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Cablegate: Egypt Delays Sale of Second Tranche of Telecom Egypt

VZCZCXYZ0003
RR RUEHWEB

DE RUEHEG #2557 3581224
ZNR UUUUU ZZH
R 231224Z DEC 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 1220
INFO RUCPDOC/USDOC WASHDC 0438

UNCLAS CAIRO 002557

STATE FOR NEA/ELA, NEA/RA, EB
USTR FOR MOWREY
COMMERCE FOR 4520/ITA/ANESA

SIPDIS

E.O. 12958: N/A
TAGS: ECON ECPS EFIN EINV PGOV EG
SUBJECT: EGYPT DELAYS SALE OF SECOND TRANCHE OF TELECOM EGYPT
1. (U) Summary: The Government of EgyptQs planned sale of 20% of
Telecom Egypt, the countryQs sole fixed-line provider, has been put
off indefinitely. Citing unfavorable market conditions and worries

over the global economic crisis, the Ministry announced that it was
scuttling the offering originally planned for 2009. In the past
nine months, Telecom EgyptQs shares have dropped 38% on the Cairo
Stock Exchange. End Summary.
2. (U) Minister of Communications and Information Technology Tarek
Kamel announced December 22 that the plan to offer a second tranche
of Telecom Egypt shares in the stock market has been delayed. In the
first tranche, Telecom Egypt sold 20% of its shares to the public in
2005. The Ministry had been planning to offer a second tranche in
2009. Kamel said that any future decision to move ahead with the
sale Qdepends on the circumstancesQ of the economic environment and
the ongoing global financial crisis.
3. (U) Telecom Egypt is Egypt's sole fixed-line operator, with 11.3
million subscribers as of September 2008. In the first three
quarters of 2008, Telecom Egypt had net earnings of LE 2.2 billion
(US$ 400m) up 28.5 percent from fiscal 2007. In addition to fixed
telephone lines, Telecom Egypt has 340,000 broadband subscribers for
its ADSL internet services.
4. (U) In its initial offering in 2005, Telecom Egypt sold 20
percent of its shares at LE 20.33 (US$3.60) per share, netting the
GOE LE 5.132b (US$930.3m). Telecom EgyptQs share price peaked in
March 2008 at LE 22.95 (US$4.17) per share, but has since fallen 38
percent to LE 14.17 (US$2.58). Despite this decline, shares of
Telecom Egypt have far outperformed the benchmark CASE 30 index of
Egyptian stocks which is off by nearly 60% year to date.
5. (U) The Government of Egypt currently owns 80 percent of Telecom
Egypt, with twenty percent held by the public. Egyptian law
requires the government to own a majority of Telecom EgyptQs shares.

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