Dec. 10 (Bloomberg) -- Orascom Telecom Holding SAE of Egypt will offer mobile-phone services in North Korea starting next week, the first foreign telecommunications company to invest in the Stalinist state.

Orascom, the biggest mobile-phone company in the Middle East, rose 9.8 percent in Cairo after a spokeswoman who declined to be named disclosed the investment in a telephone interview today. The gain was Orascom’s biggest in two months.

The Egyptian phone company, trying to offset a slowdown in Pakistan and Bangladesh, estimates it will spend $400 million on a cellular license and investment over three years. Orascom joins OAO Russian Railways and Emerson Pacific Group among a handful of companies in North Korea. The reclusive nation’s economy has been ravaged by famine and U.S. sanctions over its nuclear program.

“It’s a new, untapped market,” said Teymour El-Derini, a trader in Cairo at Beltone Securities Brokerage. “If you believe in North Korea, and that it will eventually open up, it’s an excellent market for Orascom.”

Orascom Telecom won the license Jan. 31 and will have exclusive rights in North Korea for four years.

“Growth will be limited, but even if the service is only offered to government officials, in a military state like North Korea, that is a substantial number,” El-Derini said.

Orascom Telecom had its price estimate reduced and credit ratings cut by the likes of Standard & Poor’s, Moody’s Investor Services and EFG-Hermes on political and economic instability in emerging markets, especially Pakistan.

The company said today it appointed a new chief executive officer of Mobilink and a chief executive of Banglalink in Bangladesh.

The North Korean unit will see average revenue per user of $12 to $15 this year as Orascom Telecom targets three of the country’s biggest cities, according to the company’s forecasts.

To contact the reporter on this story: Tarek Al-Issawi in Cairo at talissawi@bloomberg.net.

Last Updated: December 10, 2008 12:25 EST