly 19 per cent of group revenue and and 21 per cent of group ebitda in 2009. But the only Mobinil figure it did give – average revenue per user (ARPU) – was telling enough. ARPU fell 19.6 per cent during Q1 even as subscriber numbers rose 16.2 per cent to 30.3m.

As Khaled Bichara, who this week replaced Naguib Sawiris as Orascom’s executive chairman, said in the trading statement (emphasis ours):

The political circumstances in Egypt had a noticeable impact on the performance for Mobinil, where the forced shut-down of voice and data services for several days led to declining ARPU and usage……

It added later on in the statement:

The first quarter of 2011 performance was impacted by the political events and ensuing economic uncertainty which slowed subscriber growth, decreased revenues and pressured margins.

The Q1 2011 closing base reached 30.4 million mobile customers (year on year increase of 16%) and 227 thousand ADSL subscribers (year on year increase of 14%) Q1 2011 mobile customers‟ net additions reached only 0.13 million due to a strong drop in sales activity mainly in February: many shops were closed due to lack of security and limited mobility of persons during the weeks of the turmoil.

Due to the intensity of the political events in January and February, Mobinil was constrained in terms of commercial launches especially with the limited shop activities, however some compensations were provided to the customers to make up for the services disconnections (50% on Fixed DSL, 30% on MBB and a 1 EGP daily emergency credit for pre-paid customers who were not able to place calls).

The bright spot in Orascom’s business – which stretches from Egypt to North Korea to Pakistan – continues to be Algeria, a country that has so far avoid the large scale turmoil that have rocked neighbouring Tunisia and Libya.

Q1 revenues for Djezzy, as the unit is called, rose 6.3 per cent to $438.6m while ebitda climbed 13.6 per cent to $260m. But Orascom is selling this prize along with other assets to Russia’s Vimpelcom, in a deal due to be completed soon. Vimpelcom is set to take on the tricky problem posed by plans by the Algerian government to nationalise the business.

But the Q! numbers highlight the hole that Orascom will now have. Djezzy accounted for 46 per cent of group revenue for Q1 this year.

Related reading:
Soc Gen: counting the cost of Egypt, beyondbrics
Stay on the line: Orascom-Vimpelcom deal close, beyondbrics
Egypt file, beyondbrics

Get alerts on Emerging markets when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Follow the topics in this article