Orascom and Korek to form joint GSM venture

Egyptian group Orascom Telecom Holdings (OTH), which decided not to participate in the recent auction for national mobile licences in Iraq, has announced a joint venture with Kurdish cellco Korek Telecom, which won one of the new 15-year concessions. OTH, via its subsidiary Iraqna, had been operating a cellular network under temporary licence since February 2004, but it backed out of August’s auction saying the asking price of the permits was too high at USD1.25 billion plus an 18% revenue-sharing agreement. Under the deal inked yesterday, both cellcos will contribute their existing infrastructure to the joint venture, in which OTH will hold 70% and Korek the other 30%. The new combined entity has been valued at USD2.2 billion and will have a good footing in northern Iraq, uncharted territory for other Iraqi cellcos due to the lack of licences in the region of Kurdistan. The new cellco has a subscriber base of four million subscribers, which give it around a 40% market share, making it market leader. Under the agreement, Korek Telecom will have a call option on 18% of OTH’s equity stake to be executed by 2 November 2007, while OTH will never be obliged to reduce its holding below 51%.