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4-Traders Homepage  >  Equities  >  CAIRO AND ALEXANDRIA STOCK EXCHANGE  >  Telecom Egypt Company    ETEL   EGS48031C016

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Telecom Egypt : CSG seeks to increase business in Gulf region in 2017

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01/04/2017 | 03:15pm CET

Cloud Services Group (CSG) targets further expansion in the Gulf region over the coming period, as well as holding new partnerships in Saudi Arabia, Bahrain, and Oman to increase its volume of business in foreign markets, according to the commercial manager of CSG Karim El-Dessouky. The company aims to make a profit of $1-1.5bn during the current year, based on their services provided in the Gulf markets.

El-Dessouky said in an interview with Daily News Egypt that his company aims to activate its partnership with Telecom Egypt in 2017, in order to provide solutions for small- and medium-sized enterprises (SMEs).

How do you see the local IT market in the current period?

The market is currently going through a difficult period. It will either witness a sharp decline in the coming period, or unprecedented rapid growth rates.

The information technology market consists of several sectors. There is the infrastructure sector, which includes cables and communication networks; the telecommunications sector, which includes mobile and internet services; the hardware sector, which provides servers, data storage devices, and electronic security devices; the software sector, which provides mobile applications; and the electronics sector.

A sharp decline would come as a result of bad economic conditions currently plaguing the country, which has reduced the purchasing power of many customers as well as the budgets allocated by companies to develop their IT services. Therefore, the provision of IT services in a traditional manner will cause a sharp drop in the market’s size and growth rates.

The second scenario depends on changing the methodology of IT companies, based on two main axes: cloud computing and the Internet of Things. Cloud computing provides many storage solutions with high quality and lower cost.

The software companies have to develop their programmes to be able to work through cloud computing. Also, hardware companies have to change the way they provide their services; they have to stop participating in tenders that aim to provide storage devices, and start getting involved in partnerships with cloud computing companies to provide these companies with storage solutions, as well as establishing data centres. The slogan of the coming period has to be integration and partnership to work on upsizing the market and pushing it to grow. If the market grows, its contribution to Egypt’s GDP will increase to 6-7%.

As for Internet of Things, many countries have started to rely on its solutions; it relies on using sensors in providing many services, which save a lot of money. These devices are significantly used in lighting, surveillance cameras, and traffic lights.

Is the sector’s infrastructure able to provide advanced services based on Internet of Things?

The infrastructure needs to develop its services, but the launch of fourth generation services (4G) will be a milestone in the launch of services related to Internet of Things.

What are the main challenges that the sector is currently facing?

The biggest challenge is the local market, as the purchasing power of local customers decreased due to the rising US dollar prices and thus, the volume of demand fell locally. On the other hand, the sector benefited from the pound’s flotation in exporting services and software, making the price of our products more competitive, especially software products.

Another challenge facing the IT sector is the lack of skilled and efficient labour in addition to the lack of educational degrees that fit the needs of companies.

What are the opportunities provided in the IT market?

Solutions provided through mobile applications represent the most promising opportunities, especially because many producers and service providers are seeking to reach customers through mobile applications, which will help promote the growth of the IT sector.

What are the services offered by your company?

Our company was founded through a partnership between the Kuwaiti company Zagel, specialised in providing internet services and data centres, and Automation Company for Consulting, an Egyptian company that provides software services of which 60% of the company is owned by AYLA for Consulting and Investment Services Company.

We provide integrated solutions based on technology, such as cloud computing, data centres, and software.

What sectors are you focusing on?

CSG focuses on all cloud computing services, whether hosting services, infrastructure services, or cloud computing applications. We also focus on providing our services to institutional clients and governments in Egypt, the Gulf region, Jordan, and Lebanon. We also plan on expanding into the African market during the coming period.

What are your main plans for the current year?

In 2017, we are focusing on building a network of partnerships so that they will be able to offer their services via cloud computing applications. By then, they will be offering integrated solutions through applications based on cloud computing which allows the company to widely spread its services.

We are also targeting five partnership contracts to cover various markets in the region. We started with Zagel which will cover the Gulf region. We have contracted with IBM-Egypt, allowing us to sell our applications through them, and a partnership with Telecom Egypt but it hasn’t been activated yet. We want to activate our partnership with Telecom Egypt to provide value-added tax services for SMEs.

We are also looking forward to signing a contract with Saudi Arabia, Amman, and Bahrain in 2017, as well as reaching 100 clients. We aim to register $1.5m in profits by the end of 2017, of which 80% is expected to come from our businesses in foreign markets, and 20% from the Egyptian market. We also target SMEs, especially in the retail, financial, and education fields.

We want to increase the growth rate by 30% compared to 2016.

Have service prices increased in the current period?

Yes, service prices increased by 10-20% due to the inflation, and US dollar price increase.

(c) 2017 2016 Daily News Egypt. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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Financials ( EGP)
Sales 2016 13 135 M
EBIT 2016 2 053 M
Net income 2016 3 189 M
Debt 2016 64,0 M
Yield 2016 5,76%
P/E ratio 2016 6,68
P/E ratio 2017 7,98
EV / Sales 2016 1,67x
EV / Sales 2017 1,65x
Capitalization 21 816 M
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Income Statement Evolution
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Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 12
Average target price 11,1  EGP
Spread / Average Target -13%
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Managers
NameTitle
Tamer Gadalla Chief Executive Officer, Director & MD
Maged Ibrahim Osman Chairman
Mohamed Hassan Shamroukh Chief Financial Officer, Director & Vice President
Ahmed Mohammed Jamal Abou Ali Independent Director
Eskander Adel Eskander Tooma Director
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