Algeria to name price for Djezzy by mid-2011:sources
Timeframe in line with market expectations.
December 20, 2010 2:42 by Reuters
The Algerian government is likely to make an offer to buy Orascom Telecom’s local mobile phone unit by the middle of next year, Algerian government and telecoms sources said.
Orascom Telecom has over $3 billion of debt maturing between 2010 and 2013 and so is eager to resolve a row over its Djezzy unit quickly, especially if a contested deal for Russia’s Vimpelcom to buy Orascom assets falls through.
“I think Algeria will make an offer to Djezzy by the end of June 2011,” an official close to the Telecommunications Ministry, speaking on condition of anonymity, told Reuters.
A second source in the Algerian telecoms sector with direct knowledge of government thinking on Djezzy, told Reuters: “Algeria should finalise the Djezzy issue by the end of the first half of 2011.”
Orascom Telecom executives in Cairo were not available for comment. An offer for Djezzy by the end of the first half would be broadly in line with market expectations.
The Egyptian firm reluctantly agreed to talks on the nationalisation of Djezzy — which has been its biggest source of revenue — after Algeria hit the unit with back taxes, stopped it from moving its money abroad and blocked a sale to South Africa’s MTN .
Vimpelcom announced in October it would buy Orascom Telecom assets, but that deal suffered a big set-back on Monday when Telenor , a shareholder in the Russian firm, said it will not back the acquisition. Vimpelcom is scheduled to hold a two day meeting from Tuesday to vote on final approval of the deal.
Algeria’s Finance Ministry last month short-listed 10 firms to provide it with a valuation of Djezzy, the first stage in the nationalisation process.
The official close to the Telecommunications Ministry said the tender was making progress. “The selection should be done before the end of this year,” he said.
Several short-listed firms had predicted the valuation would take several months, meaning Algeria would not be ready to do a deal until the middle of the year.
“So in that context, (completion of due diligence by) mid-2011 is probably, I would say, in line with what was expected,” Martin Mabbutt, analyst at Nomura, told Reuters.
Orascom Telecom shareholders are anxious for a swift end to the row over Djezzy, either with Algeria paying it a price it deems acceptable or letting it continue to run the business.
An additional time pressure is that, according to sources in the company, restrictions imposed by Algeria are making it increasingly difficult for Djezzy to function and it may have to stop operating within months.
The official close to the Telecommunications Ministry underlined the government’s stance that any offer to Orascom Telecom for Djezzy would be conditional on the Egyptian firm settling its liabilities in Algeria.
These include a back tax claim for $230 million which Orascom Telecom received last week. Under Algeria law it has to pay within 40 days of notification. (Additional reporting by Alexander Dziadosz in Cairo; Editing by Louise Heavens)