OT labours back towards the black

17 January 2003
Orascom Telecom (OT)is understood to have reached a tentative agreement with the US' Motorolaover its default in August on a $101 million payment due to the company, a Motorola spokesman told MEED on 15 January. The companies have declined to give further details of the repayment deal, which was struck shortly before OT releashed financial results for the first nine months of last year (MEED 16:8:02).

OT continued its painful struggle towards profitability in 2002, buoyed by rising revenues from its GSM businesses but weighed down with a hefty tax burden and increasingly heavy interest payments on its debts. OT recorded a net loss of £E 96 million ($21 million) for the nine months ending 30 September, compared with losses of £E 163 million ($35 million) for the same period in 2001.

The lucrative sale of OT's Tunisian and Jordanian GSM operations in the fourth quarter, yet to be recorded in the financial statements, should bring some relief. However, revenues from the intended sale of the company's stake in GSM operator Syriatelhave been blocked by a protracted legal dispute with OT's Syrian partners.

Earnings before interest, tax, depreciation and amortisation (EBITDA) reached £E 1,561 million ($337 million), an 89 per cent increase on earnings for the previous year. The earnings increase was fuelled in part by a 49 per cent increase in revenues from GSM operations to £E 3,539 million ($764 million). The bottom line was bolstered further by the sale in September of OT's stake in Yemeni operator Sabafonfor $18.5 million.

OT has taken a £E 118 million ($25 million) charge on the sales of subsidiaries of its Sub-Saharan operator Telecel. The company attributes its net losses to the write-down, but the most demonstrable restraint on OT's return to profitability are the heavy interest payments on its debts. Interest expenses rose by nearly 40 per cent to reach £E 403 million ($87 million). This reflects a mounting short-term debt burden over the first nine months of the year, with current liabilities reaching £E 6,017 million ($1,300 million) by the end of this period. The picture is marginally brighter for OT's long-term liabilities which were reduced by 14 per cent over the year to reach £E 4,658 million ($1,006 million).

OT in late December sold its stake in Jordan Mobile Telephone Services (Fastlink)to Mobile Telecommunications Companyof Kuwait, in a deal worth $424 million. The company said the sale would help to offset its debts, which have been compounded by the major regional expansion programme launched in 2001, when OT acquired Algeria's first GSM licence for $737 million. While the company says it plans to concentrate on its North African assets, in mid October it sold a 50 per cent stake in its Tunisian GSM operation to another Kuwaiti company, Wataniya Telecom, for $113.5 million.

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