On June 19, 2016, Egyptian subsidiary of French group Orange, formerly known as Mobinil, said in a statement on the Egyptian Stock Exchange that Egypt’s Telecom Regulatory Authority (NTRA) had set the price for 4G licence at EGP3.54 billion ($399 million).

The French operator, and its direct rivals, Vodafone Egypt and Etisalat who also said they had been approached by NTRA without disclosing the price set, will have to give their response to their respective offer by the first week of August 2016. With the new licence, the operators, in exchange for allowing Telecom Egypt (Egypt’s incumbent operator) to use their 4G infrastructures, will be able to provide fixed line services and international calls as well.

One of the conditions imposed by the NTRA is that half of the amount to be paid for the licence has to be in dollars, the remaining in Egyptian pounds. Technically, Orange Egypt has enough cash to pay for the licence since it successfully cut its debt to $1.7 billion in 2015, from $2.5 billion in 2011. Moreover, the company’s overall assets, though down in value by 34% since 2010, are still valued at $1.84 billion. With this, it could afford the licence.

Nevertheless, if the firm decides to acquire the licence, it could walk down the deficit path. Indeed, at December 31, 2015, Orange Egypt’s available treasury was $88 million, for a short-term (less than 12 months) debt of $862 million. However, if the licence reveals to be of strategic importance, the firm’s head company (Orange France) could intervene given that, at 31 December 2015, its available treasury was $1.7 billion. Orange Egypt could also resort to loans to mobilize the required funds.

In terms of profitability, Orange Egypt is gradually coming out of the dark tunnel it was in from 2011 to 2014 and where it recorded negative results. However, its margin which was slightly positive in 2015 ($1.3 million and, over the past 12 months, $4.3 million) remains quite weak. In spite of all these challenges, it should be recalled that Egypt remains one the firm’s biggest markets in Africa.

Idriss Linge