Egypt's Orascom confirms talks with MTN

Orascom Telecom (OT) said on Wednesday its parent company Weather Investments was in talks with South Africa’s MTN Group Ltd.

concerning a potential acquisition of some or all of the Egyptian telecom giant’s businesses.

Orascom said in an e-mailed statement that it was “aware that ... Weather Investments SpA, is in discussions with MTN Group which may or may not lead to a transaction relating to the acquisition of control of Orascom and/or its businesses by MTN.”

The announcement, coming after days of speculation that MTN may be looking to buy some or all of Orascom’s Africa assets, appeared to disappoint the market. Orascom’s stocks were down about 0.66 percent to 7,55 pounds on the Egyptian exchange by midday Cairo time, while its GDRs were off almost 4,3% on the London Stock Exchange.

OT said it had requested its shares resume trading after it had asked for a halt on both bourses pending an announcement about “material” news.

“People are not very happy because the price rallied two weeks ago when speculation mounted,” said Sally Gerges, a telecoms analyst with Cairo-based Mideast investment bank Beltone Financial.

The market was “expecting more details about the talks with MTN,” she said.

The news marks the first confirmation by OT, which operates GSM networks 11 nations including Egypt, Algeria and North Korea, that it was in talks with MTN, Africa’s largest mobile phone company.

Brokers and analysts have said the most likely purchase—if a deal is reached—would be of some or all of Orascom’s African assets, with the notable exception being Mobinil in Egypt.

Analysts believe Orascom may be eager to exit Algeria because of a tax dispute with Algerian authorities relating to its Djezzy subsidiary in the North African nation.
The back-tax issue surfaced around the same time that a World Cup qualifier match last year between Egypt and Algeria turned violent, temporarily straining relations between the two nations.

“Algeria is the bulk of (Orascom’s) business,” said Gerges. If OT chief executive Naguib Sawiris is “going to sell Algeria, he might as well sell Tunisia” and the other African operations that include Burundi, Zimbabwe, the Central African Republic and Namibia.

MTN, meanwhile, stands to expand its emerging markets operations through such a deal. Last year, it failed for a second time to complete a $23-billion merger with Bharti Airtel Ltd, India’s largest telecommunications provider. Instead, Bharti has been pushing to buy the Africa assets of Kuwait’s Zain, leaving MTN with few other options for an Africa expansion.

The South African company has been reportedly reaching out to banks for funding for the possible deal, with estimates of the deal ranging between $5-billion to $10-billion.

OT’s announcement comes a day after France Telecom said it would pay the Egyptian company $300-million as part of a deal to end a long-running dispute over Mobinil’s ownership. Under the terms of the deal, both companies agreed to keep their ownership structure unchanged.

Along with its Africa operations, Orascom operates GSM networks in North Korea, Canada, Pakistan and Bangladesh, and has almost 93-million subscribers.—Sapa/AP