Summary
Orascom operates in a very wide variety of economies and cultural and political environments. It will face the choice between divesting or expanding its relatively minor sub-Saharan holdings as the forces of regional consolidation and the initiatives of entrants eyeing the region gather momentum.
Analysis
Orascom's current operations include: Egypt "Mobinil";Algeria "Djezzy", Pakistan "Mobilink", Tunisia "Tunisiana", Bangladesh "Banglalink", Italy "WIND", Greece "WIND", North Korea "Koryolink", Lebanon "Alfa", and "Telecel" in the sub-Saharan countries of Burundi, the Central African Republic, Namibia , and Zimbabwe , as well as in the near future Canada “WIND”. However, this last investment (exploiting AWS spectrum acquired in 2008) has run into a roadblock following a ruling by the regulator CRTC that the Orascom vehicle Globalive does not meet Canadian requirements on foreign ownership. In Africa Orascom is counted among the six largest mobile operators, which also include two Europeans (France Telecom/Orange and Vodafone), two other operators based in the Middle East (Zain(Kuwait) and Etisalat(United Arab Emirates)), and the South Africa-based MTN. It is widely expected that this alignment will change (Zain's desire to divest its African holdings is one example) as other players are attracted by the high growth prospects within this region (e.g. Indian and Chinese operators) while at the same economic forces are encouraging consolidation that will establish a limited number of regional players and affecting individual companies’ decisions either to seek a buyer or partner for their African assets or become buyers of someone else’s. It is noteworthy that as between the Middle East and Africa, some of the former countries have attracted very high bids for spectrum (higher than in Europe with the exception of the 3G frenzy at the turn of the century) and enjoy relatively high ARPUs, whereas most African countries present very different and much poorer economic circumstances. Apart from North Africa, African countries do not account for a large proportion of Orascom’s current subscriber base. Hence logically Orascom might prefer to sell these assets to an operator who is already more heavily committed to sub-Saharan Africa, or has determined to make major investments in the region, enabling Orascom to focus more resources on other opportunities. However the decisions of entrepreneurs such as Orascom’s Chairman Naguib Sawiris can follow their own logic - and ambitions - that are formed by influences extending well beyond the dynamics of individual markets, even one as large as mobile communications.
