Business | Telecoms
Goldman downgrades Orascom on problems in Pakistan and Algeria
Goldman Sachs downgraded mobile phone operator Orascom Telecom to 'neutral' from 'buy', citing continuing operating difficulties in Pakistan and Algeria, and low probability of a bid in the medium term.
- Reuters
- Published: 23:12 September 5, 2008
Cairo: Goldman Sachs downgraded mobile phone operator Orascom Telecom to 'neutral' from 'buy', citing continuing operating difficulties in Pakistan and Algeria, and low probability of a bid in the medium term.
"We believe that the stock is unlikely to outperform in the medium term as the company will likely suffer from economic problems in Pakistan and execution problems in Algeria," the brokerage said. It cut its price target on the stock to 65 Egyptian pounds from 100 Egyptian pounds.
Goldman also cut its six-month price target on Egyptian Company for Mobile Services (Mobinil) to 160 Egyptian pounds from 225 Egyptian pounds along with its estimates to reflect higher depreciation and interest expenses at the company.
On September 2, Orascom Telecom reported lower-than-expected net income in the second quarter as growth in Pakistan and Bangladesh slowed and financing costs rose, hitting its shares.
The No 1 Arab mobile phone operator by subscribers said net income in the quarter ending June 30 dropped 64 per cent to $80.8 million, compared with the first quarter of the year, its first quarterly profit decline since 2007.
Investment bank EFG-Hermes had forecast second-quarter net income of $190 million, while CI Capital had a forecast of 1.035 billion Egyptian pounds ($192.7 million). Pharos Securities had forecast a net profit of $198.6 million.
"The results are definitely below expectations," said May Khamis, a telecom analyst at HC Securities in Cairo. "The quarter-on-quarter net income decline is basically due to slowdown in top-line growth in Pakistan and Bangladesh."
Orascom Telecom also said it recorded a $30 million impairment of the licence of its Algerian fixed-line joint venture Lacom, but gave no further details.
"There are still problems with the fixed-line operation in Algeria. The government said it would take a decision before the end of 2008 but OT is already writing off ($30 million)," said Delilah Heakal, vice president of research at Pharos Securities.
The company has long accused Algerian regulators of giving preferential treatment to state-owned operator, Algerie Telecom.
Orascom's total subscribers exceeded 77 million, up 31 per cent from June 2007 on a proforma basis, the group said. It added the number was calculated after excluding the subscribers of its former Iraqi subsidiary Iraqna in June 2007
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