Billionaire Facing Death Threats Says Egypt Risks Becoming Iran

From his 33rd-floor penthouse apartment with sweeping views of the Nile River, Naguib Sawiris, Egypt’s best-known billionaire and most prominent Christian, can hear the chants of Friday prayers in the distance. As he sits down to a breakfast of taameya and ful, dishes made from fava beans, demonstrators are gathering in Cairo’s Tahrir Square for a planned protest, this time aimed at stopping military trials of thousands of civilians arrested during the revolution that brought down the regime of President Hosni Mubarak.

Sawiris says his new political party, the Free Egyptians, is backing the demonstration, although he won’t be attending, Bloomberg Markets magazine reports in its December issue.

“I would love to go, but the problem is, my life is threatened,” he says.

The death threats started in late June after Sawiris, 57, posted an image on his Twitter account of Mickey Mouse in a beard and Minnie Mouse in a niqab, or full veil. The cartoon, sent to him by a Muslim friend after circulating in the blogosphere, was titled “Mickey and Minnie after …” -- meaning after Egypt’s November parliamentary elections, in which a September poll suggested Islamist parties would win the biggest share of the vote.

Sawiris thought it was funny. Muslims accused him of mocking their religion.

Sawiris, the founder of Orascom Telecom Holding SAE (ORTE), apologized to his 139,000 Twitter followers, saying he meant no disrespect. That wasn’t enough to prevent a boycott of mobile phone company MobiNil, a joint venture between Orascom and France Telecom SA (FTE), which lost 800,000 subscribers in the months following the tweet.

Islamist Rant

It also prompted a televised rant on July 7 by Islamist preacher Abu-Ishaq al-Huwaini, accusing people like Sawiris of insulting the Prophet Mohammed. “We will kill him even if he repents,” Huwaini shouted.

In the months since Huwaini spoke, Egypt has been shaken by a wave of sectarian violence that threatens to throttle the world-captivating spirit of peaceful change projected by the Arab Spring protesters in Tahrir Square last January and February. On Oct. 1, several thousand Muslims attacked a Coptic Christian church in the southern Egyptian province of Aswan, setting it on fire, just one of many assaults on Coptic churches around the country since the revolution.

On Oct. 9, a Christian protest against the attack turned into a bloody clash with security forces, as armored vehicles drove into the crowds, crushing demonstrators. At least 25 people were killed.

Sawiris Founds Party

The Free Egyptians party, which Sawiris co-founded in April, condemned the violence, saying it undermined trust in the ruling military council and its commitment to protecting the Coptic minority, estimated at 10 percent of Egypt’s population.

Sawiris worries that Egypt will end up looking more like Iran than Turkey, whose combination of tolerant Islamic government and vigorous economic growth is seen as a model by many Egyptians. Sawiris cites the attacks on the churches and the Feb. 18 return to Egypt of Sheikh Yusuf al-Qaradawi, who has condoned terrorist attacks on Israel, to lead Friday prayers after 30 years in exile.

He also cites the release from prison in March of an unrepentant Aboud Al-Zomor, who was convicted of assisting in the assassination of President Anwar Sadat in 1981 and who was one of the founders of the Egyptian Islamic Jihad, a breeding ground for al-Qaeda.

“It’s a clear sign that we are going in a very bad direction,” Sawiris says.

Bad Omens

Sawiris sees another bad omen in the deteriorating relationship between Egypt and Israel, exemplified by the Sept. 9 attack on Israel’s Cairo embassy by an angry mob. Police were late to intervene, and when they did, the clash left three people dead and 1,000 injured.

“We didn’t do the revolution because of Palestine and Israel,” Sawiris says. “This was an Egyptian revolution against dictatorship.”

Sawiris’s anguish is writ large in Egypt and beyond as newly liberated populations wrestle with the unaccustomed task of reinventing political systems -- and the economic and civil institutions that go with them. On Nov. 28, Egyptians will begin voting for a new parliament that will appoint a committee to rewrite the constitution. The Free Egyptians party is pushing a secular, free-market agenda ahead of the elections. With the worsening economy set to foster more turmoil, the party is also advocating social programs for the poor.

Dreams of Democracy

For Egypt, the elections will determine whether the dreams of pro-democracy demonstrators will become reality or be smashed by sectarian turmoil and continued military rule. At stake for the wider region is whether Islamists or secular parties gain the upper hand and whether newly elected governments can kick- start stalled economies.

In late October, Tunisia’s Islamic Ennahdha party won 30 percent of the vote for the country’s Constituent Assembly. The party’s leaders said they espoused a moderate interpretation of Islamic law and were willing to form a national unity government with secular parties.

In Egypt, the Oct. 9 battle between Christians and the army heightened concerns about a security vacuum in the country.

“I wasn’t worried about Egypt until this incident,” says Nathan Brown, a professor at George Washington University in Washington and author of four books on Arab politics. “You have an incompetent military, a panicking public and a political leadership that is divided.”

Collapse of Authority

As Egypt suffers a collapse in authority, its economy has ground to a standstill. Gross domestic product shrank 2 percent from January to June compared with the same period in 2010. The benchmark EGX 30 Index (EGX30) of stocks has fallen 40 percent so far this year. Tourism, which accounts for 11 percent of GDP, was hit hard by the upheaval, as the number of visitors plummeted 40 percent in the first seven months of the year.

“We still see a lot of turbulence ahead,” says Hisham el- Khazindar, co-founder of private-equity firm Citadel Capital and a financial backer of the Justice Party, a liberal group contesting the elections. “Two sectors that the economy is dependent on, tourism and construction, have been hit hard.”

Investors are fleeing.

“The last thing an asset manager wants to do now during this perfect economic storm is to invest in countries with high political risk,” says Angus Blair, head of corporate development at Beltone Financial Holding, a Cairo-based investment bank that manages 21 billion Egyptian pounds ($3.52 billion). “Political risk is compounded by the lack of economic growth in the region.”

No New Taxes

Sawiris attacked a proposed rise in the capital gains tax in June, saying it would scare investors away.

“Now, it would be a disaster,” he says. “Already, we can’t find anybody to invest.”

Egypt should hold off on raising taxes until the economy is back on its feet, he says.

Sawiris is contrite about stirring up Muslim anger with his Twitter message.

“I said to myself, ‘You think of yourself as an intelligent guy; how could you do something stupid like that?’” he says, wearing jeans and a blue shirt as he sits for an interview in his penthouse.

The apartment is adorned with oriental rugs and Egyptian contemporary art, including a painting by surrealist artist Abdel Hadi El-Gazzar for which Sawiris says he was offered $10 million.

Nation of Emotions

“His political opponents are using this against him,” Hassan Kabbani says about the Twitter message and its aftermath. Kabbani stepped down as chief executive officer of MobiNil in September. “The country is led by emotions,” he says.

The eldest son of Egypt’s richest family, Sawiris made his billions building Orascom into the Middle East’s biggest mobile phone operator. His younger brother Nassef, 50, is chairman and CEO of Orascom Construction Industries (OCIC) SAE, the business started by their father, Onsi, in the 1950s. A third brother, Samih, 54, is chairman and CEO of Orascom Development Holding SAE, which builds and operates vacation resorts.

All three brothers are billionaires. The Sawirises are the largest private employers in Egypt, and the companies they invest in account for almost 40 percent of the value of the EGX 30. Naguib says he’s the country’s single largest taxpayer.

Council of Wise Men

Naguib is the only brother who has gotten involved in politics. When demonstrations broke out in January, Sawiris says, he had no qualms about siding with the protesters. As a member of a self-appointed group that the press dubbed the “council of wise men,” he was one of several prominent Egyptians mediating between demonstrators, for whom he was providing medicine and food, and the Mubarak regime, whose 30-year reign ended with his resignation on Feb. 11.

“Sawiris got on the right side of the revolution,” George Washington University’s Brown says. “He did well under the old system, but he wasn’t deeply implicated in the old regime.”

The protests in Egypt came on the heels of a Mideast economic boom, as greater prosperity brought demands for political freedoms. In 2004, a reform-minded Egyptian government led by then-Prime Minister Ahmed Nazif (now in jail on corruption charges he denies) began selling stakes in state giants such as Telecom Egypt and Bank of Alexandria SAE and attracted record investment by cutting tax rates to a flat 20 percent.

The country’s economy went from growth rates of about 4 percent annually to an average of 7 percent from 2006 to 2008.

Military in Charge

Ten months after the revolution, the military was still ruling Egypt by decree. The country has a secular tradition and also a history of cronyism, corruption and autocracy. In the wake of the uprising, a clutch of Egypt’s top businessmen have either fled the country or are being tried for corruption.

Among the latter is Gamal Mubarak, who once worked as an investment banker at Bank of America Corp. and later helped set up a London-based private-equity company called Medinvest Associates Ltd. Gamal and his brother Alaa are being tried on charges of using their father’s position to acquire property. Hosni Mubarak is charged with embezzling public funds and with ordering security forces to fire on the demonstrators in Tahrir Square, killing hundreds.

They have pleaded not guilty to the charges.

Mubarak’s refusal to allow democratic elections was one reason Sawiris threw his support behind the protesters. He says he told the former president at a meeting in Sharm el-Sheikh in November 2010 that one-party rule was unsustainable. Later that same month, Mubarak’s National Democratic Party won a landslide victory in a parliamentary election marred by allegations of widespread fraud.

Muslim Brotherhood

Sawiris founded the Free Egyptians party as an alternative to Egypt’s recharged Islamist movement, led by the Muslim Brotherhood, which was banned but tolerated under Mubarak. The Brotherhood’s Freedom and Justice Party has the support of 39 percent of decided voters, making it the most popular party in Egypt, according to a September poll by the Danish-Egyptian Dialogue Institute.

The Brotherhood has built grass-roots support by sponsoring education and health-care programs to counter poverty in Egypt, where 40 percent of the population survives on less than $2 a day.

The Free Egyptians is one of more than a dozen secular parties contesting the elections. It had 110,000 members as of mid-October, three-quarters of them Muslim, and the support of 6 percent of decided voters, making it the fourth-most-popular party in Egypt.

‘Liberal, Secular, Capitalist’

“Our line is clear: liberal, secular, capitalist,” Sawiris says, adding that the party’s ideology is based on the social democratic economic system espoused by the former West Germany. “We want a market economy that puts all the regulations in place and which prevents harming of the lower income bracket.”

The Free Egyptians party is advocating a minimum wage for the private sector, folding state-owned firms into a holding company with independent management, and an infrastructure investment program to create jobs, says Hani Sarie-Eldin, a vice president of the American Chamber of Commerce who is one of three members of the party’s presidential council, which doesn’t include Sawiris.

“We want to hammer on poverty,” says Sarie-Eldin, noting that the party is not relying on Sawiris alone for financing.

The Free Egyptians have formed a coalition that includes the Egyptian Social Democrats along with a handful of other parties.

‘I Say What I Think’

Sawiris decided not to run for parliament himself.

“My character is very dangerous for a politician,” he says. “I say what I think without thinking too long.”

He says his two brothers are encouraging him to steer clear of politics. And he admits he has made life uncomfortable for them. Samih was convicted of a securities law violation in August for giving contradictory information about his firm’s holdings, a charge he denied. He was sentenced to two years in prison -- a sentence that was nullified after he agreed to pay a $3.3 million fine.

Egypt’s political uncertainty won’t end with parliamentary elections. The interim military government hasn’t set a date for presidential elections. Sawiris says he is supporting both former Arab League chief Amre Moussa and Mohamed ElBaradei, former director general of the International Atomic Energy Agency, in the presidential race.

Stepping Back

Sawiris has stepped back from day-to-day management of his telecom businesses. In January, he sold his 50 percent stake in Tunisiana, the mobile phone operator in Tunisia, for $1.2 billion to Qatar Telecom QSC, closing the deal two days before Tunisian President Zine El Abidine Ben Ali fled the country.

In April, shareholders approved a $6.5 billion deal to merge his Rome-based Wind Telecomunicazioni SpA, including most of his Orascom Telecom assets, with Russia’s VimpelCom Ltd. (VIP) to create the world’s sixth-largest mobile phone company, which now has 193 million subscribers.

Sawiris and his father now own a 19 percent stake in U.S.- listed VimpelCom that is worth $3.4 billion. VimpelCom shares have fallen 24.4 percent this year as of Oct. 26.

Sawiris pocketed about $300 million in cash from those two deals, he says. He’s using some of it to set up a private-equity fund in London to invest in telecom assets around the world. Adding in money from outside investors, he expects the fund to raise as much as $500 million.

“We’ll be looking at any telecom assets, anywhere, that we believe are undervalued and that with proper management will create value,” he says.

Won’t Sell MobiNil

Sawiris remains emotionally tied to his Egyptian assets. He declined to fold his 34 percent stake in Egypt’s MobiNil (formally Egyptian Co. for Mobile Services) into the merger with VimpelCom and has resisted efforts by joint-venture partner France Telecom to buy him out.

“It was my first asset and the reason for my success,” Sawiris says.

Sawiris has become a player in media as well as telecom. He’s pouring about $6 million a year into OnTV, his independent satellite television station, which started a 24-hour news channel in September to challenge Qatar-based Al Jazeera.

He’s also helping to bankroll one of Egypt’s most prominent independent newspapers, Al-Masry Al-Youm.

Sawiris and his family have a lot to lose if Islamist parties dominate Egypt’s new government and make life hard for Coptic Christians. Sawiris says he would consider leaving Egypt if the new parliament bans alcohol or imposes a dress code on women.

Onsi in Exile

Naguib’s father did leave the country -- though it was Arab socialism that drove him out. In 1950, Onsi, now 81, founded a construction company that grew into one of Egypt’s biggest contractors by digging canals and building roads. Lt. Col. Gamal Abdel Nasser seized power in 1952, and in 1961, his socialist government took over Onsi’s company. Onsi managed the company as a state employee until 1966, when he moved to Libya and launched a new construction business.

Sawiris and his brothers remained in Cairo, living with their mother in the leafy, affluent neighborhood of Zamalek. Naguib attended the German Evangelical School. In 1976, his father returned to Cairo to restart his construction business after Sadat began opening up Egypt to private investment.

Sawiris attended the Swiss Federal Institute of Technology in Zurich, earning a degree in engineering. He says he never touched any of the money his father sent him, preferring to earn cash by doing Arabic-German translations, selling jewelry on the street and working as a night porter at a hotel.

‘A Lot of Pride’

“I had a lot of pride,” he says. “I didn’t want my success to be attributed to my dad.”

After finishing his degree and returning to Cairo, Sawiris started his own small business with a friend, initially selling car jacks. By the age of 23, he says, he’d made enough money to live independently. His father told him it was time to join the family business.

“You’ve proved yourself; don’t be silly,” Sawiris recalls his father telling him.

Sawiris started work at his father’s Orascom Group in 1979 on the condition he would run his own businesses and not just take over the family construction company. He started a unit that built railways and then branched out into information technology, selling equipment made by companies such as Cisco Systems Inc. (CSCO) and Hewlett-Packard Co. (HPQ) in Egypt and investing in the country’s first Internet service provider in 1994.

Grabbing Telecom Assets

Sawiris soon began buying up mobile telephone assets across the Middle East and beyond, going for high-risk markets such as Bangladesh and Zimbabwe. In 1997, Sawiris made his breakthrough by paying about $500 million for one of Egypt’s first mobile phone licenses together with France Telecom.

A flurry of deals followed. In 2001, he paid $737 million for a mobile license in Algeria, outbidding France Telecom by $315 million. The next year, he led a consortium that paid $454 million for a mobile license in Tunisia, beating Spain’s Telefonica SA. (TEF)

By 2002, Orascom Telecom was close to collapse as it struggled to service $2.2 billion in debt. To stay afloat, Sawiris sold his Jordanian mobile operator to Kuwait’s National Telecommunications Co. for $420 million. He also sold most of his sub-Saharan African businesses.

By 2003, he was growing again. He invested $160 million in a new Iraqi mobile phone service, Iraqna. He flipped it four years later for $1.2 billion to Zain Group, Kuwait’s mobile phone company.

Foray Into Italy

Booming telecom markets and easy credit led to his biggest deal ever: the 12.1 billion euro ($16.5 billion) 2005 acquisition of Wind Telecomunicazioni, Italy’s third-largest mobile phone provider, from Rome-based utility company Enel SpA. At the time, it was Europe’s largest leveraged buyout and included 7 billion euros of debt.

“They were an electricity company, a utility -- what were they doing selling mobiles?” Sawiris says. “I know how miserably managed public-sector companies are. It’s like nobody’s money. I decided I could manage it 10 times better.”

Orascom Telecom replaced top management and cut 250 million euros a year in costs at Wind by, among other things, shedding 2,000 jobs. By the time he sold it to VimpelCom, Sawiris says, he had increased pretax earnings to 2.2 billion euros from 1.2 billion euros in 2005.

By 2009, Sawiris was bogged down in a fight with the Algerian government over his biggest cash cow: mobile phone operator Djezzy, which contributed nearly half of Orascom’s pretax profit. The Algerian government accused Djezzy of failing to pay $600 million in taxes.

VimpelCom Deal

With his most profitable unit tied up in a tax dispute and shouldering a heavy debt load from his flurry of acquisitions, Sawiris began searching for a partner for Orascom. In October 2010, he struck the deal with VimpelCom.

“You can’t grow anymore by buying new licenses; I had already bought everything,” Sawiris says. “The only way to grow is to merge. Only large companies will be sustaining their existence because of their powerful position negotiating with equipment manufacturers.”

Left out of the VimpelCom deal was his most controversial asset: a 75 percent stake in Koryolink, a joint venture with North Korea’s Post & Telecommunications Corp. In 2008, Sawiris bought a 25-year mobile phone license in North Korea and announced plans to spend $400 million on the service, which now has 666,000 subscribers.

Dinner With Kim Jong Il

On Jan. 23, days before Egypt’s uprising broke out, Sawiris had dinner with Kim Jong Il in Pyongyang, North Korea, to discuss Koryolink.

“He likes me very much,” Sawiris says with a smile. “I was the only crazy person in the world who decided to go and throw hundreds of millions of dollars into this country.”

Sawiris sees no disconnect between his push for democracy in Egypt and his deal with the North Korean dictator.

“How did the revolution in Egypt start? Mobile phones,” he says, shaking the phone in his hand in the air. “You should understand that this is the first tool for change.”

Sawiris himself played an important role in Egypt’s uprising. The day after the protests began on Jan. 25, he was flying on a private jet with his brother Samih to Paris, where his father was having an operation. After learning of the growing revolt, he ordered the plane to turn back to Cairo. His father urged him not to return.

“They will think we fled the country,” Naguib says he told his father. “And only rats leave a boat when it is sinking.”

Broadcast Crackdown

At the same time, Minister of Information Anas El Fekky had called Albert Shafik, the head of Sawiris’s OnTV channel, and ordered him to stop broadcasting news of the demonstrations.

“You are showing that there are a lot of people on the streets,” Shafik recalls the minister telling him. “I want your program tonight to be very quiet and calm.”

Shafik says he thanked him for the call and continued his broadcasts. El Fekky also called Sawiris and told him to stop broadcasting. Sawiris refused, daring him to take action.

“If you want to shut the station, you can shut the station,” he says he told El Fekky.

The government backed off, and OnTV stayed on the air.

On Jan. 28, the telecom regulator ordered all mobile operators in Egypt, including MobiNil, which has 39 percent of the country’s mobile phone market, to shut down their networks. Sawiris called up his old school friend, Minister of Communications Tarek Kamel, to protest.

Caving to Pressure

“How can you do this?” Sawiris told him. “What if someone is sick and needs an ambulance?”

Kamel threatened to revoke his license, and Sawiris’s lawyers confirmed the government had the right to order a shutdown for security reasons. Sawiris says he had no choice but to comply.

“I have a fiduciary duty to my shareholders,” he says of the decision. “I could have destroyed the value of my company completely if I didn’t obey.”

Some protesters think Sawiris could have tried harder. “They could have done much more to resist,” says Hossam Bahgat, executive director of the Egyptian Initiative for Personal Rights and a MobiNil subscriber who took part in the demonstrations. “We were out in the streets taking bullets, and the least they could have done is say no and make the government force them to shut down.”

The shutdown had no effect on the demonstrations, which only grew larger.

Wise Men Convene

Meanwhile, Sawiris joined the council of wise men, spearheaded by Ibrahim El Moallem, chairman of Dar El Shorouk, Egypt’s largest publishing house. After meeting with the revolution’s youth coalition, the wise men issued the first of four statements on Feb. 1, urging Mubarak to delegate his powers to the vice president during a transitional period and agree to rewrite the constitution.

“Naguib did a lot,” says Moallem, 66, smoking a cigarette in his Cairo office surrounded by books. “We were all doing what we could.”

Sawiris says he spent from midnight to 4 a.m. the next day on the phone with protesters and Vice President Omar Suleiman urging him to pull back security forces from Tahrir Square. The day would later be dubbed the “battle of the camel” because government-hired thugs rode camels and horses into the square and assaulted demonstrators with iron bars and wooden batons, killing eight people and injuring 1,000.

18-Day Uprising

At about 4 a.m., Suleiman called Sawiris to say it was over, that government security forces had left the square.

Sawiris says he spoke to Suleiman numerous times throughout the 18-day uprising; he refuses to say whether he spoke to Mubarak. He thinks the ailing Mubarak, 83, who was confined to a cage on a hospital bed during his trial, deserved more-dignified treatment.

“Yes, they were dictators; they misused the power they had,” Sawiris says. “But as a human being, that’s not the end I would have liked him to have.”

That’s the kind of statement that has made Sawiris a controversial figure in post-revolution Egypt. Once again, he has said what he thinks -- and he says he doesn’t care about the consequences.

-- Editors: Michael Serrill, Stryker McGuire

To contact the reporters on this story: Stephanie Baker in London at stebaker@bloomberg.net and Mahmoud Kassem in Cairo at mkassem1@bloomberg.net.

To contact the editor responsible for this story: Michael Serrill in New York at mserrill@bloomberg.net.

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