Cairo-based Orascom Telecom (OT)reported a net profit of£E 3.1 million ($687,000) in the first quarter of 2002, marking a recovery from the heavy losses the company made in 2001. The improved performance came on the back of a 74 per cent year-on-year increase in proportionate subscribers, and a 52 per cent rise in total turnover to£E 1,150 million ($255 million).
However, the company is still labouring under a formidable debt burden, and it has been involved in a dispute over its stake in a Syrian GSM operation.
OT reported a net loss of £E 435 million ($96 million) in 2001. This sum included a considerable amount covering the writedown of its investment in sub-Saharan African operator Telecel. The loss excluding the Telecel operations was £E 74 million ($16.4 million).
OT says the results for the first quarter of 2002 show that the company has succeeded in maximising value from its subscribers, as reflected in the 98 per cent year-on-year increase in EBITDA to £E 467 million ($103 million).
During the quarter, OT added almost 200,000 proportionate subscribers to its GSM operations, to reach a total of 2.2 million, compared with 2 million at the end of 2001. The Jordanian Fastlink service climbed into first place, with the number of proportionate subscribers rising by 13 per cent in the three-month period to 671,038. The Egyptian MobiNil fell to second place at 657,085, followed by Telecel and the Pakistani Mobilink, both at just under 400,000. The increased subscriber base includes 44,297 people who signed up for the new Algerian service, of which OT's proportionate share was 23,743.
The company's total current liabilities rose by 18.9 per cent during the quarter to reach £E 4,938 million ($1,094 million). This compares with total current assets of £E 2,105 million ($447 million). Total long-term liabilities declined by 3.5 per cent to £E 5,253 million ($1,164 million).
OT said in June that it had managed to remove $114 million of debt from its balance sheet through the sale by Telecel of its stake in Cote d'Ivoire operator Loteny. It also announced that it had secured fresh equity finance for the Algerian venture from the US-based AIGAfrican Infrastructure Fund (MEED 14:6:02). The company says it is in negotiations about the sale of more Telecel holdings, and is poised to conclude a substantial increase in its own capital.
Analysts have expressed concern about the delay in concluding the capital injection. 'We believe that the main driver behind [the first-quarter net profit] is the company's strict cost-cutting strategy, which might affect future subscribers growth,' comments the EFG-HermesTelecom Fund in a note released on 6 August. 'Another major concern is the delay of the company's capital increase, which was supposed to take place last month and which is critically needed in order to finance current operations and to reduce the company's existing highly leveraged debt structure.'
Also hanging over OT is the wrangle with its erstwhile Syrian partner about the SyriatelGSM operation, which now has an estimated 135,000 subscribers. OT says that in May it sold most of its 25 per cent stake in the venture, but this deal is being contested by the Syrian partner, which is also pursuing a financial claim against the Egyptian firm. OT in turn is contesting the legality of an 11 July general assembly held by Syriatel, at which a new board of directors was appointed. OT also claims that the transfer of the Syrian partner's shares from British Virgin Islands-registered Drex Technologiesto Damascus-based Ramakis illegal. In an 8 August statement to MEED, OT says: 'Despite all these unfortunate occurrences, OT has recently contacted the local partner to state its intention to settle the conflict amicably.'