Orascom to open talks on Algeria mobile unit

28 May 2010

Orascom Telecom looks set to open negotiations with the Algerian government that could lead to the nationalisation of its highly profitable subsidiary in the north African country, Djezzy. Algeria brought in legislation two years ago giving the state the right of first refusal when a foreign owner wants to sell assets in the country. It invoked those pre-emption rights over the ‘entire capital’ of Djezzy last month. Orascom argues the law on pre-emption should not be applied retroactively as the rule was not in place in 2001 when it made its investment in Algeria.

The move raises doubts about whether Orascom will seal a deal with MTN, Africa’s largest mobile operator. If it went ahead this would see MTN acquiring most of the Egyptian group’s African assets. The two groups confirmed last month they were in talks. These began as a discussion about Djezzy but expanded to include other Orascom operations, including units in Tunisia, Burundi, the Central African Republic, Namibia and Zimbabwe. But after the talks were made public the Algerian government said it would block any sale of Djezzy.

Analysts speculate that the removal of the Algerian subsidiary from any package of assets to be sold by Orascom makes it far less attractive to MTN. The Algerian operation is Orascom’s most profitable business and last year accounted for just over half of the Egyptian company’s earnings before interest, tax, depreciation and amortisation (EBITDA), which totalled USD2.24 billion.

Algeria, Global Telecom Holding (GTH, formerly OTH), MTN Group, Optimum Telecom Algerie (Djezzy)