TE narrows search for GSM partner

01 November 2002

Telecom Egypt (TE)is understood to have held discussions with a number of regional and international companies interested in taking a strategic stake in its GSM division. Contracts for the supply of equipment for TE's planned cellular service are not expected to be awarded until the company has concluded its search for a partner to share the financial burden and provide operational expertise (Telecoms, MEED Special Report, 16:8:02, page 28).

Industry sources say the strongest candidate to join forces with TE is Austria's Mobilkom, which is understood to be conducting a due diligence exercise. TE is being advised by Credit Suisse First Boston.

Five companies submitted bids in mid-2002 for the equipment supply contract. They are Alcatelof France, Ericssonof Sweden, Motorolaof the US, Canada's Nortel and Germany's Siemens.

TE acquired its GSM licence for £E 1,975 million ($420 million) and is entitled to start operations from 1 December. However, the service is now unlikely to be launched until mid-2003, at the earliest.

The two incumbent operators - Egyptian Company for Mobile Services (ECMS)and Vodafone Egypt - each have over 2 million subscribers. The continued profitability of the market is evident from ECMS' results for the third quarter of 2002. The company's total revenues for January-September rose by 9.7 per cent year-on-year to reach £E 1,948 million ($418 million), and net profit rose by 38.4 per cent over the same period to £E 371 million ($80 million).

The major issue facing TE is whether it will be able to secure sufficient numbers of high-value subscribers to compete effectively with the two incumbents.

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