Telecom Egypt Pays $806 Million for 4G License; Shares Gain

  • State-controlled fixed-line carrier needs wireless for growth
  • Shares rise 3.1 percent in Cairo after higher intraday gains

Telecom Egypt is set to become the country’s fourth mobile carrier after acquiring a 4G license Wednesday as the state-controlled landline monopoly seeks to keep up with rivals.

The carrier, 80 percent owned by the government, bought the license for 7.08 billion Egyptian pounds ($806 million), Chief Executive Officer Tamer Gad Allah said at a news conference in Cairo. The company will begin trial operations within six months of receiving its frequencies.

“The ability to operate our own mobile services will allow Telecom Egypt to once again focus on growth,” Gad Allah said in a statement.

Wireless services are vital for Telecom Egypt to keep pace with Vodafone Egypt, Orange Egypt and Emirates Telecommunications Corp.’s Etisalat Misr. An earlier plan to hand the fixed-line carrier a mobile license in the Arab world’s most populous nation faced threats of international arbitration by other operators in 2014. The three incumbents have until Sept. 22 to respond to 4G licenses offered to them by the government.

Telecom Egypt rose 3.1 percent to close at 10.10 pounds in Cairo, after advancing as much as 8.2 percent earlier in the day.

Telecom Egypt won’t have to sell its 45 percent stake in Vodafone Group Plc’s local unit and the National Telecom Regulatory Authority will “ensure” competition and governance compliance, Executive President Mustafa Abdul Wahid said at a news conference.

Telecom Egypt paid 5.2 billion pounds upfront for its permit and will tender the remainder in installments over four years, according to Gad Allah. Egypt has about 95 million mobile subscribers, the Communications Ministry said on its website.

Rivals’ Concerns

“The surprising announcement raises concerns over mobile operators’ acceptance of Telecom Egypt’s entry," said Ahmed Adel, lead telecom analyst at Beltone Financial. "As long as they will get an entry point for 4G like Telecom Egypt, I don’t think it will be negative for them. The concern is if Telecom Egypt gets exclusivity rights for a certain period."

Telecom Egypt will establish its own 4G network but will use other carriers’ 2G and 3G networks virtually. It has two months to agree on interconnection rates or the regulator will determine them if no deal is reached within time, according to Abdul Wahid.

The regulator has demanded that operators who agree to acquire 4G must pay half of the license’s value in dollars, a challenge to companies operating in Egypt where a dollar shortage is crippling business activity. Orange Egypt said the license is overpriced for the amount of frequencies it offers.

The license terms are "favorable" to Telecom Egypt in the short term, Adel said. But if other operators get International Gateway licenses or seek discounts on infrastructure leasing prices it will hurt Telecom Egypt revenues.

Telecom Egypt is in advanced negotiations to obtain bank finance overdraft facilities that will fund up to 50 percent of the up-front cost of the license, Gad Allah said in the statement.

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