CAIRO: Egyptian brokerage HC Securities cut its target prices for Egypt s mobile phone operators, predicting they will have to buy 3G licenses.
HC cut its target for Mobinil to 192 Egyptian pounds ($33.45) from 232.5 pounds, and for Vodafone Egypt to 99 pounds from 120 pounds. Mobinil shares closed on Thursday at 138.05 pounds and Vodafone at 82.00 pounds.
HC raised its recommendation on Mobinil to strong buy from buy , but cut Vodafone s to buy from strong buy .
The brokerage said it assumes the telecoms firms will have to buy 3G licenses, which cost 3.34 billion pounds and involve a 2.4 percent royalty fee, to increase their network coverage and retain contract subscribers.
HC predicted Vodafone and Mobinil could otherwise lose those lucrative customers to Etisalat of the United Arab Emirates (UAE), which in July won an auction for Egypt s third mobile license. The license allows it to offer a 3G service.
Mobinil has said it will postpone a decision on a 3G license for a year because conditions are unattractive. Vodafone has said it has not decided whether to seek a license.
If the phone operators decide not to buy a 3G license, HC said it would maintain its strong buy recommendation on Mobinil but lower its target price to 187 pounds.
It would also cut its recommendation on Vodafone to accumulate with a lower target price of 95 pounds per share.
Despite the cuts in target prices, HC justified its strong buy and buy recommendations on Mobinil and Vodafone respectively by predicting steady population growth and up to 6 percent growth in real GDP in the next three to five years. Reuters