Orascom Telecom: continued resistance to Canadian market entry and changes at the top

Shaw Communications: joining the opposition to Orascom's Canadian market entry

A recent DevelopingTelecomsWatch article reported on the challenges faced by Orascom Telecom-backed nascent Canadian cellco Globalive Wireless as it seeks to intrude upon what its CEO has described as the "oligopoly" of incumbent players Rogers Wireless, Bell Mobility and Telus. We noted that the Wind-branded operator has fallen foul of foreign ownership despite Orascom Telecom supremo Naguib Sawiris having been, in the words of Terence Corcoran of the National Post, "led... into bidding for spectrum and a major role in the Canadian wireless market" only to have the carpet pulled out from under his company.

As debate rages about how poorly consumers might be served by keeping Globalive out of the country's wireless market, Telus, which is estimated by WCIS to account for around 29% of Canadian mobile subs, is urging Industry Minister Tony Clement not to overturn the CRTC ruling which has stymied the prospective new entrant's plans.

According to Steven Chase, writing today for the Globe and Mail, Telus is arguing that a relaxation of the foreign ownership rules would be unfair "because other companies stayed within existing ownership rules when bidding for frequencies in the 2008 wireless spectrum auction." Telus, which also offers wireline telephony, broadband and TV services, has joined forces with another telco headquartered in Western Canada, Shaw Communications, to publish an open appeal to Mr. Clement in the press.

Chase writes that the two operators are asking the Minister to ignore calls to reverse the October 29th decision by the CRTC. It would send "a very bad message to companies that complied with the Canadian ownership laws as they were required to do in the auction and spent over $4-billion bidding - that the rules can be changed at any time in the game," Michael Hennessy, Telus's SVP of Regulatory and Government Affairs, said in an interview.

The CEO of Rogers Communications, meanwhile, has made it clear how the wireless arm of his business would respond if the Orascom Telecom-backed startup is indeed unable to launch. The market-leading mobile operation would look to acquire the unused spectrum.

"Spectrum is a very valuable asset," Nadir Mohamed said last Friday after a speech to the Toronto Board of Trade. "It's the real estate of our business, so Rogers would be for sure interested in picking it up. I'm sure others would be."

I sense a few more twists in this tale before it becomes clear what is to become of Orascom Telecom's planned foray into North America. Meanwhile, the overall expansion strategy - of which entry into Canada's surprisingly under-penetrated mobile market was meant to be a part - will continue to be guided by Naguib Sawiris. Orascom Telecom recently announced changes to the management structure which will see Group COO Khaled Bichara promoted to the CEO role and Sawiris taking on the position of Executive Chairman.

"The telecommunication business is continuing to grow and evolve at a rapid pace, and we're reshaping OTH to be a leader in this transformation. Our strategy leverages our core strengths and capitalizes on vastly emerging trends to drive growth and profitability. Khaled is dynamic, energetic and will be able to draw on his... experience... to gear the Group into a more aggressive period of growth and transform OTH into a more innovative, integrated and agile global company," Sawiris said. "I will also remain involved in the businesses with more focus on steering the Group’s strategic growth while guiding and supporting the activities of the senior management team. I believe that the telecom market will see massive consolidation during the coming years, and with the new structure I will be able to devote more time and effort in this direction," he added.

With Sawiris now free to focus more sharply on growth opportunities, it will be interesting to see if the group will continue the taste for adventurous enterprises suggested by its decision to invest in North Korea. Koryolink is a W-CDMA operator in which Orascom Telecom holds a 75% stake. Having launched services in December last year, the company now has around 70,000 subscribers according to Cellular News.

For a glimpse inside the secretive and isolated country, this clip about the launch of the Orascom-backed MNO makes interesting viewing, even if the commentary is impenetrable to non-Koreans:

Orascom Telecom: continued resistance to Canadian market entry and changes at the top

Acquisitive telcos to widen the net?

In a recent post on my former blog (now handed over to my Informa Telecoms & Media colleague Julie Rey) I discussed evidence to support the theory that the current economic woes will prompt MENA region-headquartered telcos to go shopping for valuable assets at knock down prices. One of the examples I flagged up was Orascom Telecom paying US$59 million in cash for Namibian GSM player Cell One and closing previously agreed deals to reacquire Telecel Centrafrique in the Central African Republic and U-Com Burundi (formerly Telecel Burundi).

This example, in common with several others which I cited, concerns a MENA-region powerhouse extending its footprint into further emerging markets. Prior to receiving yesterday's Global Mobile Daily, I had merely speculated about operations in more mature markets being on the radar of prospective buyers from the Arab world. This struck me as a theoretically plausible development but I had not gone as far as trying to work out where this might happen. Now it seems that a possible scene for this kind of move is Austria, where OeIAG, the state holding vehicle which has a 27% chunk of incumbent Telekom Austria, may offload its stake. Orascom Telecom has been named as a possible taker.

The GMD story quotes Stefano Songini, Investor Relations Director for Orascom Telecom, who says that the Egypt-based company "could look at merging with another similar-sized telecoms operator to create a large wide-scale operator." According to Songini, "Telekom Austria or others would potentially be right candidates", but any possible sale will depend on the Austrian coalition government’s position on privatization, which has yet to be made known.

Orascom Telecom is one MENA region telco with previous experience of moving into Western Europe. In 2005, Italy's Wind Telecomunicazioni was sold to Weather Investments, a company controlled by businessman Naguib Sawiris, the Orascom Telecom Chairman & CEO. Via Weather Investments, Sawiris went on to acquire the Greek mobile carrier TIM Hellas from Apax Partners and Texas Pacific Group in a deal worth EUR 3.4 billion in 2007, rebranding it Wind Greece.

Keeping track of the Sawiris strategy requires some agility. I really enjoyed how he livened up a morning plenary session at the 3GSM World Congress in February 2007. Speaking immediately after Vodafone's then-CEO Arun Sarin and the then-CEO of Orange Sanjiv Ajuha, Sawiris gestured towards his fellow presenters and told the audience "the difference between me and these two gentlemen is that, for me - it's all about the money... the other difference between me and these two gentleman is that I am the biggest shareholder in my company, and I have made a lot of money that way."

Explaining how he had amassed this fortune, Sawiris spoke about a simple strategy: winning as large a market share as possible in as few countries as possible. Turning towards the Orange CEO, he told the audience that "Sanjiv talked about having around 100m subscribers in 23 markets. Well, we will have 100m subscribers in just six markets."

This sounded wonderfully convincing to me as I scribbled my notes in the darkened auditorium in Barcelona. I was therefore quite surprised when I heard about the above-mentioned re-enty of Orascom Telecom to a number of relatively small African markets. The company ran around a dozen mobile networks across Africa prior 2005, including Gabon, Togo, Burkina Faso and Zambia. These were sold as part of the strategy of which Sawiris seemed so proud in his jocular World Congress talk in 2007, i.e. getting out of minor markets to focus on the big stuff.

Now, according to Arab Finance, Sawiris "is considering the entry to a number of new markets on the African continent... characterized by low rates of mobile usage, which is a remarkable motive to invest in them." According to this article, Sawiris has indicated that Orascom Telecom "is looking for opportunities to work in Mali and Equatorial Guinea".

One aspect of this rather fluid Orascom Telecom strategy appears to be something of a taste for adventure. Last year, the company was awarded a mobile licence in what must be one of the most challenging markets in the world - isolated, secretive North Korea. According to a GMD article of March 2008, Orascom Telecom will spend around US$400 million over the next three years on the license and establishing operations in the country.

Yesterday seems to have been Sawiris day for Global Mobile Daily. In addition to the story about possible Orascom interest in a piece of Telekom Austria, the daily news service came with an update on Koryolink, the aforementioned North Korean cellco, which has "reportedly seen 6,000 applications within its first two weeks of operation in the secretive one-party state."

"So far we have about 6,000 applications. The important point is that they are normal citizens, not the privileged or military generals or party higher-ups. For the first time they have been able to go to a shop and get a mobile phone," Sawiris was quoted as saying.

I am sure it will be interesting to keep an eye on further developments from Orascom Telecom and other Arab World telcos looking to take advantage of opportunities to acquire new subsidiaries at good prices. All of this reminds me of how Naguib Sawiris concluded his speech to the World Congress audience two years ago: he said he was delighted to see two Indian-born men and an Egyptian giving the keynote presentations at one of the world's biggest industry gatherings, saying that this was proof that the developing world is the place to be in mobile. I agree - and am delighted that I will be remaining active in emerging markets in the coming years.

Acquisitive telcos to widen the net?