Orascom HQ, Cairo (Photo: Reuters)
Orascom Telecom, the Egypt-based communications giant bought in March by Russia's Vimpelcom, has reported a net loss of US$58.5 million loss for the second quarter as a short-term upswing in revenues was countered by higher tax on the sale of its Tunisian unit.
Orascom was expected to report net profits of $64 million, according to average analyst forecasts gathered by Reuters. The telecoms firm reported a quarterly loss of $66 million a year earlier, mainly due to foreign exchange losses, while net profit for 1Q2011 was $813 million.
Operations outside Egypt played a key part in its performance. Orascom has subsidiaries in Algeria, Pakistan, Bangladesh, North Korea, Namibia and the Central African Republic.
Orascom's earnings before interest, taxes, depreciation and amortisation grew 8 per cent in the quarter to $476 million, driven by lucrative Algerian subsidiary Djezzy -- where subscriber numbers were up 5 per cent from a year earlier -- and its south Asian businesses. This was around 15 per cent higher than consensus forecasts.
Total revenues came in at $1.002 billion, 1.6 per cent above predictions. It was a rise of 5.5 per cent on the first quarter but down from $1.06 billion a year earlier.
In Egypt, its Mobinil venture with France Telecom boosted subscribers by 17 per cent, but average revenue per user dipped 15 per cent due to "intense" competition, Orascom said.
A statement from investment bank Beltone Financial said a combination of factors contributed to lower-than-expected net income. On 4 January, OT sold its entire shareholding in Orascom Tunisia Holding and Carthage Consortium through which OT owned half of Orascom Telecom Tunisia, for a total of $1.2 billion. Amendments in Egypt's corporate tax rate, from 20 to 25 per cent for 2011, affected sales from the profits accordingly.
"The application of the new tax law, which resulted in $58 million in additional taxes, almost wiping off the gains from Namibia, coupled with higher than expected interest expense, unforeseen foreign exchange losses and depreciation charges," said Beltone in a statement, which still found plenty of grounds for optimism.
"Overall, the results are strong and include a number of positive aspects .. Looking closely at the numbers, we find that the balance sheet continued to grow despite the political turmoil," the bank said.