Orascom Telecom has announced that Algeria’s Court of Appeal has dismissed its claim to overturn an earlier judgement which imposed fines totalling DZD99 billion (USD1.3 billion) on its local subsidiary Orascom Telecom Algeria (OTA), which trades under the Djezzy brand. Orascom says it will now take its case to the country’s Supreme Court. A related criminal case against a Djezzy executive has, however, been dropped after the appeal review.
The fines against Djezzy were imposed by the government in 2010 for alleged breaches of foreign exchange regulations. The case further complicates the already strained relationship between Orascom’s parent company, Russian firm Vimpelcom, and authorities in Algiers. Throughout 2010 Djezzy and the Algerian government were embroiled in a bitter legal dispute, ostensibly over the payment of back taxes. However, the real issue was the government’s attempt to derail Vimpelcom’s pending acquisition of Djezzy shareholder Orascom Telecom Holding (OTH). In September 2010 Vimpelcom agreed to merge its telecoms assets with those of OTH, including its Algerian arm, in a transaction valued at USD6.5 billion. The Algerian government, unhappy at the move, attempted to block the deal since, according to the terms of legislation passed in 2009, Algiers was supposed to have first refusal over Djezzy if Orascom ever opted to sell the lucrative mobile unit.
In October 2010 Vimpelcom conceded that it was happy to sell part of the OTH stake in Djezzy, but only if the Algerian government was willing to match its USD7.8 billion valuation – more than the Russian firm had eventually paid for the collective telecoms assets of OTH. Eventually, in January 2012, Vimpelcom signed a memorandum of understanding for the sale of a 51% stake in Djezzy to the Algerian state. Terms and conditions have yet to be finalised, and the latest developments will have done nothing to ease the negotiations.