The economic slowdown triggered by this year’s popular uprising in Egypt tipped land-lines monopoly Telecom Egypt into a worse than expected 21 percent fall in third-quarter net profit, the company said on Monday.
The business, banking on data services to offset lower fixed-line income, said net income fell to 623 million Egyptian pounds.
Revenues were hit by slower business activity, weaker household incomes, depressed tourism and an absence of cable revenues.
“While there has not yet been a return to normal operating conditions in Egypt, we have mitigated the effects to a greater extent than all our competitors,” said Chairman Akil Bachir.
Shares in the company were down 2.75 percent at 1100 GMT. The malaise in Egypt’s economy hit household incomes and reduced the number of active Telecom Egypt subscribers as the company stopped counting customers who were not paying bills. The company’s subscriber base fell to 8.6 million at the end of September from 9.4 million a year earlier.
Analysts at CI Capital said net income undershot its estimate by 15 percent, while the 42.8 percent margin of earnings before interest tax, depreciation and amortisation was also weaker than expected.
“The EBITDA margin was pressured by the increase in interconnection costs as a result of higher mobile traffic and the increases in employee salaries,” said CI Capital analyst Mohamed Hamdy.
Investment income from a mobile venture with Britain’s Vodafone was in line with forecasts, he added. Telecom Egypt’s shares fell 0.8 percent after the results, bringing their decline this year to 19 percent.
Consolidated operating revenue fell 10 percent to 2.35 billion pounds, even as revenues from its TE Data Internet arm grew to 292 million pounds from 200 million, company officials said. But it expects two new cable projects to come online in the fourth quarter, boosting wholesale revenues.
Despite the third quarter dip, Chief Financial Officer Hassan Helmy said 2011 net profit would be no lower than last year’s. Telecom Egypt expects to propose a higher dividend pay-out ratio to shareholders at their next annual meeting, Helmy said.
The company no longer hopes to secure a mobile virtual network licence towards the end of the year — a key goal of the company as it seeks to push further into mobile services.
“We are in continuous conversation with the regulator,” CFO Helmy told Reuters. “We don’t expect it to happen in 2011 of course… It is not happening as quickly as we wanted.”