UNDER AFRICAN SKIES
Orascom Telecom wants to bring phone services to Africa. For Egypt’s top wireless provider this is not so far-fetched.
Should Africa have state-of-the-art communications? Definitely, says the Egyptian entrepreneur Naguib Sawiris, who knows that even warring nations need telephones and the internet.
Sawiris’ Cairo-based Orascom Telecom already offers wireless GSM (global system for mobile communications) and other telephone services in several African nations, from Zimbabwe to Burundi.
His next bet is also in the sub-Saharan region, where last year he acquired Telecel International’s 11 licenses for a mere $164 million, boosting the number of Orascom’s licenses at the time to 17. Since then it has acquired three more licenses for GSM networks. All told, 17 are on air, and 3 are expected to be launched this year, reaching 400 million people.
The African sky could be the limit for Orascom, which has fewer than 2 million subscribers in a region where its closest competitor, Mobile Services International of the Netherlands, owns licenses in just four countries.
“No one has consolidated holdings on an entire continent,” says Sawiris, who started to implement his pan-African vision three years ago.
A first coup, in April 1998, was to convince the giants France Telecom and Motorola to form a partnership with him in MobiNil, now Egypt’s leading private wireless operator. Motorola has since sold its stake in MobiNil, leaving France Telecom and Orascom as MobiNil’s two principal shareholders. A year later Orascom acquired controlling stakes in Jordan’s FastLink and Pakistan’s MobiLink; it then headed for the heart of Africa, where it won licenses in Chad and the Republic of Congo.
Financing high-risk ventures is never easy, but Orascom Telecom managed in July to raise $320 million in Egypt’s largest flotation ever. The dual initial public offering in London and Cairo, at $16 a share for a 15% stake in the company, valued Orascom at $1.75 billion (its price in mid-March was $8.86).
To be sure, the picking is slim for investors eager to venture into sub-Saharan Africa, and Orascom represented a unique opportunity. Political risks, even wars, are not much of a concern to Sawiris, who plans to bring the interneta sector where his group occupies the top spot in Egyptto sub-Saharan Africa. “Phone service is like a utility: Nobody can afford to cut us off,” Sawiris says.
Indeed, no regional conflict has disrupted Telecel’s operations since its creation in 1986. Orascom even negotiated GSM licenses in the midst of a 1999 coup d’état in Côte d’Ivoire, a country that generated about 75% of Telecel’s revenues.
Sawiris worries more about foreign exchange risks than wars, so he limits Orascom’s exposure to currency fluctuations with prepaid plans and phone cards, sold to customers through small retail stores. The company believes in building customers’ loyalty in countries where economic conditions can quickly and widely fluctuate. Prepaid phone cards allow users to receive incoming calls even if they let their telephone service lapse because they cannot afford outbound calls.
The philosophy fits Orascom well; it has remained a family business, being 60% owned by the Sawirises, including Naguib’s father, Onsi Sawiris (see FORBES GLOBAL, July 3, 2000), who made a fortune in construction and contracting.
Naguib, 46, entered the information technology (IT) arena in 1981 as an importer of it products from such leaders as Hewlett-Packard, Microsoft, Compaq and ibm before moving into the telecom equipment business.
As MobiNil’s subscriber base quickly doubled, the company expanded the network by relying solely on in-house expertise. This encouraged Sawiris to move beyond Egypt’s borders in June 1999, boosting his stake in Jordan’s FastLink to 65% and negotiating lower tariffs there with King Abdullah. The savings were passed on to subscribers, whose number doubled in just one year. By acquiring Motorola’s shares at the end of 2000, Orascom raised its stake in FastLink to 92%.
Sawiris doesn’t mind the risks and enjoys the opportunities that come with them: little or no competition, low telecom license fees and minimal fixed-line infrastructures that promise to grow quickly.
Orascom is now considering investments in Algeria, Tunisia and Nigeria. This might require strategic partnerships to develop GSM and internet services. Sawiris would not be surprised if large multinationals soon start eyeing his territory. (In January Syria awarded Orascom one of two GSM contracts.) “They’ll look at this continent and find a blue sign saying Orascom,’” he declares.
Meanwhile, Orascom Telecom generates most of its revenues from its 31% stake in MobiNil. It has high hopes for MobiLink of Pakistan, where the subscriber base is growing at a triple-digit rate and the population is twice that of Egypt. “We expect MobiLink to be another MobiNil,” says Sawiris.