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Unrest looks set to lift profit at Telecom Egypt

What's Up: Telecom Egypt is emerging as the main beneficiary of the social media revolution that gripped Egypt and eventually ousted Hosni Mubarak.

Telecom Egypt is emerging as one of the top beneficiaries of what has been called the "Facebook revolution".

The company, which has the landline monopoly in the country, is a clear winner from the prominence of the internet in a popular uprising that eventually ousted Hosni Mubarak from the presidency on February 11.

Credit Suisse upgraded the company yesterday to "outperform" from "neutral" to reflect expectations of strong revenue for the year as a result of the sharp increase in internet use in Egypt after the country's unrest.

In a note to investors, the brokerage said Telecom Egypt's shares were cheap at current levels and represented a defensive investment in a volatile Egyptian market.

But to reflect higher market risks after the protests, Credit Suisse cut its price target on the stock to 16.5 Egyptian pounds from 17 pounds.

The country's telecoms companies, including Vodafone Egypt, which is 45 per cent owned by Telecom Egypt, were forced to cut their service at the height of the protests in February in a government attempt to stifle the unrest.

This hurt Telecom Egypt's shares in the short term, but some analysts said the subsequent surge in internet use would prop up the company's revenue in the months to come.

Egypt's internet penetration rate stood at 24.5 per cent in March, according to research from Prime Securities in Cairo, versus the Middle East's average penetration rate of 31.4 per cent.

Telecom Egypt will be a "major beneficiary from the revolution with increased access to internet stimulated", analysts at Prime Securities wrote in their note to investors.

The stock closed 1.3 per cent lower at 14.68 pounds yesterday on the Egyptian Exchange.

fhalime@thenational.ae

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