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telecom egypt addresses major issue telecom egypt (te) is looking for a few good investors. the government’s fixed-line operator said in a press release that it was expecting its highly anticipated corporate bond to be ready by new year. the £e 2 billion bond – te’s first ever issue – is meant to “enable the company to widen its prospective investments.” the new bond will offer medium-term investments, ranging from five to seven years, with a fixed interest rate of 12 percent. half the issues will offer fixed dividends and half will offer varying dividends. as for how the papers will be allotted, 30 percent will be offered to individual investors, while the remaining 70 percent will be allocated to institutions. while technically still awaiting approval from the capital market authority, the bond will be managed by hsbc bank, which has been the company’s primary financial consultant since january 2004. te was established in 1998 to replace the debt-ridden egypt national telecommunication organization. its fixed-line subscriber base recently topped 9 million users. the mammoth state firm’s decision to issue a bond has raised some questions about its motives. according to te vice-president ali salama, the firm’s rationale is simple: “it’s a financing arrangement,” he said, “the main objective of which is to reduce the cost of te’s financing.” some observers wonder, however, if the issue might not portend te’s entrance onto the stock exchange, while others say that the floating of long-term bonds could suggest an intention to privatize in the short term. on the latter point, te officials insist that there are no ipos
in the offing. “privatization is not our decision,” said
salama. “it’s the owner’s decision, and the owner,
in our case, is the egyptian government... right now, no one knows
when and why they will decide to privatize.” another financial analyst, however, wael zyada, suggested that te might be issuing the bond with an eye on the eventual acquisition of vodafone egypt, a quarter of which te picked up last year, in exchange for renouncing its long-stated dream of launching a third mobile phone network. “telecom egypt isn’t a traded listed company,” zyada said. “it’s listed, but not traded, and it’s a hundred percent governmental. issuing bonds could be a way to achieve the financial acquisition of vodafone egypt.” according to salama, the te-vodafone egypt partnership is under way. in december 2003, vodafone group sold 16.9 percent of its stake in vodafone egypt to te. vodafone egypt’s minority shareholders then sold an 8.6-percent stake of the company to te. te has looked to the mobile phone business for the past three years, but with the 2003 devaluation of the local currency, the proposal became financially non-viable. the company was also repeatedly hindered in its efforts to find a strategic partner, a situation at least partly due to its insistence on maintaining managerial control of the company. regardless of the state phone company’s ulterior motives, though, the decision to issue bonds is getting good marks from analysts. “it’s a good deal for the creditor who wants to mobilize his money for a long time, and get a guaranteed interest rate,” said zyada. “this rate is quite high in comparison with bank rates, which haven’t exceeded 11 percent lately.” el-sheikh agreed, describing the 12-percent interest rate as “compelling,” and pointing out that the last 10-year government bond offered 11.7 percent interest. “it’s a safe investment with a fixed income,” she said. “you are basically lending to a quasi-government institution.” lina attalah |
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