Out of Africa



ANOTHER LOOK: Out of Africa

Last spring (Apr. 2, 2001) we wrote about Naguib Sawiris’ bet that sub-Saharan Africans would subscribe to his Orascom Telecom (OT) mobile-phone service. His company’s success in Egypt, Jordan and Pakistan boded well for extending service to a whole continent.

But OT’s gamble on the growth of mobile telephony in Africa has not paid off. The number of subscribers is steadily increasing, but expensive new licenses and currency devaluations have caused costs to rise faster than revenues. Mohamed Fahmy, an analyst at Prime Securities in Cairo, estimates OT’s year-end losses at $41 million, $35 million of which belong to Telecel, a mobile operator with 11 African licenses, which is 80% owned by OT. Meanwhile, ot’s share price has fallen from $16 a share at its IPO in July 2000
to $2.36.

Sawiris now plans to unload Telecel and concentrate on OT’s Mediterranean and South Asian holdings. Though Sawiris tells FORBES GLOBAL that he’s mulling over two offers, many analysts doubt whether Telecel can fetch much cash, given the current global telecom slump.

There are potential bright spots for OT. In July it bought an Algerian GSM license for a steep $737 million. Though ot will have to spend some $150 million to build out the Algerian network in 2002, the license could prove to be a good move, says Fahmy. Algeria has a large population (32 million), and the service provided by the government-run incumbent is poor.

The internet also holds promise for OT. In October OT’s subsidiary LINKdotNET, Egypt’s largest internet service provider (ISP), launched with Microsoft a regional Arabic portal, called MSN Arabia.

In January LINKdotNET opened a Jordanian subsidiary, and it promises at least one more foreign ISP this year.

Juliette Rossant

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