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Stake in Telecom Egypt up for sale by cash-strapped government

Cairo pledged to sell off state assets as part of $3bn bailout with IMF amid economic crisis
Telecom Egypt was responsible for the first telegraph line in Egypt and today employees about 53,000 people (Reuters)

Egypt is offering a 10 percent stake in state-controlled Telecom Egypt, as the cash-strapped government tries to address a mounting economic crisis.

Last month, Egypt announced a plan to sell stakes in at least 32 state-owned companies by the end of March 2024. Telecom Egypt was not listed among them, but the decision, reported by Bloomberg and other outlets on Tuesday, reflects a need for Cairo to raise hard currency. The company is 80 percent government-owned.

Telecom Egypt has a long history. Built by the British Eastern Telegraph Company in 1854, it was responsible for the first telegraph line in Egypt, running between Cairo and Alexandria. The Egyptian government purchased the company in the late 19th century. Today it has about 53,000 employees. 

Egypt’s military has historically played an outsized role in Egypt's economy. President Abdel Fattah el-Sisi, a one-time general who rose to power after the overthrow of former President Mohamed Morsi, turbocharged the state’s economic footprint, doubling down on a military-controlled economic model.

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Successive Egyptian governments - Sisi's included - have pledged to privatise state-owned companies, but efforts have generally stalled. The new push comes as the government faces a crippling economic crisis.

The Arab world’s most populous nation was hit hard by the dual impacts of the Russia-Ukraine war and the Covid-19 pandemic which raised the price of imported goods. Foreign investors pulled $22bn from Egypt’s debt market last year and they have been reluctant to re-enter when rising interest rates in the West have dented the appeal of Egyptian debt.

Cairo was forced to turn to the IMF last year for its fourth loan from the lender in six years. As part of its $3b bailout, the government is supposed to open up the books of state-owned enterprises (SOEs), move forward with privatization, and allow its currency to float freely.

As a result, Egypt’s pound has plummeted in value and inflation has skyrocketed, jumping to 25.8 percent in January. Ordinary Egyptians are paying the price and have been forced to scale back on purchases of basic goods.

The IMF hopes that privatisation will make Egypt’s economy more competitive and spur investment. However, critics have raised concerns that Cairo is simply selling off prized state assets to make up for decades of economic mismanagement.

Energy-rich Gulf states are eyeing new acquisitions. The Qatar Investment Authority (QIA) has joined Saudi Arabia’s Public Investment Fund in looking to purchase a stake in Vodafone Egypt, which is 45 percent owned by Telecom Egypt.

Together with the UAE and Qatar, Saudi Arabia has pledged billions of dollars to Egypt's economy. The IMF has called the Gulf states’ support “a critical part” of its $3bn bailout programme.  

But unlike previous moves to shore up Egypt's economy, this time Gulf powers are more rigid, looking for a return on their money. 

“[Saudi Arabia is] providing a lot of support to Egypt and we’ll continue to - not directly through just grants and deposits, but also through investments,” Saudi Arabia’s finance minister, Mohammed al-Jadaan, said in January.

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