EGYPT: ETISALAT CONSORTIUM WINS THIRD MOBILE

UNCLAS CAIRO 004142

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ELA AND EB/CIP
USTR FOR SAUMS/AUGEROT/MCHALE/NEUREITER
USAID FOR ANE/MEA MCCLOUD
COMMERCE FOR 4520/ITA/MAC/ANESA/TALAAT
FCC FOR INTERNATIONAL BUREAU/COOPER

E.O. 12958: N/A
TAGS: ECON ECPS EINT EINV ETRD EG KCOR KGIT
SUBJECT: EGYPT: ETISALAT CONSORTIUM WINS THIRD MOBILE
LICENSE

REF: A. CAIRO 01805 (NOTAL)

B. CAIRO 02789


1. (U) Emirati telecommunications corporation Etisalat, in
partnership with the Egyptian Post Office, the Commercial
International Bank of Egypt (CIB),and the National Bank of
Egypt, on July 4 won the auction for Egypt's third mobile
license, pledging to pay a whopping LE 16.7 billion (USD 2.91
billion) and six percent of revenues to the GOE for the next
three years (reftels).


2. (U) The mood among those touched by the auction - GOE and
private sector - was generally celebratory. The GOE touted
the bid price as evidence of confidence in the sector and the
economy, and most onlookers agreed that the auction was
fairly transparent. Minister of Finance Yusuf Boutros-Ghali
stated that the proceeds will assist the GOE to offset the
budget deficit, raise economic performance, and increase
social services. A private sector industry contact told
Econoff that his company would benefit from the expected
increase in competition and expansion of market penetration,
while a senior Ministry of Communications and Information
Technology (MCIT) official quipped that he hoped to propose
the Fourth of July as a new Egyptian holiday. The Cairo and
Alexandria Stock Exchanges (CASE) also reacted positively
overall, with the CASE30 Index climbing by 2.6 percent. Not
only did shares of winning consortium partner CIB increased
by 7.6 percent, but even shares in current mobile providers
MobiNil and Vodafone witnessed sizeable increases, 20 percent
and 9.6 percent, respectively.


3. (SBU) Comment: Not all the news was good, however. As
the same MCIT official admitted to Econoff, the future of
Telecom Egypt (TE) stock prices would continue to be a
problem (reftels). TE prices only declined by 2.8 percent on
the day to LE 11.67/share, with some contacts suggesting that
the market had already absorbed the possibility that TE would
not win the auction. Although TE might try to increase its
share of Vodafone or make a deal with the new consortium -
there are rumors that it could become the "virtual operator"
for the group (what that means precisely remains unclear) -
it is unlikely that it will recover much ground in the short
term. The potential for political fallout remains high over
the harm to small investors who sank their life savings into
TE stock when it was over double its current value, and who
were hoping for success in the auction. End comment.
RICCIARDONE