Orascom to Cut Costs by 10 Percent This Year

By Aamir Attaa · Tuesday, May 19, 2009 0 Comments

Orascom Telecom will spend this year cutting costs and focusing its investments into new networks in Africa, Canada and North Korea, says Aldo Mareuse, the chief financial officer.

Competition with bullish government-backed operators from the Gulf had pushed Orascom, Egypt’s largest public company, to be more alert and disciplined, he said.

“It makes things easier and more difficult,” Mr Mareuse said. “It is easier because decisions are shareholder driven, return driven, so there is no strategic or political decisions entering the picture. Naguib Sawiris says ‘every buck I put down, I want to see returns’, and that’s the culture of the company.”

The company was largely absent from the multibillion-dollar acquisition spree of regional operators in recent years, focusing instead on building up operations in Algeria, Egypt, Bangladesh and Pakistan.

“We have to rely on markets. And obviously that is a much more challenging job. In a way it’s a much more disciplined approach.”

As telecoms markets across the region have become matured after years of rapid growth, the industry’s major players are beginning to focus more on cutting costs and rationalising operations, which often grew bloated during the boom times. “We are entering a more low-growth scenario for our existing assets, so this is a new challenge for us,” Mr Mareuse said. “One example is advertising. The mentality is, ‘we have 60 per cent market share so we have to have 60 per cent share of TV’. Is this a returns mentality? No.”

The company is already decreasing its capital expenditures on operations in Pakistan and Bangladesh, where falling currencies and social instability have hit profitability hard. It aims to cut overall operational spending across the group by 10 per cent this year.

Via [The National]