UPDATE 2-One-off boosts Orascom Tel profit, Algeria subs fall

* Third-quarter net profit excluding one-off gain $112 mln

* Djezzy subscribers decline from previous quarter

* Top line within analyst expectations

(Adds analyst quote, details, background)

By Alexander Dziadosz

CAIRO, Nov 7 (BestGrowthStock) – Egypt’s Orascom Telecom (ORTE.CA: ),
which may tie up with Russia’s Vimpelcom (VIP.N: ) to create the
world’s fifth-biggest mobile operator by subscribers, said on
Sunday it returned to profit in the third quarter.

But Orascom said government restrictions in Algeria were
causing its local unit Djezzy — the parent firm’s biggest
source of revenue — to lose subscribers and market share.

A one-off gain involving Orascom’s jointly-owned Egyptian
operator Mobinil (EMOB.CA: ) boosted bottom line to $934 million.
Excluding that, net profit from continuing operations was $112
million, about in line with an average analyst estimate.

Naeem Brokerage analyst Ahmed Adel said Orascom’s top line
and net income excluding one-off gains was within expectations,
but that Djezzy’s performance was a more immediate concern.

“I think they are facing a hard business environment there
(in Algeria) which will keep squeezing the business there,” he
said, adding that Djezzy’s numbers for the quarter were not as
bad as they might have been.

Orascom said the unit’s total number of mobile subscribers
fell to 14.9 million at end-September from 15.1 million at
end-June and its market share dipped from about 59 percent to
about 58 percent owing largely to pressure from the state.

Algiers has asked Djezzy for hundreds of millions of
dollars in back-taxes and penalties, which Orascom disputes,
and blocked an earlier plan to sell the unit to South Africa’s
MTN (MTNJ.J: ). It is now preparing to nationalise the unit.

Analysts say a low offer could threaten billionaire Naguib
Sawiris’s $6.6 billion deal to sell majority stakes in Orascom
and Italian operator Wind to Vimpelcom. Algeria denies
pressuring Orascom and says its actions are within the law.

Sawiris, also Orascom’s chairman, told Norweigan newspaper
Dagens Naerinsliv he only gave the deal a 50 percent chance at
best of going through. [ID:nLDE6A60E0]


Orascom said Wind Canada, a start-up which it funds, raised
its number of subscribers to 140,000 at end-September from
about 94,000 at end-June. Subscribers at Orascom’s North Korean
operation also rose, to about 302,000 from about 185,000.

The firm said its third-quarter revenues were $1.07
billion, down about a fifth from a year earlier, but in line
with market expectations. Total subscribers rose to over 103

Six brokers and bankers polled by Reuters gave an average
net profit estimate of $135 million, with estimates ranging
from $48 million to $289 million.

Orascom previously said it made a net profit of $181
million in the third quarter of 2009 and a $108 million net
loss from continuing operations in the second quarter of 2010.

The Cairo-based firm reached a broad deal last April to end
an acrimonious legal dispute with France Telecom (FTE.PA: ), its
partner in Mobinil. The deal included $300 million in cash for
Orascom and changes to the way it accounts for the unit.
(Editing by Marguerita Choy)

UPDATE 2-One-off boosts Orascom Tel profit, Algeria subs fall