More on Naguib Sawiris
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"I am driven by my stock price. Nothing else but my stock price. All my decisions are based on that and that alone. I go where I smell money – money means my stock price will rise and so I go there"
Naguib Sawiris, Orascom Telecom |
ORASCOM TELECOM HAS something that investors want to be a part of. Once you have spoken to Naguib Sawiris, the company’s CEO and chairman, it becomes clear what that is. "I am driven by my stock price. Nothing else but my stock price. All my decisions are based on that and that alone," he says in an interview with Euromoney. "I go where I smell money – money means my stock price will rise and so I go there." Orascom Telecom’s stock market performance suggests that Sawiris’s strategy is working. Since 2002 the share price has climbed from less than one Egyptian pound to the staggering E£78 that it is today. This statistic makes Orascom one of the world’s best-performing companies, and Sawiris, a 57% shareholder of Orascom, one of the world’s richest men, with a $10 billion fortune.
But this raises a question. Why can this growing international conglomerate enjoy share price increases when others fail to impress investors? The answer is simple – Sawiris has learnt from mistakes over the years and now he is growing the company with a story that investors understand. There is no sign of Orascom Telecom’s share price suffering from a conglomerate discount, because his strategy is simple. "When there is a high population and a low mobile penetration in a country then Orascom Telecom will look at it," he says.
At the moment Orascom has operations in Algeria, Tunisia, Egypt, Iraq, Pakistan, Zimbabwe and Bangladesh and holds a leading market position in three of them. From this list of countries it is clear that Sawiris is no stranger to risky countries: "Where there is risk there is often a lot of money to be had," he says. Just a glance at a couple of Orascom’s markets show that Sawiris has kept to this theory.
Most obvious are the security issues and loss of potential revenues in Iraq. Since the war started, Iraq has lost nearly a quarter of its population through death and migration, and the Orascom subsidiary there, Iraqna, foots a $30 million security bill. But Sawiris is positive: "The war will end eventually and then we will be there. We will never move out of Iraq. It fits the Orascom strategy too well." And Sawiris is committed to the country in more ways than just business. "I was for the Iraq war at the start because it removed a dictator," he says, "but there has been mass destruction there now. I think the post-war management in Iraq is one of the worst stories in modern history. I think it should be taught in school on how to screw up."
In Bangladesh, the subsidiary Banglalink has had to deal not only with being in third position in a market of six operators but also trying to persuade the authorities to reverse a decision to tax SIM cards. By March 2007, revenues had fallen to $30 million from $94 million in December 2006 as the subsidiary realized rapidly diminishing profits. But, as ever, Sawiris remains confident. "We have had very positive talks with the current regime – they are not corrupt and so the problem can be overcome," he says. "We have shown them our balance sheets and they have seen the losses we are making, and seen the investments that we have put into the country, and so we think this will be resolved very soon. We have seen understanding from their side." As ever his long-term vision and discipline in sticking to a clear-cut strategy mean that Orascom will not leave a market such as Bangladesh.
Looking forward
Despite the problems that Orascom’s businesses have to deal with, growth targets have been revised down only marginally. "Only slight changes were needed to our targets and we still expect growth of 20% to 25% in ebitda and revenue," says Sawiris. "We are looking at 70 million to 75 million subscriptions by the end of 2007, and are aiming to cross the $5 billion revenue mark." That is an impressive objective since subscriptions passed the 50 million mark only in December 2006. This was up from 30 million in just 12 months.
Sawiris maintains that Orascom’s subsidiaries now have an economic presence that means they cannot abandon markets. "When mobile phones are introduced to a country the GDP quickly jumps by up to 2%," he says. "Obviously it is profitable for us, but you also feel you are helping the community." Orascom subsidiaries have also been linked to driving forward the capital markets in countries they operate in. One such example is the bond issued by Mobilink, the Pakistan subsidiary, in November 2006.
Mobilink placed $250 million of 2013 notes that became a benchmark for Mobilink and Pakistan because it was the first international corporate bond issuance by a Pakistani issuer for 12 years. This was also the first international bond issued by one of the Orascom subsidiaries, which complete all financing at the subsidiary level. Aldo Mareuse, CFO of Orascom Telecom, says: "This offering expands the range of financing alternatives available to us to fund the development and growth of our operations in respective markets." No further bond offerings are in the pipeline.
Naguib Sawiris is not a retiring man – his risk-taking strategy and quick tongue are viewed positively by leading businessmen worldwide. But in 2001 his foray into acquisitions left his short-term debt stretched and the telecoms company on the brink of bankruptcy. How did the situation arise? "You could call it over-ambitious from my side – I was a bit of a novice back then," says Sawiris. "But with time I have matured and the company has evolved into what it is today with a balance sheet that is very different to what it was back then."