Iraq Is Easy Next to Italy

By Peter Gumbel/Paris

Naguib Sawiris likes to think of himself as a Middle Eastern Richard Branson. Last year the Egyptian entrepreneur started Iraq's first mobile-phone network. After just six months, his company, Orascom Telecom, already had more than half a million subscribers, earning $95 million before taxes and interest. Like Branson, Sawiris is a music lover--he calls himself a "party animal"--and has a taste for risky ventures.

"It's one of our most profitable operations," says Sawiris, 50, sprawled on a leather chair in Orascom Telecom's ornate Paris office. "I take a lot of risks, but calculated risks." Now Sawiris stands on the edge of his biggest gamble, and it's not in an unstable country. This month he closed a massive $15.6 billion deal with the Italian utility Enel to acquire a 62% stake in its mobile-phone network, Wind. Sawiris borrowed more than $12 billion to pay for it all.

Sawiris is no bootstrap entrepreneur. He comes from a wealthy Coptic Christian family. His father Onsi made his fortune in Egypt in the 1950s in the construction industry but then lost it all when President Gamal Abdel Nasser nationalized the business in the early '60s. After living in Libya, the family moved back to Egypt a decade later. There Sawiris Sr. built his fortune anew. He has since divided his empire among his three sons: Naguib, the eldest, took telecommunications; Nassef, the youngest, runs the construction business; and Samih, the middle brother, has a tourism and travel company.

Naguib seems to have inherited his father's golden touch. Over the past six years, Cairo-based Orascom Telecom Holding has grown into an increasingly profitable company, with more than $4 billion in revenue and 17.1 million subscribers in Muslim countries, including Algeria, Egypt and Tunisia.

Although Sawiris has always been able to rely on family money, his path to international success has not been entirely straight. He was once bailed out by Yasser Arafat, the late Palestinian leader, who approved a sizable investment in Orascom when it was struggling in 2001.

Since getting back on its feet, Orascom has jettisoned some markets, including Chad and Ivory Coast, and concentrated on a handful of key nations. At the top of the list is Algeria, where Orascom has more than 70% of the market. The firm also has 6 million customers in Pakistan.

The Wind buyout has some investors puzzled because it runs counter to Sawiris' strategy of investing in underserved Middle Eastern markets. Wind, with 12 million subscribers, is Italy's third largest mobile-phone service, but it has never made a profit. Moreover, given Sawiris' focus on bringing phone service to developing countries, it's hard to see the attraction of Italy, a wealthy nation saturated with telefonini. That's one reason Sawiris is investing his own money, not Orascom's. "It doesn't fit," he acknowledges--at least not for now. Yet Sawiris can point to his record of success in unlikely places: "When I went into Algeria and Pakistan, people thought I was crazy. They still think I'm crazy because I'm in Iraq." --With reporting by Amany Radwan/Cairo

[This article contains a table. Please see hardcopy of magazine or PDF.]

Risky Business Orascom has tripled its subscribers in three years by focusing on developing markets like Iraq and Algeria Division 2002 2003 2004 Djezzy (Algeria) 315,040 1.3 million 3.4 million MobiNil (Egypt) 2.3 million 3 million 4 million Mobilink (Pakistan) 952,174 2 million 5.1million Tunisiana (Tunisia) 0 497,774 1 million Iraqna (Iraq) 0 0 573,944 Telecel (Africa) 693,890 753,452 189,892 Libertis (Brazzaville, Congo) 76,544 109,955 162,700

With reporting by Amany Radwan/Cairo