Beltone Financial on Thursday issued a new report saying that the political unrest and mobile operations that were disrupted in the region left telecom operators weaker in the first quarter of 2011. However, the investment bank added that they expect a slowdown this year, but are optimistic that overall profits will improve as the political instability lessens.
“We foresee a likely change in the consumption pattern of subscribers on the back of an anticipated economic slowdown,” the MENA Region Telecoms Digest report said.
“This should result in slower revenue growth, tightened earnings and weaker earnings growth, compared to previous years, especially in light of the already expected slowdown in the markets’ overall growth momentum, as mobile penetration rates soar,” the report continued.
Beltone said it expects mergers and acquisitions to occur in the region’s telecom markets, but the overall speed of these mergers “will cool.” It said that despite the overall tension that has resulted from the political instability, mergers and acquisitions as a whole, however, would not disappear altogether.
The investment bank did highlight their “buy high-risk recommendations for Orascom Telecom (OT), owned by Egyptian tycoon Naguib Sawiris,” to what it said was “the higher likelihood that the VimpelCom deal will be completed successfully, providing significant support for OT’s financial position amidst an inability to repatriate cash outside Algeria, alleviating concerns regarding OT’s significant debt caused by refinancing.”
Analysts in Cairo tend to agree with the reports assumptions, saying that the next few months will be “critical” to the sector maintaining its position.
“I fully expect the telecom sector to rebound more than better than its past shows. The region is ripe for mobile expansion and we expect the last part of this year and early next year to show major gains,” said Ahmed Metwally, a securities analyst with the country’s Stock Market.
By Jonathan Terry
