Orascom: This Mobile Upstart Really Gets Around
Last year, Naguib Sawiris, chairman of Cairo's Orascom Telecom Holdings, added Italian operator Wind Telecomunicazioni to his growing mobile telecom empire for $15 billion. Believing the company was "a mess from a management point of view," he quickly dispatched a team of five trusted Middle Easterners, including new chiefs of fixed line, purchasing, and technology, to straighten things out. He says they're doing a bang-up job. Wind now expects double-digit revenue and profit growth in an otherwise stagnant market. The people Sawiris sent to Italy, he says, are "10 times better than" the former management of Wind.
Sawiris is a great advocate of operating in and from emerging markets. While he has had near-disasters, such as getting financially overextended in 2003, it's hard to argue with his success so far. Starting from scratch in 1997, he has strung together a telecom empire that stretches from North Africa to Iraq to Pakistan and Bangladesh. At the end of the first quarter of 2006, Orascom subsidiaries had a total of 35 million subscribers, a 101% year-on-year increase. For 2005, total revenues were $3.2 billion, a 64% year-on-year gain, while profit before tax rose 56%, to $857 million.
In an interview in his French art deco office at the top of his family's tower on the Nile, Sawiris ticks off the advantages that emerging markets give him over established European rivals. While capital costs are similar around the world, operating expenses are perhaps a tenth in Egypt or Pakistan of what they are in Britain or France, he estimates, because engineers and salespeople work so cheaply. But the killer edge is growth. Sawiris' operations are adding subscribers at the rate of over 100% a year. "Sawiris can use scale to keep cutting costs," notes Wael Ziada, an analyst at EFG-Hermes Holding Co., a Cairo investment bank.
Sawiris hires the best people for top jobs, regardless of nationality, and motivates them with generous stock options. Operating a family-controlled but publicly listed company from Cairo allows him freedom to make decisions others would consider risky. In 2001 he bid what many observers thought was a too-pricey $737 million for an Algerian license, topping France Telecom (FTE ). But Djezzy (GSM ), as the Algerian company is now known, has become his empire's crown jewel. When he needed financing help, he brought in investment funds controlled by none other than the late Yassir Arafat.
While he imports technology from the West, Sawiris believes in local branding. Names such as MobiNil in Egypt and Djezzy in Algeria have a homegrown flavor. His marketers are also masters at tailoring offerings to local pocketbooks. "We don't need to go out and import a brand like Vodafone," he says. Of course, Western telcos such as Vodafone Group PLC (VOD ) are seeking quarry in emerging markets. "They are too late," Sawiris says.
By Stanley Reed in Cairo