The Egyptian mobile sector is still in a growth phase, which is expected to continue for the coming five years. Penetration rates are expected to grow up to 14.3 percent in 2005 from 3.4 percent in 2000, at a CAGR of 36 percent. The economic slowdown Egypt witnessed in 2000 did not negatively affect the mobile sector, as penetration rate rose 2.6 times from 1.3 percent at the end of 1999 to 3.4 percent at the end of 2000.
ECMS has a 21 percent weight in the Egyptian MSCI index (ranked number one) after its rebalancing on April 10, 2001. Once the index goes into the MSCI composite, the global financial community will monitor ECMS more intensively. More than a year remains to attract more subscribers and establish higher customer loyalty before the third player enters.
ECMS delivered the expected revenues in FY2000 (2.1 billion, 41 percent higher than FY99) and number of subscribers (1.23 million subscribers at the end of FY2000). Revenue and NAI are expected to grow at a CAGR of 15 percent and 19 percent, respectively, during the forecast period driven by subscriber growth and market leadership. We concluded that ECMS DCF fair value is LE88/share, suggesting an upside potential of 38 percent. Moreover, comparable valuation yielded a fair price of LE100/share.
Egyptian Company for Mobile Services –ECMS provides cellular network services throughout Egypt in three main packages; post-paid residential, pre-paid mass market and the business segment. In order to promote its services and dig deeper into lower income segments, ECMS has eliminated its post-paid subscribers’ connection fee. Moreover, it is currently providing its pre-paid subscription with connection fees paid through an installment program, ranging from 12 to 24 months.
ECMS closed FY2000 with a 55 percent market share. Although we believe this level will fall to 46.8'y 2005, two years after Telecom Egypt introduces its network and our last forecast year. However, this market share level will secure ECMS’s position as market leader.
Prime Securities S.A.E.
© 2001 Mena Report (www.menareport.com)