Algeria Plans to Acquire Djezzy

The Algerian government is poised to make an offer to buy Orascom Telecom's Djezzy mobile phone unit by the middle of next year, Reuters reports, citing an unnamed Telecommunications Ministry source.

The hotly contested unit has been the source of much speculation in recent years, and came to the fore once again following October’s agreement between Russia's Vimpelcom and Egyptian entrepreneur Naguib Sawiris under which Vimpelcom would take a majority stake in most of Orascom Telecom's units, originally slated to include its most valuable asset Djezzy.

Provisional negotiations between Vimpelcom and Algiers over the potential privatisation of Djezzy stalled, and the Algerian government forced Orascom’s hand by hitting the telecoms firm with substantial back taxes.

Last week Algiers demanded a figure of around USD230 million for the tax years ending 2008 and 2009; Orascom has called the reassessment ‘completely unfounded’. In November Algeria's Finance Ministry shortlisted ten firms to provide it with a valuation of Djezzy, with the results anticipated to be available before end-2010. The Algerian telecoms official, speaking on condition of anonymity, told Reuters: ‘I think Algeria will make an offer to Djezzy by the end of June 2011’.
Although Vimpelcom has expressed its desire to acquire Djezzy throughout, its plan suffered a major setback yesterday when Norwegian shareholder Telenor confirmed that it is not willing to back the acquisition.
 
Telenor, which holds a 36% voting stake in Vimpelcom, is generally perceived as taking a more cautious approach towards international expansion than its co-shareholder, Alfa Group, and its reluctance to push through the Djezzy deal has been rumoured for some time.
 
Telenor spokesman Dag Melgaard commented: ‘In our capacity as a shareholder of Vimpelcom Ltd., we do not believe this transaction makes strategic or financial sense for Vimpelcom's shareholders’.
 
In a subsequent press statement Vimpelcom confirmed: ‘Six of nine directors, including all three independent directors and the three Altimo-nominated directors, voted in favour of the transaction, with the Telenor-nominated directors voting against the transaction. The supervisory board did not approve an amended shareholder agreement, or vote on other shareholder-related agreements due to Telenor’s publicly stated position that, in its capacity as a shareholder of Vimpelcom, it does not support the transaction’.

Orascom Atributes Q3 Loss to Forex

Egyptian telecoms group Orascom Telecom has revealed a net loss for the three-month period ended 30 June 2010 on the back of unrealised foreign exchange losses.

In the second quarter of its 2010 fiscal year the company posted a net loss after minority interests of USD66.1 million, reporting that forex losses in the three-month period were USD120 million; by comparison, in the same period a year earlier Orascom posted a net profit of USD111.8 million.

The Egyptian company also noted that impairment charges in Algeria and start-up losses attributed to its Canadian operations had both impacted on the bottom line.

Revenues however fared better, with Orascom generating turnover of USD1.058 billion in 2Q10 compared with USD990.6 million a year earlier, a 7% year-on-year increase, although monthly average revenue per user (ARPU) continued to decline across all regions of operation.

In the three-month period Orascom reported that global ARPU was USD5, down 16.7% y-o-y, with Lebanon-based Alfa ad Egyptian cellco MobiNil reporting the largest declines, of 25% and 22.9% respectively.

In operational terms, Orascom saw subscriber growth at every one of its subsidiaries in the quarter, with the group’s total wireless customer base standing at 99.079 million at end-June 2010. Mobilink, Orascom’s Pakistani unit, remains its largest by subscribers, with the subsidiary adding just over 630,000 customers in the three months to 30 June 2010 to bring its total to 32.302 million.

In its home country meanwhile MobiNil, which accounts for the second largest number of Orascom’s total customers, reported 26.147 million subscribers at the end of the first half of 2010, up just 0.1% y-o-y, with the slowing growth attributed to new regulations and the shortage of new numbers.

Orascom Renews Lebanon Contract with Government

Orascom Telecom Holding (OTH) has extended its management agreement with the Lebanese government to mange one of the country's two state-owned mobile networks. The extension is for a period of 6 months ending on 31 July 2010.

Under this contract, OTH receives a monthly sum of US$2.5 million in addition to 8.5% of total revenues. Out of these amounts Orascom Telecom Holding is liable to cover all the operational expenses (OPEX) of the network and is entitled to keep the remainder as management fees. The Republic of Lebanon is fully responsible for the CAPEX during the contract period.

The mobile network assets of Alfa were transferred to the Republic of Lebanon with effect on August 31, 2002 following the termination of the build, operate and transfer contract under which Alfa was constructed.

"We're happy with the achievements made in the Lebanese mobile market through our management of Alfa during the past year, and are hoping to secure a presence for OTH within the long term plans of the Republic of Lebanon for its mobile communication market" said Khaled Bichara, Orascom Telecom's CEO.

Orascom, Zain Win Lebanon Bids

Orascom Telecom and Zain have won the contracts to operate Lebanon's two mobile networks. Contracts to operate the MTC Touch and Alfa mobile networks had expired last month. Orascom said the new contract will run for one year, with an option for another year. The company has agreed to increase Alfa's subscriber base from around 600,000 currently to 1 million by the end of 2009.

Zain also confirmed it will manage the MTC Touch network for another year, from 1 February, and target another 400,000 customers on top of the existing 800,000. The Lebanese government has agreed to finance the capital expenditure for expanding the networks and will pay the two operators management fees based on operating costs per subscriber.

Lebanon has some 1.1 million mobile phone users out of a population of 4 million. The new operators are expected to increase the network coverage and bring prices down. The new contracts are a stop-gap measure until long-delayed privatization of the mobile firms takes place. The privatisation has been put on hold because of global market conditions.