CAIRO: Egyptian telecoms firm Orascom Telecom on Wednesday said its net profit tumbled in the first quarter of 2010, lagging forecasts after start-up costs in Canada and troubles in Algeria hurt its bottom line.
Orascom said the 32 percent fall in profit, to $49 million, was also due to an exceptional gain in the same quarter a year ago for the sale of M-Link, a long distance network for voice and data.
The profit figure was much lower than the $74 million average forecast given by seven analysts polled by Reuters and at the low end of a $34 million to $105 million range. But revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) were broadly in line.
"Operationally the company performance was in line with expectations, but at the bottom line net profit missed because start-up losses relating to the Canadian operations were underestimated," said Pharos Securities analyst Delilah Heakal.
Revenue at Orascom’s Algerian unit Djezzy, which accounted for one-third of its total revenue, fell to $412.5 million in the quarter from $462.5 million a year earlier.
Orascom said Djezzy was hit by a new 5 percent sales tax on mobile recharges and the lingering fallout from attacks on the unit’s headquarters and shops in November after a bitter World Cup qualifying match between Egypt and Algeria.
The Cairo-based international mobile network operator is in talks to sell Djezzy plus some smaller sub-Saharan assets to South Africa’s MTN, but the deal has so far been stymied by Algerian resistance.
"Djezzy’s decline in EBITDA or revenue is not that unexpected, and they held their market share at 59 percent which might indicate they have stopped bleeding subscribers," Naeem analyst Ahmed Adel said.
Orascom posted a net profit of $71.8 million in the first quarter of 2009, and a net loss of $46.4 million in the fourth quarter of 2009.
The firm posted EBITDA of $520.9 million on revenue of $1.216 billion in the first quarter of 2010, an EBITDA margin of 42.8 percent.
Mobinil, the Egypt-based operator whose ownership Orascom shares with France Telecom, posted lower-than-expected earnings last month.
The two owners were embroiled in a long-running dispute in the quarter, but have since resolved their differences.
Canadian start-up Globalive contributed most of a $33.7 million associate cost, the firm said. Orascom does not fully incorporate the Wind-branded operation, which launched in December, but holds a 65 percent indirect stake and minority voting rights.
Another entrant to the Canadian wireless market, Public Mobile, has appealed a 2009 ruling that Globalive complies with Canadian ownership and control requirements, Orascom said.
Orascom, which runs operations from North Korea to North Africa, said it was facing strong competition in Egypt and Pakistan and a new entrant in Tunisia.