Egypt Telecom, the country's main telephone company, has denied media reports that it is planning to sell its 45 per cent stake in Vodafone Egypt to Saudi Telecom Company (STC). The news, however, drove the Egyptian company's shares to a new high in active trade on Wednesday.

Egypt's telecommunications regulator said early this month that it would in coming weeks issue a licence allowing a company to operate fixed-line and mobile networks, a move that could allow Telecom Egypt to offer mobile services.

Currently, Telecom Egypt offers only fixed line services; if it gets a mobile licence, to avoid a conflict of interest it is expected to either sell out of Vodafone Egypt or try to raise its ownership to a controlling level.

"Either scenario is positive for TE," said Sarah Shabayek, telecommunications analyst at Egypt's CI Capital. If Telecom Egypt sells it will pay out some of the cash in the form of a higher dividend, and if it raises its Vodafone Egypt stake, it will be increasing its exposure to a leading, established mobile operator, Shabayek argued.

Kuwait's Al Rai newspaper reported on Wednesday, quoting unnamed sources, that Saudi Telecom might buy Telecom Egypt's stake in Vodafone Egypt. After the Cairo market closed, Telecom Egypt said in a statement that it was not looking to sell the stake.

Saudi Telecom officials could not be contacted for comment.

Speculation about a possible sale boosted shares in Telecom Egypt by 5.2 per cent in active trade to their highest since Oct. 22. Vodafone Egypt slipped 1.3 percent, while Saudi Telecom was flat.-Reuters