Telecom Egypt May Buy Vodafone Local Division When 4G Is Offered

Telecom Egypt, the country’s landline monopoly, said it may buy a controlling stake in Vodafone Group Plc. (VOD)’s local mobile-phone unit when 4G spectrum is offered, to avoid a possible conflict of interests.

The Egyptian telecommunications company owns 45 percent of the unit. It has no legal obligation to sell the stake and hasn’t received an official offer before receiving an integrated license, which will allow Telecom Egypt to provide mobile services, Chief Executive Officer Mohamed Elnawawy said in an interview. The company expects 4G spectrum for faster mobile data services to be offered within 10 months to a year.

At that point, Cairo-based Telecom Egypt may have a conflict if it develops its own 4G services, which would put it in competition with the Vodafone asset, said Elnawawy. “Management may propose that we evolve with this asset and by evolve we mean being buyers or sellers,” he said by phone.

The London-based company has expressed interest in buying Telecom Egypt’s holding, a Vodafone official said last month.

Licenses that would allow Telecom Egypt to offer mobile services, while breaking its monopoly on landlines, have been delayed several times, and Elnawawy said he expects they will be issued this year. That would allow landlines to be offered by Egyptian Co. for Mobile Services, which operates the Mobinil brand; the Vodafone local unit; and Emirates Telecommunications Corp.’s Etisalat Misr division.

“We have a unique opportunity to cater to customer demand because of the integration of fixed and mobile assets,” said Elnawawy.

Telecom Egypt’s third-quarter net income after tax rose to 650 million Egyptian pounds ($94.4 million) from 636 million pounds a year earlier. Vodafone Egypt contributed 218 million pounds, according to a statement today.

Telecom Egypt’s shares fell 1 percent to 13.70 pounds as of 2:30 p.m. in Cairo. The stock has declined 3.2 percent this year compared with a 14 percent rise for the benchmark EGX 30 Index.

To contact the reporter on this story: Tamim Elyan in Cairo at telyan@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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