Vodafone is packing its bags.
Plus: Trump unveils his plan to make Israel great again

We have big news for you this morning, ladies and gents: Vodafone Group yesterday confirmed earlier reports that it was looking to leave Egypt and sell its stake in Vodafone Egypt to Saudi Telecom. The two companies will apparently be signing a memorandum of understanding that could lead to an acquisition (though we’re not quite sure when that will happen).

An announcement coming today? Youm7 reported that Vodafone Egypt CEO Alexandre Froment-Curtil will today hold a press conference to address the announcement — and maybe to officially announce an acquisition by STC, if the company source that talked to the press is to be believed. We wait with bated breath.

The world’s most prolific headline generator continues to dominate the news cycle this morning: President Trump yesterday unveiled his administration’s long-awaited plans to make Israel great again. The proposals give Israel the all-clear to a large-scale land grab in the West Bank, and in return the Palestinians would receive international investment and be allowed to form a “state” (emphasis on the inverted commas). We explain in this morning’s Speed Round below.

A bit of perspective courtesy of the New York Times: “Rather than a serious blueprint for peace, analysts called it a political document by a president in the middle of an impeachment trial working in tandem with a prime minister under criminal indictment and about to face his third election in the span of a year.”

Speaking of which, the Donald’s ongoing impeachment trial continues to spam our news feeds. Senators will over the coming two days debate whether to allow witness testimony after Trump’s defense yesterday wrapped up their arguments. Trump’s team may soon be looking for a plan B after Monday’s potentially-damning allegations from ex-national security chief John Bolton increased uncertainty about whether Senate Republicans would have the votes to block witnesses. The Atlantic definitely hasn’t been shy about what it thinks of proceedings, calling the trial an “absurdity”, Trump’s legal arguments “kafkaesque,” and the Senate “utterly ridiculous.”

It’s GERD deadline day (again): We have our fingers crossed that today is the day that Egypt and Ethiopia finally kiss and make up, as talks in Washington come to a close. The original deadline for a final agreement passed earlier this month when Egyptian, Ethiopian, and Sudanese officials agreed on the terms of the initial filling timetable for the dam. Technical talks last week produced what the Sudanese irrigation minister called “convergence,” but as far we are aware there remained points of disagreement heading into the talks yesterday.

Cabinet will today announce the winner of the Sixth of October dry port tender at its weekly meeting: It’s looking like the contract is going to the Elsewedy-Concorde-AE International consortium, if reports over the last two days are to be believed (see here and here).

Stuff you can go to this week:

• CI Capital’s annual three-day MENA Investors Conference wraps tomorrow at the Four Seasons Nile Plaza.
• The British Embassy and IFC’s StartEgypt Forum 2020 will pit 45 startups against each other in a pitch competition today at the Greek Campus.
• This year’s Cairo International Book Fair runs through to Tuesday, 4 February at the New Cairo International Exhibition and Convention Center.

News triggers to keep your eye on with the new month approaching:

• The purchasing managers’ index for Egypt, Saudi Arabia and the UAE is due out on Tuesday, 4 February at 6:15am CLT.
• Foreign reserves figures for January will be released on Tuesday, 4 February.
• Inflation figures for January are out Monday, 10 February.

DEBT WATCH- Egypt’s external debt rose 18% y-o-y to reach USD 109.4 bn at the end of 1Q2019-2020, according to the Central Bank of Egypt’s monthly statistical bulletin (pdf).

Domestic debt also rose 8% to USD 270 bn during the quarter.

As China succumbs to coronavirus, Europe’s top luxury brand stocks take a USD 46 bn tumble: The top nine European luxury goods stocks have seen a wipe-out of USD 46 bn as one of their main markets is focusing less on designer getup and more on the spread of the coronavirus, according to Bloomberg. China contributes to around 35% of luxury goods revenue with many of the biggest European luxury players having an average revenue exposure to Asia in excess of 40%. Citi believes the stocks most at risk are Swatch, Prada and Ferragamo, but so far LVMH has taken the biggest blow with half of the cumulative market cap wipe-out coming from them.

All of this market turmoil isn’t just about the virus — it’s concerns about how it will affect the global economy. Investors are growing worried again about the outlook for global economic growth after these concerns were quelled in recent weeks with the approaching US-China trade agreement and the cooling off of tensions between Washington and Tehran, Peter Goodman writes for the New York Times. A large part of these concerns is the lack of adequate information available to accurately assess the severity of the issue and just how much it will impact the world as a whole, which has pushed investors the world over to reduce their exposure to risk. “What was left to the imagination resonated as a reason for investors to unload anything less than a sure thing,” Goodman says.

In tech miscellany:

• WhatsApp revealed it saw a spike in security flaws last year but denies its vulnerabilities were to blame for the now infamous hacking of Amazon chief Jeff Bezos’s iPhone, the Financial Times reports,
• Big Tech execs jump aboard the regulation bandwagon before it’s too late: Heads of Microsoft, Google, Facebook and Apple are now asking for governments to regulate them. Why might tech companies want more rules in play despite actively resisting controls in the past? The answer is likely more strategic than altruistic suggests the WSJ.
• Johnson risks wrath of the Donald by giving go-ahead to Huawei: UK Prime Minister Boris Johnson has approved the limited use of Huawei equipment in UK’s 5G infrastructure despite repeated warnings from the US that the move will make the UK vulnerable to Chinese spying, according to the Financial Times.

It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical, Hardhat, will focus each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and even social infrastructure such as health and education.

In today’s issue: Hardhat gives an extensive primer on the Dabaa nuclear power plant, where the project currently stands, and some insight into the ongoing debate over its safety and economic viability.

It was truly a mixed bag of politics, economics, and health on the airwaves last night.

Trump’s long-awaited Middle East Peace Plan was the center of attention last night, Al Hayah Al Youm’s Lobna Assal (watch, runtime: 2:33) and Yahduth Fi Misr's Sherif Amer (watch, runtime: 6:07) both covering the news out of Washington. We have more on that in this morning’s Speed Round below.

CBE governor says the hard part is over: Masaa DMC’s Ramy Radwan interviewed the CBE Governor Tarek Amer who said that the Egyptian economy had stabilized and that the country has reached safety (watch, runtime: 1:46). Amer said that the surge in the USD against the pound after the float was expected, but it has since cooled down and the EGP is rising slowly against the greenback (watch, runtime 3:47). Amer suggested that tourism the recovery in the tourism sector, which achieved USD 12.6 bn in revenues last year, is indicative of an improving situation in Egypt (watch, runtime: 1:17) and (watch, runtime: 0:47).

No funding from IMF: Amer said that Egypt does not need new funding from the International Monetary Fund (IMF) adding that the discussions with fund entail using the IMF's experience in the structural reforms program to improve government efficiency and bolster the investment climate (watch, runtime: 1:58)

No Chinese infected with Wuhan virus: Chinese ambassador to Egypt Liao Liqiang yesterday moved to reassure Egyptians that no Chinese were infected with the Wuhan virus in Egypt, Lobna Assal noted. Liqiang added that they are communicating directly with the foreign and health ministries to prevent the disease from spreading to Egypt (watch, runtime: 3:19). Min Masr's Amr Khalil phoned Cabinet Spokesman Nader Saad, who confirmed that no infections have yet been reported among Egyptians in China and that the embassy is following up on the situation (watch, runtime: 10:40).

M&A WATCH- Those rumors of Vodafone wanting to bail on Egypt have turned out to be true: Vodafone Group is set to sign a memorandum of understanding with Saudi Telecom (STC) that could see it offload its stake in Vodafone Egypt, the cabinet said in a statement yesterday. This confirms rumors last week that STC was in talks with the multinational to acquire its 55% stake in its Egypt arm.

CEO attributes exit to strategic shift: The statement came following talks between Vodafone Group CEO Nicholas Read, Vodafone Egypt CEO Alexandre Froment-Curtil and Prime Minister Moustafa Madbouly in Cairo yesterday. Read said that the company has decided to exit Egypt because of its “strategy to focus its investments,” the statement reads. Vodafone has exited several markets in the past year, selling both its New Zealand and Malta units. There is also speculation that it could leave India following disastrous quarterly figures last year.

Regulators are ready to sign-off on the acquisition: A source in the telecoms sector told Al Mal that the National Telecommunications Regulatory Authority will approve the acquisition after the companies have finalized an agreement. The due diligence process will take a maximum of six months, the source said, adding that financial and legal advisers to oversee the transaction have not yet been appointed.

An acquisition would bring Vodafone’s 22-year history in Egypt to an end: The company has been operating in Egypt since 1998, and is the largest mobile operator in the country.

STC has been eyeing up Vodafone Egypt for years: The Saudi company more than six years ago was reported to be engaged in acquisition talks with state-owned Telecom Egypt over its 45% stake in the company. Telecom Egypt said on Sunday that it has no plans to exit the company.

Telecom Egypt shares rose 6.1% yesterday in anticipation of an acquisition agreement, EGX data shows.

Are we getting an official announcement today? A source close to Vodafone Egypt yesterday told the local press that STC will today announce its acquisition of the company.

IPO WATCH- Emerald set to become Egypt’s first IPO of 2020 in 10 days -Omran: Real estate investment firm Emerald will make its EGX debut “within 10 days,” making it this year’s first IPO, Financial Regulatory Authority Chairman Mohamed Omran said, according to the local press. EGX boss Mohamed Farid had said earlier this week that an IPO worth under EGP 1 bn will be going to market in 1Q2020. While Farid did not name the company, this is in line with previous press reports on Emerald’s planned offering, which will see the company sell 28% of its shares. Emerald plans to raise EGP 203 mn from the sale, unnamed sources said at the time.

Background: The IPO will see the company selling up to 70 mn shares, with 95% of these earmarked for institutional investors. The fair value assessment, which was conducted by the Professionals for Investment Banking, has set the share price at EGP 2.90 apiece. The IPO prospectus was reviewed by lead manager and major shareholder Odin Investments, along with the FRA.

Emerald will make its debut after the EGX closed 2019 with only two IPOs. Rameda Pharma went public in December after fintech player Fawry floated in August. Egyptian companies pulled back from raising capital after Sarwa Capital’s IPO went sideways in late 2018. A global slowdown in appetite for emerging market IPOs and fears the recent Aramco listing would suck liquidity out of the market also played a role last year. Meanwhile, Eastern Tobacco’s 4.5% secondary sale in March was the only state-owned company to go to market last year.

Trump unveils his plan to make Israel great again: US President Donald Trump finally unveiled the political component of his Middle East Peace Plan yesterday winning the praise of Israel and immediate anger from Palestinians. In a press conference with Israeli caretaker PM Benjamin Netanyahu, Trump didn’t disguise where his administration’s priorities lay, describing the long-awaited proposals as a “great plan for Israel…a great plan for peace.”

The plan reads like Israel’s wish list, allowing the Jewish state to annex its illegal settlements in the West Bank and take control of the land bordering the Jordan Valley. Israel would get to claim Jerusalem as its unified capital, with the Palestinians being designated land on the outskirts of East Jerusalem on which to build their capital ‘Al Quds’. Israel has offered to halt its colonization of the West Bank for four years, but Netanyahu yesterday pledged to push ahead with attempts to annex the existing settlements and the Jordan Valley.

What do the Palestinians get? The Palestinian Authority would receive around USD 50 bn in investment from international donors with which to build a new state in which the US pledged to establish an embassy. This authority would not be permitted to become a fully fledged state equal to Israel on the world stage, but would be banned from having an army and an airforce. Israel would be responsible for overall security in the Palestinian territories, which would also contain more than a dozen Israeli “enclaves.” Trump tweeted a map showing the Palestinian territories far smaller than envisioned by the Oslo peace agreement in 1993, linking Gaza to the West Bank by road. You can find the entire plan here (pdf).

Surprising absolutely noone, Palestinians were not happy: Trump said he sent a letter to Palestinian President Mahmoud Abbas asking him to read the plan. However, Abbas mocked the plan dubbing it the “slap of the century,” according to Reuters. Abbas stressed that Jerusalem is not for sale, while thousands of Palestinians took to the Gaza streets in protest.

Egypt’s Foreign Ministry released a fairly positive statement on the plan, urging the Palestinians and Israelis to “undertake a careful and thorough consideration of the U.S. vision to achieve peace and open channels of dialogue, under U.S. auspices, for the resumption of negotiations. Jordan, meanwhile, said it was committed to a two-state solution based on the pre-1967 borders while rejecting Israel’s annexation of its valley. The United Nations Secretary-General Antonio Guterres said he supports the Palestinians and Israelis in resolving their conflict on the basis of UN resolutions, international law and bilateral agreements while the European Union also said it needed to study it more closely, according to the Associated Press.

M&A WATCH- The number of investors wanting in on Raya’s Aman Holding minority stake doubles in a week: Twenty-four domestic and international investors have now submitted bids to acquire a minority stake in Raya subsidiary Aman Holding, up from 12 last week, Chairperson Medhat Khalil said, according to Al Shorouk. Aman Holding was set up earlier this month to parent Raya’s three non-banking financial service arms — Aman for Financial Services, Aman for E-Payments, and Aman for Microfinance. The company has EGP 375 mn in capital and holds 99% stakes in the former two businesses and a 74.5% stake in the latter.

US-Egypt trade talks to restart next year: Egypt and the US will re-enter negotiations over a bilateral trade agreement next year, US Ambassador Jonathan Cohen said on the sidelines of a conference at the American Chamber of Commerce in Cairo, according to Al Shorouk.

The slow pace of reform has stood in the way of a trade agreement for almost three decades: A bilateral trade agreement between the two countries has been talked about on and off since the 1990s. The US currently imports some Egyptian products duty free through its Generalized System of Preferences program and Egypt’s Qualified Industrial Zones, but Washington has repeatedly conditioned a comprehensive trade agreement on Egypt undertaking deeper economic reforms. We heard this once again last year, when a US State Department official said Egypt must continue lifting non-tariff trade barriers and improving the quality of its exports if it wants to go back to the table.

The US is currently our #1 export destination: The value of Egyptian exports to the US stood at USD 732.2 mn at the end of 1Q2019-2020, making it the biggest importer of Egyptian goods, according to CBE figures (pdf).

Meanwhile: The House industry committee has called for the government to annul its trade agreement with Turkey, saying that it harms domestic industry, Asharq Alawsat reports. Egypt at the start of the year began exempting Turkish car imports from customs, further increasing pressure on the local market.

DEBT WATCH- Four Egyptian companies are gearing up to issue EGP 5 bn in sukuk on the EGX, Al Shorouk reported head of the Financial Regulatory Authority’s (FRA) insurance department Sayed Abdelfadil as saying. CIAF Leasing will offer USD 50 mn while Talaat Moustafa Group (TMG) will issue EGP 2 bn before the end of March (which is slightly sooner than previously expected). The two unnamed companies — one of which is a real estate holding company and the other a hospitality company — will offer EGP 1 bn and EGP 1.5 bn respectively. Both are still in the stage of preparing the required documents. Abdelfadil also disclosed that EFG Hermes has obtained approval for the EGP 1 bn sukuk issuance for TMG.

EFG Hermes, Banque Misr, and Abu Dhabi Islamic Bank will receive sukuk licenses within the next three months, Abdelfadil said. Consumer and structured-finance player Sarwa Capital was granted Egypt’s first sukuk license last year and will meet today with FRA officials to discuss a new issuance.

EFG Hermes is also in talks to manage green bond issuances: EFG Hermes is negotiating to manage an unnamed state company’s green bond offering, sources told the local press, without disclosing the value of the issuance.

And regulators are currently deciding whether to approve a EGP 500 mn green bond issuance by an unnamed Norwegian renewable energy company, according to a separate report.

These would be the first green bond issuances in the country: The Capital Markets Act issued last July opened the door to the introduction of new financial instruments, including short-selling, futures and commodities exchanges, sukuk, and green bonds. But FRA chief Mohamed Omran believes that green bonds will be the “biggest challenge” for financial markets over the coming period, even after the authority in November slashed inspection fees in half.

Egypt, ExxonMobil sign USD 332 mn oil and gas agreements: The Oil Ministry has signed two new agreements with ExxonMobil for oil and gas exploration in the Mediterranean, according to a cabinet statement. The US company will invest a minimum USD 332 mn to drill seven wells, paying the Egyptian government USD 17 mn as a signature bonus. The first USD 220 mn agreement covers four wells in the North East El Amriya offshore block, and the second will see Exxon drill three wells in the North Marakia block at a minimum investment cost of USD 112 mn.

Background: The US oil giant acquired both blocks last month for offshore exploration, with a combined area of more than 1.7 mn acres. Exxon will operate and hold 100% interest in both blocks, where operations are expected to start this year. The agreement comes less than a week after Shell, Apache and Petronas inked USD 450 mn in exploration and production agreements with the state oil company EGPC.

Egypt is considering sending LNG shipments to Lebanon via sea, Oil Minister Tarek El Molla told Al Arabiya. Egypt is already technically linked to Lebanon through the Pan Arab Pipeline built in 2003 — the same pipeline that delivers our gas to Jordan — but using the pipeline means that gas would have to pass through Syria first before reaching Lebanon which is no longer a viable option, El Molla said..

Egypt’s ambitions for becoming a regional energy hub have seen major developments in recent weeks: Israeli finally began exporting gas this month under the landmark USD 19.5 bn agreement. Egypt is currently receiving 200 mcf/d from Israel’s Mediterranean fields, and is set to receive more than 85 bcm over the next 15 years to use both for domestic consumption and to export. The seven-member Eastern Mediterranean Gas Forum was also formalized this month, an organization which will increase cooperation between the region’s gas producers, consumers and transit countries.

DISPUTE WATCH- Raya files appeal against EGP 110 mn+ fine: Raya Holding yesterday filed an appeal against the Cairo Economic Court’s ruling against its chairman Medhat Khalil, the company announced in an EGX disclosure (pdf). In separate comments made to Al Mal the group’s legal advisor, Hani Khalil, stated that the company’s shareholder transactions and ownership fell pursuant to EGX bylaws, insisting the Financial Regulatory Authority (FRA) instead direct its dispute towards the EGX. Khalil also contended that the regulator’s reliance on civil law to define shareholder relationship is without precedent.

Medhat Khalil was ordered to pay a record EGP 110 mn fine on Monday following a drawn out dispute between Raya Holding and the FRA over a violation of ownership regulations. Khalil had already failed to pay an EGP 11 mn fine to the regulator after he was found to have exceeded the maximum ownership limit in Raya without making a mandatory tender offer (MTO). The FRA originally ordered Khalil at the end of 2018 to make a MTO or sell off his shares after it determined that he along with related parties violated regulations by controlling a combined 42% of the company.

World Bank, IFC launch advisory program in MENA to improve MSME access to finance: The World Bank Group and the International Finance Corporation (IFC) are launching the second phase of an advisory program to improve access to finance for micro, small, and medium enterprises (MSMEs) in MENA countries including Egypt, according to an emailed statement (pdf). The program — on which the World Bank and IFC are cooperating with the Netherlands, Switzerland, the UK, and Sweden — will also be implemented in Algeria, Iraq, Jordan, Lebanon, Morocco, Tunisia, and Palestine. The program, which pays particular attention to women entrepreneurs and businesses geared towards financial inclusion, “involved enhancing the enabling environment, developing financial market infrastructure, and building the technical and funding capacity of financial intermediaries.”

LEGISLATION WATCH- The Consumer Credit Act will be introduced to the House of Representatives within the coming two weeks, Chairman of the Financial Regulatory Authority Mohamed Omran said yesterday, after the House Economic Committee signed off on the legislation. The local press is reporting that the committee introduced a new article listing the types of goods eligible to receive consumer finance. The legislation is now with the House General Committee, which will decide in a few days whether to introduce it to the general assembly.

Background: We reported yesterday that the House had given a preliminary nod to the Consumer Credit Act. Under the legislation, new consumer finance companies with at least EGP 10 mn in issued capital would be able to obtain a license from the FRA. Companies must also be at least 25% owned by a financial institution, and be founded by legal persons that hold at least 50% of the company.

Egypt’s new unified digital tax payment system is set to be fully implemented by the end of the year, Finance Minister Mohamed Maait said in a statement. The new system will provide businesses with a single online system for filing and paying income tax, stamp tax and VAT, in an effort to streamline procedures and encourage informal businesses to go legit. IBM is designing an integrated model for the automated system, while e-Finance, SAP, and Ernst & Young also have pieces of the project. The government expects to roll out a beta model for large-scale taxpayers before gradually expanding the system to encompass all tax payments. The Madbouly Cabinet greenlit the proposed legislation last year.

LEGISLATION WATCH- The Financial Regulatory Authority (FRA) will begin working on a draft law to regulate the fintech industry in collaboration with the European Bank for Reconstruction & Development, FRA boss Mohamed Omran said, according to Al Shorouk. The authority has been considering legislation to govern crowdfunding, but decided to incorporate it within a broader fintech law that would cover this type of financing. The draft should be finalized this year.

It’s a deadzone in the foreign press this morning.