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Thursday, 3 June 2021

The tobacco license tender may be back on again

Revised terms for the license to establish Egypt’s second major tobacco company have been handed to four local tobacco companies, according to a document seen by Reuters. The conditions booklet for the tender — which is set to end Eastern Tobacco’s historical monopoly over the sector — has been redrafted by the government more than two months after several tobacco players filed a formal complaint asking for new, more competitive terms. The government had been drawing up the new rules for the tender as of late April.

What’s new? The new terms slash the number of cigarettes the company will have to produce to 1 bn each year, down from 15 bn in the original tender. The government has also reversed its position on future licenses, and has now agreed to issue more a decade following the tender.

It’s not known how authorities have tackled some of the other sticking points:

The most controversial aspect of the original tender was the preferential treatment it would hand to Eastern, allowing it to compete unfairly against the new company. Not only would the new license have to hand a 24% stake to Eastern, but it would be forced to sell popular brands at a price 50% higher than Eastern, effectively shutting them out of the market. The four companies also alleged that the terms breached antitrust rules, claiming that the new company would assume monopoly power over e-cigarettes and heated tobacco products.

Who’s in? The Industrial Development Authority invited JTI-Nakhla Tobacco, British American Tobacco Egypt, Imperial Tobacco and Al Mansour International Distribution Company to bid for the new license in March. It remains unclear which companies will submit bids based on the new terms.

The deadline for lodging bids is now set on 1 August, according to the newswire.

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