France Telecom (Orange) has announced the signing of an agreement with Kuwaiti logistics company Agility to acquire a 44% stake in Korek Telecom, an Iraqi mobile operator based in the Kurdistan region, enabling the French group to expand its presence in the Middle East. Under the terms of the agreement, a joint venture will be formed by Agility (54%) and France Telecom (46%), which will provide Korek with new capital against 44% of its equity. Agility will contribute its existing convertible debt and inject an additional payment of USD50 million, in exchange for a 24% indirect stake in Korek, as well as a USD100 million four-year shareholder loan to the Kurdish operator. France Telecom will pay USD245 million for a 20% indirect stake in Korek, and will extend a USD185 million four-year shareholder loan to the cellco. Korek Telecom will use the entire proceeds for the payment of licence fees, the reduction of outstanding borrowings and for the improvement and expansion of its network and services.
In addition, France Telecom will have the opportunity to exercise an option in 2014 to increase its indirect stake in Korek to 27% and, in the process, gain indirect control of the company, thereby consolidating Korek in its accounts. If this option is exercised, Agility will be able to sell part of its indirect stake in Korek to France Telecom, thereby increasing the French firm’s indirect interest to 39% in 2014 and up to 51% as from 2016. The remainder is held by private investors. ‘The acquisition of this stake in Korek Telecom is a new step in our policy of expansion outside Europe, and contributes to our stated aim of doubling our revenues in Africa and the Middle East by 2015,’ commented Stephane Richard, France Telecom’s chairman and CEO, adding: ‘I am delighted to contribute to this strategic partnership, especially at a time when Korek Telecom is expanding its operations across the entire country, thereby offering the latest services and technologies to the whole Iraqi population.’ The final closing of the agreement remains conditional on the approval of the Communications and Media Commission (CMC), and is expected to take place in the next few weeks. Agility originally acquired a minority stake in Korek through its Dubai-based private equity arm Alcazar in 2007 for USD250 million.