African Mobile & Fixed Operators :: Mobile operators in Africa & Middle East

Major African Mobile Markets: Future Growth Prospects 2006-2011  

Key Operator - Orascom Telecom
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Company Overview

Business Strategy

Financial and Operational Performance

Recent Developments

Future Outlook
Figure 1: Revenue from Mobile Sector in Africa (2002-2004)

Figure 2: Revenue break up in Africa - by Geography (2004)

Figure 3: Mobile Subscribers in Africa (2002-2005)

Figure 4: Mobile Subscribers in Africa - by Geography (June 2005)

Table 1: Orascom - Mobile Operations in Africa

Table 2: Key Performance Indicators in Different Geographies (2004)

Company Overview

Orascom Telecom is a part of the Orascom group of companies. It provides mobile and Internet wireless communication services in Africa (Egypt, Algeria, Tunisia and Zimbabwe), Asia (Bangladesh and Pakistan) and the Middle East (Iraq). The company's mobile subscriber base worldwide had reached 21.20 million as on 30th June 2005, with 12.18 million mobile subscribers in Africa alone. Egypt and Algeria together constituted more than 80 percent of the company's total subscribers in Africa.

Table 1 provides a regional snapshot of Orascom's mobile operations in Africa as on 30th June 2005.

Table 1: Orascom - Mobile Operations in Africa


Source: Company Reports

Orascom Telecom Holding S.A. (OTH) is the holding company for Orascom Telecom. The company is headquartered in Cairo, Egypt, and employs more than 11,000 employees across the world.

Business Strategy

Orascom aims to increase its network presence in the high-subscriber markets in Africa and has sold off stakes in smaller markets. Orascom is looking for growth opportunities beyond Africa in Asia and the Middle East and has already launched its networks in Bangladesh, Pakistan and Iraq.

Specifically, Orascom has the following strategies:

Expand in key markets in Africa

  • Orascom has focussed on extending its networks in its key markets of operation - Algeria, Egypt and Tunisia. For this, it has invested heavily in network deployment in new areas - for example the company increased CAPEX in Egypt by 931 percent during the first half of 2005. The company also seeks to retain its existing customer base through offering new promotional services.

    Discontinue other African operations

  • Orascom has discontinued its business operations in low-subscriber base markets in Africa. For instance, it has sold off its controlling stake in Libertis (Congo Brazzaville), Oasis Telecom (DRC), TchadMobile (Chad) and Telecel Loteny (Ivory Coast) during 2004 to 2005.

    Expand geographic scope outside Africa to Asia and Middle East

  • Orascom has endeavoured to increase its presence in some of the fast-growing Asian and Middle Eastern mobile markets, such as Bangladesh, Iraq and Pakistan. It has increased stakes in its subsidiary in Iraq; renewed the operating license in Pakistan for 15 years starting from 2007; and purchased 100 percent shares of Sheba Telecom in Bangladesh and re-branded it to Banglalink in February 2005. The company also made unsuccessful bids for an operating license in Saudi Arabia and Iran.
  • In order to further expand its operations in the emerging markets of Asia Pacific, Orascom entered into a strategic partnership with Hutchison Whampoa Ltd. in December 2005 by acquiring a 19.3 percent stake in Hutchison Telecommunications International Limited (HTIL) from Hutchison Whampoa Limited (HWL) for USD 1.3 billion. According to Orascom, this strategic partnership will help it pursue its objective of expansion in the largest and the highest growth mobile markets in the region, such as India, Indonesia and Vietnam.

    Financial and Operational Performance

    Revenue

    The company's worldwide revenues were USD 2.02 billion for the financial year ending December 2004. Out of this, total revenues from mobile activities in Africa were USD 1.24 billion, an increase of approximately 50 percent over the previous full year. This increase in revenue was due to strong growth in the subscriber numbers, with a growth rate of 57 percent during the period.

    Profitability

    The EBITDA margin of the mobile operations of the company in Africa for the financial year 2004 was 54.7 percent, an increase of 8.7 percentage points over the previous year. The improvement in the margin was driven by earnings in Algeria and Tunisia, which increased by 187 and 113 percent, respectively.

    Figure 1, below, shows the revenue and EBITDA margin of the company from 2002 to 2004 and Figure 2, also below, depicts the revenue break-up, by geography, for 2004.

    Figure 1: Revenue from Mobile Sector in Africa (2002-2004)


    Source: Company Reports

    Figure 2: Revenue break up in Africa - by Geography (2004)


    Source: Company Reports *Others include Zimbabwe, DRC and Chad (Operation in Chad suspended in July 2004).

    Capital Expenditure

    The capital expenditure (CAPEX) of the company in Africa reached USD 652 million in 2004. Out of this, 62.6 percent of the expenditure was incurred by the operations in Algeria.

    Operating KPIs

    Orascom had 8.83 million mobile subscribers in Africa at the end of financial year 2004, an increase of 56.5 percent over 2003. Moreover, in 2005, the growth continued and the total number of mobile subscribes had reached 12.2 million at the end of June 2005.

    Figures 3 and 4 below, show Orascom's total subscriber base growth in Africa from 2002 to end-June 2005, and the geographic break-up as at 30th June 2005.

    Figure 3: Mobile Subscribers in Africa (2002-2005)


    * Subscribers till June 2005

    Source: Company Reports

    Figure 4: Mobile Subscribers in Africa - by Geography (June 2005)


    *Others include Zimbabwe, DRC and Congo Brazziville

    Source: Company Reports

    The blended ARPU earned by Orascom's African subsidiaries had decreased significantly during 2003-2004 (6.3 percent in Egypt, 29 percent in Congo Brazzaville, etc.). This decrease was due to the company's continued expansion in these countries, which are relatively low-income markets.

    Table 2 gives the key performance indicators of Orascom for the financial year 2005.

    Table 2: Key Performance Indicators in Different Geographies (2004)


    Source: Company Reports

    Ownership Structure

    The company is owned by the Sawiris family, which has about 56.5 percent ownership. The rest of the shares have been freely floated.

    Recent Developments

    The following are some recent developments for Orascom:

    Mergers & Acquisitions

  • Orascom acquired 19.3 percent stake in Hutchison Telecommunications International Limited ('Hutchison Telecom' or HTIL) from HWL for USD 1.3 billion.
  • Orascom had been trying to increase its stake in two subsidiaries - Djezzy in Algeria and Tunisiana in Tunisia for the last two years. Finally its percentage stake in the subsidiaries had reached 87.66 and 50 percent, respectively, as on 30th June 2005.
  • The company has sold off its stakes in a number of subsidiaries in Africa. For instance, in

    - December 2005, it sold its 65 percent controlling stake in Libertis Telecom (Libertis), a GSM operator in Congo Brazzaville

    - September 2005, it sold its 100 percent in Oasis, a GSM operator in DRC

    - July 2004 it suspended its mobile operations in Chad, TchadMobile

    - February 2004, it sold its 51.7 percent stake in Telecel Loteny, the mobile operator in Ivory Coast

    - In 2003, Sold Fastlink, its mobile operator in Jordan, for USD 423 million

    Network & Service Expansion

  • The company has entered into roaming agreements with more foreign players. For instance, by the end of June 2005, Tunisiana had signed 25 roaming agreements with operators in 18 countries.
  • In 2005, the company offered new promotional services during key events such as Ramadan and New Year and new flexible pre-paid and post-paid plans in Africa to lure more customers. Outside Africa, in Iraq, it had launched 29 different IVR and SMS-based entertainment services by the end of June 2005.
  • In May 2005, the company made the announcement that it would launch Blackberry services in its markets in Africa, the Middle East and South Asia.
  • In February 2005, Orascom launched its mobile network in Bangladesh.

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    Future Outlook

    The company is focused upon expanding its network operations in its key markets in Africa, while also looking for expansion opportunities in other fast-growth markets in Asia and the Middle East. The number of mobile subscribers in Bangladesh has shown an unprecedented increase after the launch of its services in the country, in February 2005.

    Orascom will probably continue to expand and grow in the key emerging markets of the Asia and Africa and its latest initiative in this direction has been the acquisition of 19.3 percent stake in Hutchison Telecommunications International Limited ('Hutchison Telecom') from HWL. The future outlook for the company's operations in Africa is as follows:

    Egypt
    Orascom is aimed for aggressive growth of MobiNil in Egypt. It is continuously offering new value-added services in the country, and the Egyptian market offers solid growth potential over the next few years.

    Algeria
    Orascom is the biggest mobile network operator in Algeria with a market share of 68 percent in June 2005, and this dominant position is expected to remain unchecked in the immediate future, thanks to continued continuing investment and network expansion in Algeria. It has recently enlarged its value-added services portfolio, which is further expected to increase its subscriber base in the country, and it plans to launch EDGE services in Algeria very soon. The operator has also renewed its operating license in Algeria for a further 15 years, starting from 2007.

    Tunisia
    Orascom (and Wataniya) have focused on continued investment and network expansion in Tunisia, through their operation Tunisiana. It has installed more than 857 BTS in Tunisia and the network coverage has now reached 99 percent of the population. This expansion, combined with new service offerings, is expected to help fuel continued growth in Tunisia.

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