CAIRO: Telecom Egypt reported a 72 percent rise in first quarter net profit on Thursday and said it was open to spending its cash pile on acquiring a fixed and mobile telecom operator in the region.
The Egyptian fixed-line monopoly reported net profit attributable to shareholders as LE 960.5 million ($171 million) for the period and the amount attributable to minority interest as LE 1.8 million, putting net profit at LE 962.4 million.
This comfortably beat expectations of four analysts, who had forecast net income between LE 613 million and LE 762 million.
Telecom Egypt Chairman Akil Beshir told Reuters his firm had a net cash balance of LE 1.8 billion at the end of March and could use the cash for expansion if any targets met the firm s conservative criteria. Or it could raise its dividend.
We are not planning just to sit on the cash. We have to use the cash for the best interests of our shareholders. Yes, acquisitions is one (use). It is an ongoing thing. It is part of our strategy to expand, Beshir said in a telephone interview.
We always say our preference is an integrated operator, fixed and mobile, existing rather than greenfield, and in the MENA (Middle East and North Africa) region, he added.
The firm had been looking for opportunities in recent years and had identified some in the past but they had not met its criteria or had not gone ahead for other reasons, Beshir said.
We have very conservative criteria for expansion. Once we have the right opportunity we will address it. There is nothing to talk about at the moment, he said.
And in case we do have the cash and no acquisitions (are) on the horizon, then probably we will pay more dividend, he said, adding that this was the case in 2008 when Telecom Egypt increased its payout by 30 percent over a year earlier.
Solid financial footing
The firm said its operating revenues rose to LE 2.53 billion in the first quarter of 2009 from LE 2.39 billion in the same three-month period a year earlier.
Earnings before interest, tax, depreciation and amortization (EBITDA) and before provisions was LE 1.35 billion, ahead of the forecast by one analyst of LE 1.25 billion.
Beshir said Telecom Egypt was on a solid financial footing to maintain flexibility in its business despite facing an uncertain economic environment.
While voice revenues continue to experience some pressure from mobile substitution, our extensive and modern network enables us to reap the benefits of the resulting increase in mobile traffic through our wholesale revenues, which increased 11 percent year-on-year, Beshir said in a statement.
The company had previously said it had been hit by a slowdown in the broader economy caused by the global financial crisis. The firm has also said it faced competition from mobile firms as customers turn to mobiles instead of fixed-line phones.
Shrouk Diab of Beltone Financial said: We have the belief that especially in the retail segment of the voice, the revenues, that there will be a slowdown.
Telecom Egypt has an internet subsidiary TE Data and also has a minority stake in Vodafone Egypt, one of Egypt s biggest mobile operators. Beshir said this stake contributed LE 350 million to first quarter profits.
The firm expects to complete an undersea cable to Europe by the end of 2009. The cable, called TE North, travels from a site west of Alexandria to Marseille in France, and connects with an existing line from the Red Sea to the Mediterranean.
Telecom Egypt previously said it had sold around a quarter of TE North s capacity for $176 million last year. The total capital expenditure was around $150 million.