Egyptian govt sells 9.5% stake in Telecom Egypt for LE3.7 bn

The Egyptian government sold a 9.5 percent stake in Telecom Egypt to unnamed buyers for LE3.74 billion (around $121.6 million), the Finance Ministry announced on Sunday, after talks on a deal with a UAE investor fell through.

The government backed out of the Gulf sale in March, sources previously told Mada Masr, days prior to its finalization despite an urgent need for foreign currency inflows. The sale fell through due to concerns over relinquishing shares in a company with strategic value for the state, as well as disagreement on the price of the Egyptian pound between Gulf investors and the central bank.

Egypt is in need of $2 billion in dollar liquidity before the end of June to service its financing gap, according to the timeline set by Prime Minister Mostafa Madbouly, and to move forward with the postponed IMF review and receive further installments of the loan. The government has looked to sell assets to get quick cash, but potential deals have hit roadblocks due to political disagreements and disputes over their valuation and the currency used. 

While the ministry did not name the buyers, a report in Bloomberg Asharq quoted people close to the deal who claimed that “local” investors represented a majority of the buyers, with limited interest among foreign and Gulf investors.

According to the Finance Ministry statement, the government sold 1.6 million shares through an accelerated bookbuild, a form of offering on exchanges in a short period of time with almost no marketing of shares, which may not guarantee a good price for the seller in exchange for a comparative advantage for buyers who can acquire the shares at a low price. Companies usually resort to this mechanism when they are in dire need of funding.

CI Capital and Al Ahly Pharos were appointed to manage the deal, while the National Bank of Egypt participated in an advisory role, according to Bloomberg Asharq. 

The Finance Ministry said yesterday that the sale price had reached LE23.11 per share, with a total value of LE3.74 billion, and was oversubscribed by more than three times.

The ministry is offering a further 5 percent of its shares to Telecom Egypt employees, which began on Sunday and is open until May 25.  After completing that round, the company will have sold 10 percent of its total shares and about 12.5 percent of the state-owned shares.

As part of the government’s plan to rearticulate its role in the economy, the telecoms sector has been identified as an area in which it intends to reduce investments to allow more space for the private sector.

Before the completion of the deal, the state owned 80 percent of Telecom Egypt, which also owns 45 percent of Vodafone Egypt. The government’s stake in Vodafone Egypt has also been the subject of negotiations between Qatar’s sovereign fund and Egypt in recent months, but prospects for a deal have been hampered by disagreements over valuation. 

After the sale, the state now owns 70 percent of Telecom Egypt, which accounts for a small step in privatizing state assets. The sale will bring in much-needed dollar inflows which will help Egypt weather the ongoing economic crisis.