Telecom Egypt Q2 net profit up 16pc

Landline monopoly Telecom Egypt posted a consolidated second qaurter net profit of EGP789 million ($142 million) on Thursday, up 16 per cent on a year before and in the middle of a range of forecasts.

The firm said its net profit margin was 29.5 per cent on total consolidated revenue of EGP2.68 billion.

Net profit forecasts by five analysts for the three-month period ranged from EGP703 million to EGP853 million. The average forecast was EGP772.7 million. The analysts forecast revenue in a range between EGP2.50 billion and EGP2.53 billion.

The firm said it had 9.8 million fixed-line subscribers by end-June, compared with 11.3 million at the end of June 2008.

"There has been a decline in the customer base, mainly because of the change in our credit policy," said newly appointed chief executive officer Tarek Tantawy.

Telecom Egypt has tightened its consumer credit policy in order to reduce exposure to bad debt, he said. Customers are now disconnected after falling three months behind in payments, compared with 12 months previously.

Average revenue per user (ARPU) jumped to EGP59.6 per month in the quarter versus 47.8 pounds in the second quarter of 2008.

"What we see for the future is diversifying revenues in growth areas rather than just relying on growing the fixed line subscribers," said Tantawy, named the new CEO on Wednesday. He replaced Akil Beshir who remains non-executive chairman.

Telecom Egypt holds a 45 per cent stake in Vodafone's unit Vodafone Egypt. That stake added profit of EGP706 million to the landline firm's bottom line in the second quarter.

"I see that the results are good on the operational level but the investment income from (Vodafone Egypt) is lower than expected," said Nemat Choucri at HC brokerage.

Income from Vodafone Egypt slipped 4 per cent on a year earlier, the company statement said.

Telecom Egypt said Vodafone Egypt added 1.43 million subscribers in the quarter to total 20.4 million as of end-June.

Tantawy said Telecom Egypt had a strong balance sheet and continued to seek acquisitions in the region but that no targets were currently being eyed.

The firm is bidding to buy regional operator Orascom Telecom's Internet subsidiary LinkDotNet.

"LinkDotNet would be an interesting asset that we are looking at ... We are looking at acquiring LinkDotNet," he said.

Egypt's telecom regulator had approved the bid and was not expected to block any possible future purchase, Tantawy added.

Acquiring LinkDotNet would further solidify Telecom Egypt's dominance of the internet market in Egypt, currently 60 per cent of market share.