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Mobinil loses favour after earnings results

Egyptian telecoms operator Mobinil is struggling to retain positive ratings from analysts as a 94 per cent drop in net income for the first quarter hangs over investors

The telecommunications sector, normally regarded as resilient against an economic downturn, has not been spared the impact of Egypt's revolution.

The Egyptian operator Mobinil is fast losing the support of analysts and investors.

Also known as the Egyptian Company for Mobile Services, it is jointly owned by Orascom Telecom and France Telecom, and has suffered a handful of analyst downgrades after poor first-quarter earnings results.

It posted a 93.6 per cent drop in earnings compared with the first quarter of last year, to 22.7 million Egyptian pounds.

Disruptions in internet and mobile services, aimed at making it harder for demonstrators to organise protests during the months of unrest, cut into Mobinil's revenue.

Although mobile subscriber numbers rose in the first quarter, revenue per user was down as less money was collected from roaming and business customers.

Roaming revenues make up about 10 per cent of Mobinil's total income but the company's chairman, Alex Shalaby, has reportedly said he expects further declines this year.

Yesterday, analysts at HSBC cut the target price for Mobinil to 163 pounds from 165 pounds, citing probable pressure on earnings for the rest of the year.

HSBC reduced its earnings estimates for this year and next by 38 and 16 per cent respectively, but retained its "overweight" rating on the stock.

Alembic HC Securities this month also cut its rating of the company to "underweight" from "neutral".

Other analysts were more vocal in their assessment.

"The results imply that 2011 is going to be much worse than we had expected," those from Beltone Financial said in a note to investors last month.

The results significantly missed Beltone's estimate of 251m pounds for the first quarter.

Mobinil shares yesterday fell 0.8 per cent on Cairo's benchmark EGX 30 index to 138.21 pounds.

But shareholders may take some comfort from the dividend of 3.16 pounds a share the company plans to pay on June 8.

fhalime@thenational.ae

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