Telcos sparkle in Ramadan calm

01 December 2003
Telecoms stocks continue to outperform the rest of the Egyptian stock market, which entered Ramadan on a quieter note after a buoyant third quarter. Net average traded volume in October was $13.5 million a day, a slight decline from daily volume of $14.2 million the previous month. Trading remained flat as the national holiday of Eid al-Fitr approached at the end of November, although a few banks enjoyed a surge in prices on the back of strong third-quarter performances. Despite sluggish movement during Ramadan, the market has maintained a strong upward trend, with the broad-based Hermes index showing a year-on-year increase of 109 per cent at the end of October (see Banking & Finance; MEED 3:10:03).

Orascom Telecom (OT) has led the rest of the telecoms stable, buoyed by the news in early October that it had been awarded a licence to build and operate a GSM network in central Iraq. Although trading in the telecoms sector tailed off during Ramadan, foreign interest in Media Production City led to a sustained rally towards the end of the month, with the company share price rising 7.9 per cent to £E 11.97 ($1.95) on 24 November before the market closed for the three-day holiday.

Market analysts have noticed a strong correlation between the share price performance of local telecoms stocks and that of their peers in other developing markets. This has led to some speculation about possible overvaluation of some stocks listed on the Cairo & Alexandria Stock Exchanges (CASE). 'The relative performance of Egyptian Company for Mobile Services [MobiNil] and OT closely track the performance of. especially MTS and Vimpelcom in Russia and MTN in South Africa,' says EFG-Hermes in a 6 November report. 'It is interesting to note that international fund managers have been primarily responsible for driving up the share prices of MobiNil and OT in recent months.'

The ranks of telecoms stocks are due to swell when Vodafone Egypt adds its name to the CASE, after applying in October to the Capital Markets Authority for a listing. It remains to be seen what effect this will have on MobiNil's share price, but the two local GSM operators (OT and MobiNil) are likely to dominate the market for some time to come. The government has indicated that state-owned operator Telecom Egypt is unlikely to launch a third GSM network in the near future.

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