May 13, 2014 / 12:01 PM / in 4 years

UPDATE 1-Telecom Egypt Q1 net profit drops 36 pct

(Adds CEO comments)

CAIRO, May 13 (Reuters) - Telecom Egypt, the country’s fixed-line monopoly operator, reported a 36 percent fall in first-quarter net profit on Tuesday, saying business was hit by the weak economy.

The company, which is 80 percent owned by the government, said it hoped to have a unified telecoms licence operational by the third quarter of this year, which would enable it to offer mobile services directly and boost revenue.

It said net profit fell to 549 million Egyptian pounds ($77.82 million) in the first quarter while revenues dropped 5.6 percent from a year earlier to 2.564 billion pounds.

CEO Mohamed Elnawawy told Reuters that the drop in revenues was “mainly driven by a decline in wholesale services,” which the company attributed to slower international traffic resulting from depressed tourism and business activity.

Political instability and insecurity since the 2011 uprising have dragged economic growth to under 2.5 percent this fiscal year, but investors are hopeful for a rebound following presidential elections set for the end of the month.

Former army chief Abdel Fattah al-Sisi, who led the overthrow of elected President Mohamed Mursi last July, is widely expected to win the race, though he has offered few concrete plans for reviving the economy.

Telecom Egypt hopes that a new unified telecoms license will help it reach 4 percent revenue growth by the end of the year.

“Going mobile for us is the way to reverse this attrition and allow our business to thrive,” said Elnawawy.

The company has agreed to pay 2.5 billion Egyptian pounds for a mobile license, which Elnawawy said it would fund from its cash balance. He said he expected the license to be operational during the third quarter.

He said there have been no discussions yet with mobile operators who have the option to buy a license for fixed line voice services.

Egypt’s three existing mobile phone service providers are Vodafone Egypt, Mobinil and Etisalat Egypt which have been eating away at Telecom Egypt’s fixed-line services as more Egyptians opt to use mobile phones and the Internet instead.

Earnings before income, taxes, depreciation and amortization (EBITDA) was 805 million Egyptian pounds, down 15 percent from 947 million pounds over the same period last year, according to the company’s figures.

Its statement said a 12.2 percent jump in costs over the same period last year was due to rises in compensation, including a 10 percent annual salary increase. ($1 = 7.0550 Egyptian pounds) (Reporting by Stephen Kalin; Editing by Jason Neely and Susan Fenton)

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