S&P Downgrade, 5G licenses, & credit card limits

Egypt Claps

The Clap

Egypt will offer 5G licenses to telecom companies starting this December, sources told Asharq Business.?

What

The license will cost a minimum of USD 500 million, according to one of the sources.?

The companies at play–Vodafone Egypt, Orange Egypt, Etisalat Misr, and EGX-listed Telecom Egypt. The latter owns 45% of Vodafone.?

“Telecom Egypt will be able to pay the 5G fees from a mix of internal and external financing,” Amr Hussein Elalfy, Chief Equity Strategist at Thndr Securities Brokerage told Claps.?

He also stated that the license fees are not final yet, and the pricing would vastly depend on the purchased 5G spectrum.?

So What

5G technology paves the way for faster digital experiences and enhanced network capacity. It also enables new revenue streams and attracts more subscribers, Elalfy explained.?

Now What

A source cited by Asharq Business said that the 5G licenses will be offered in December or early 2024 to give time to telecom companies to secure financing.??

Some context

Phone service providers have been trying to increase their service fees by 30% to cope with the high inflation and currency devaluation.?

A source told Asharq Business that the National Telecom Regulatory Authority (NTRA) might approve the price hike to incentivize companies to get the 5G licenses.

The Clap

The Central Bank of Egypt (CBE) asked Egyptian banks to reduce credit card foreign spending limits inside the country.

What

Sources told Asharq Business that the CBE is taking this measure to combat the misuse of credit cards. The problem is that these cards are being used internationally even when the card owners aren’t traveling, according to the sources. Accordingly, the CBE asked the banks to ensure their clients are abroad before opening the full card limits.

So What?

The news comes in light of the foreign currency shortage the country is facing and aims to preserve currency reserves by reducing foreign currency spending.

With S&P and Fitch Ratings reevaluating Egypt’s credit ratings soon, it is important for Egypt to improve its foreign currency position.

Now What

This is the second restriction on foreign spending this month, with the CBE asking banks to suspend foreign currency transactions on debit cards previously.

The Clap

Standard & Poor (S&P) Global downgraded Egypt’s sovereign credit rating.?

What

The country’s credit rating was downgraded from B to B- due to the delay in implementing monetary reforms. This delay, in turn, affected the International Monetary Fund (IMF) program and other parties’ financing, weakening Egypt’s net foreign assets, according to the report.?

This is the second credit grade downgrade after Moody’s.?

So What

The lower the sovereign rating, the higher a country’s borrowing costs become as a result of lenders associating the borrower with higher risk.

Now What

S&P has a stable future outlook for Egypt, as it has the potential to accelerate economic and monetary reforms. This could help balance the challenges of financing the high external debt and resolving the foreign currency shortage, the credit rating agency explained.