Stock Options @ MobiNil
Innovative Incentive Scheme

The Egyptian Company For Mobile Services SAE (MobiNil), the leading mobile operator listed on the Cairo & Alexandria Stock Exchange - recently announced it’s intention to purchase up to 30,000 shares of its own stock to be used for a generous stock option plans benefiting eligible employees in the company. The SOP (stock option plan) is intended to be a main constituent of MobiNil’s incentive system to attract, develop, motivate and retain the best managers. Very few companies in Egypt or the Arab region adopt SOP schemes, it is widely used in North America and to a lesser degree in Europe. Among the companies that introduced an SOP in Egypt, the most notable are: EFG Hermes, Orascom Construction Industries SAE and El Ahram Beverages.

What is an SOP (stock option plan) ?
Staff compensation should be broken down to:

  • Fixed monthly income (salary) - these are related to an employee performing his duties.
  • Variable performance related incentive (such as annual bonus); which is related to an individual and / or the whole division / company achieving certain targets.
  • Long term incentive (spanning over several years, such as stock options) which are more tied to value creation or other longer term positive performance measures.

An SOP scheme is introduced as a longer term incentive tool building on medium term prosperity versus short term gains.

An employee stock option is defined to be a 'legal right - by contract' for a number of eligible employees to buy a number of shares from an employer at a 'pre-determined purchase price' (strike price) with this right remaining outstanding for a period of time 'validity period' by the end of which this option matures and can be exercised for a specific duration 'exercising period' after which the option expires. The option, if exercised, would be at the strike price regardless of its value at the time of exercise. Naturally, these rights are only exercised if the market price of these shares exceeds the strike price.
There is a range of alternatives of how these schemes could be implemented, however they all aim at achieving the following benefits:

* Rewarding employees who contributed to business success (and therefore shareholders wealth) with a growing and more rewarding incentive than outright cash.
* Strengthening employee 'ownership' and 'sense of responsibility' of performance and financial results.
* Supporting the attracting; retaining and motivating of professionals (benefiting from the scheme).
* Promoting the adoption of a global view with regards to the interests of the company, as opposed to the narrower 'departmental' perspective.

What do the beneficiary employees gain from SOP ?
Beneficiaries realized gains - upon exercise of options - are calculated as follows:
(number of outstanding shares allocated to employee X the difference between the strike price (historical price at SOP allocation - and - market price of the shares ; ie. exercise price).
It should be noted that capital gains on shares - in Egypt - are tax exempted, therefore the employee does not have to pay any income taxes on his gains (compared to 25%+ tax on regular cash bonus)

The following is a sample SOP cycle for illustration purposes:



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