Market Report

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The stock exchange had a quiet week in the absence of energising news and investors holding back until after the feast holidays. The average daily transactions during the week ending 12 October came as low as LE480 million. However, the ownership transfer of 24 per cent of Vodafone Egypt to Telecom Egypt pushed the overall turnover to LE8.5 billion.

The head of Egypt's Capital Market Authority (CMA) Hani Sarieddin was quoted as saying that CMA will install a more advanced regulatory regime in the Cairo and Alexandria Stock Exchange, with the aim of reducing investment risks. Sarieddin noted that the number of individuals investing in stocks increased from 300,000 to 1.7 million in the past 10 months. Individuals accounted for some 90 per cent of trade during the bear market of March-July, 2006.

TELECOM EGYPT (TE): The LE5.6 billion deal by which TE bought a further 24 per cent of Vodafone Egypt (VFE) made TE the owner of 49 per cent of VFE. TE said that LE1.2 billion of the deal was financed by internal sources and the rest obtained through bank loans.

In another positive note, TE announced it has a 25 per cent stake in the Arab-Egyptian consortium that recently won a licence to build and operate Egypt's first submarine cable. The consortium will pump $300 million-worth of investments to build the cable, which will provide international services. It is expected to generate $500 million in revenue over the next five to seven years.

The fixed line monopoly is also to benefit from the decision by the National Telecommunication and Regulatory Authority (NTRA) to postpone offering the international calls licence until the first quarter of 2007. The Ministry of Telecommunication and Information Technology announced it has not yet determined how international telephone licences will be offered. At least two options are being considered: an auction similar to that of Egypt's third mobile licence, or the granting of licences to Egypt's three licensed mobile operators and TE.

MobiNil and Vodafone Egypt: The two mobile phone operators are working fast to hedge against the fierce competition presented by the new mobile phone operator, Itisalat Egypt. The two companies are currently in negotiations with the NTRA to acquire a 3G licence, to the tune of LE3.4 billion each for the 15-year licence. Itisalat Egypt already received the 3G licence in July, when it won the bid to build and operate the third mobile network.

ORASCOM CONSTRUCTION INDUSTRIES (OCI): The construction conglomerate bought a 50 per cent stake in Group GLA, Spain's largest private producer of aggregates and ready-mix concrete. OCI paid for the stake through both a 59 per cent share it owns in its Spanish cement producing subsidiary Cimentos La Parilla, in addition to paying EUR51.3 million in cash.

GLA has an annual aggregate quarrying capacity of about five million tonnes and an annual ready-mix concrete production capacity of 3.5 million cubic metres. Group GLA posted revenues of EUR84 million during the first half of 2006.

Commenting on the acquisition deal, EFG- Hermes said that by expanding its Spanish presence, "OCI reaffirms its strategy of strengthening its position and securing distribution channels in not only emerging, but also key developed markets, where demand by far exceeds supply." In addition to Spain and Egypt, OCI has cement operations in Turkey, Pakistan, Algeria, Nigeria, Iraq and the UAE, with a combined operational capacity of 20.4 million tonnes, expected to reach 32.5 million tonnes by 2008.

MISR CEMENT QENA: The privately owned cement company received bids from seven companies in Germany, Denmark, France and China to build its second production line. The winner will be chosen in January, 2007 and construction will take some 15 months, at a cost of about $100 million.

The new line, expected to cost about, will have an annual capacity of 1.4 million tonnes of clinker and will double Qena's capacity to 2.8 million tonnes. New production will be sold abroad, mainly to Europe, through a special port to be built in Safaga.

Cement Qena had expressed its intention to increase its capacity several times, but the plan was delayed.

EL-SEWEDY CABLES: The company posted LE233 million in net earnings in the second half of 2006, and gross profit came at LE429 million -- much better than expected. "Gross profit for the second half came higher than our expectations for the full year due to an increase in the utilisation rate for aluminium cable, faster-than- expected sales from the company's Syrian operation, and an increase -- partly non- recurring -- in gross profit per tonne," explained a report by EFG-Hermes.

El-Sewedy increased its production capacity to 85,630 tonnes in the second half, which is 22 per cent higher than its production capacity in the corresponding period of last year. This comes as a part of the company's plan to increase its cable capacity in Egypt, Syria and Sudan by 57 per cent to 113,890 tonnes per annum by the end of 2006/early 2007.

Moreover, El-Sewedy penetrated new markets in Europe, which accounted for 17 per cent of export revenues in the second half, up from nearly zero in 2005. This, according to EFG, comes as a positive step to reduce El-Sewedy's exposure to GCC markets in which major players are expanding aggressively.

Compiled by Sherine Abdel-Razek