CAIRO: Egypt’s Mobinil posted a fall in second-quarter net profit to LE 381 million, adding far fewer subscribers than its main rival, blaming the regulatory and competitive environment.
"We still expect those adverse conditions to continue in the foreseeable future," Mobinil Chief Executive Officer Hassan Kabbani said in the earnings release.
The profit figure was down 29 percent from the same period a year ago but up 6.7 percent on the first quarter of 2010.
Mobinil, which leads the Egyptian market by number of users, added 26,000 new subscriptions in the quarter, making a total of 26.148 million at the end of June. Its main rival, Vodafone’s Egypt unit, added 1.2 million to 25.79 million.
Analysts had on average forecast Mobinil’s subscriber numbers to be at 26.9 million in the second-quarter.
"They lost 537,000 customers in May," said Naeem analyst Ahmed Adel. "They lost around 2 percent of their total base. Vodafone and Etisalat made small additions in that month," he said, citing communications ministry data."
Kabbani pinned part of the blame for the loss of customers on the telecom regulator who imposed a May 2 deadline for all mobile phones to be registered in a central database or be disconnected.
Kabbani at the time said 3 percent of Mobinil’s subscribers were at risk.
Mobinil said it has also been stymied by a delay in the rollout of a new numbering plan, exacerbated by third operator Etisalat Egypt’s foot-dragging.
"We will continue our efforts to solve the issue with the regulator who is limiting the availability of dials thus affecting the healthy competition," Kabbani said.
Mobinil had earnings before interest, taxation, depreciation and amortization (EBITDA) of LE 1.099 billion on revenue of LE 2.53 billion.
"The thing I was most surprised by was the revenue weakness," analyst Martin Mabbutt from Nomura said. "In the context of that, the rest of it wasn’t that bad, although EBITDA was a 10 percent miss on our estimates."
Mabbutt said the stagnant user base had made it easier for Mobinil to fulfill its stated plan to lower operating costs.
"You would expect operating expenditure to be easier to control when the business isn’t growing," he said.
The quarterly results were released after the close of trade. The firm’s shares ended up 0.6 percent at LE 163 pounds, valuing the firm at $2.8 billion.
Mobinil, the trade name of the Egyptian Company for Mobile Services (ECMS), paid $130 million to major shareholder Orascom Telecom for internet service provider LinkDotNet in the quarter.
The price tag was agreed as part of a deal announced in April that ended a long feud with its other main shareholder France Telecom.
In February, Mobinil said it expected 28 million subscribers by the end of 2010 and for revenue growth to slow to 5 percent due to aggressive pricing promotions the three operators use to garner and protect market share.
Revenue grew just 2.4 percent in the first quarter, while profit slipped 2 percent, disappointing analysts and the stock market.