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’.

Algeria Hires Experts to Value Djezzy

­The Algerian government will be hiring international consultancy firms to put a valuation on Orascom Telecom's local subsidiary, Djezzy and expect the process to be completed by the end of this year.

Orascom Telecom has previously indicated that it puts a valuation of $7.8 billion on the company, although analysts doubt the government would offer more than US$5 billion.

"We have a ministerial committee. We have also an Algerian consultancy firm working with foreign consultancy firms to determine the financial value of Djezzy," Telecommunications Minister Moussa Benhammadi told the Reuters news agency.

Finance Minister Karim Djoudi, also present at Thursday's session of parliament , said on the latest developments over Djezzy: "We are still ready to buy it. We have started the evaluation to prepare for the acquisition talks."

The future of the Algerian network has been under discussion for several months, with the Algerian government unwilling to let Orascom sell the company, while also suggesting that it wants to buy the firm itself.

Algerian State TV Stops Airing Djezzy Ads Over Orascom Dispute

­The dispute between Orascom Telecom and the Algerian government appears to have escalated after the country's state-owned television channels all stopped running adverts for the OTH's local mobile network, Djezzy.

Algerian state television, which controls all the country's terrestrial stations, refused to renew an annual advertising contract with Djezzy, an unnamed source with direct knowledge of the situation told Reuters.

"They (state television) are no longer agreeing to run Djezzy's ads," said the source, who did not want to be identified because of the sensitivity of the issue.

The timing is interesting as the Muslim holy month of Ramadan is typically one of the strongest selling periods for companies operating in the country.

Adverts are continuing to be run on radio and in newspapers, while satellite television networks that operate overseas but are watched in Algeria are also running adverts.

Following a long running tax dispute, Orascom recently confirmed that the Algerian government was in talks to buy Djezzy. A clamp down on advertising could push down subscriber growth, and hence the price that the government would have to pay to buy the company.

Orascom Confirms Talks With Vimpelcom Are On

Orascom Telecom's Executive Chairman Naguib Sawiris has confirmed previous press reports that his holding company Weather Investments is in talks with Russia’s Vimpelcom over possible merger plans involving assets including Weather’s controlling stakes in the Egypt-based Orascom group and Italy’s Wind. Whilst talking to press on a visit to Orascom’s Canadian subsidiary Globalive Wireless (Wind Mobile), the Egyptian entrepreneur also confirmed that he was open to discussions with any potential strategic international partner for Weather/Orascom, Canadian paper the Global & Mail reported. Sawiris said: ‘We are not only talking to [Vimpelcom], we are talking to anybody ... We have two things on our agenda right now – solving the Algerian issue [where the local government wants to block attempts to sell Orascom’s mobile unit Djezzy] and, second, finding a good partner for the group.’ He also declared it was possible that Wind Mobile could eventually acquire other Canadian cellular start-ups such as Mobilicity and Public Mobile.

Wataniya Q3 Profits Down 69%

Wataniya, Kuwait's second largest mobile phone operator by subscribers has reported a 69% drop in net profit for the three months ending 30 June 2010.

The company made a net profit of KWD19.6 million (USD68.32 million) during Q2 2010, down from KWD63.5 million one year earlier. Net profit in 1H10 was reported at KWD35.8 million, down from KWD78.8 million in the first half of 2009.

Wataniya, itself a unit of Qatar Telecom (Qtel, which will publish its Q2 results on Sunday), operates in markets including Algeria, Tunisia, Saudi Arabia and the Maldives.

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.

Algeria To Auction 4G Licence

Algeria’s government has announced that it plans to hold a 4G licence tender next year, reports daily newspaper El Khabar.

There are currently three cellcos in operation in the North African nation – state-owned Algerie Telecom Mobile (Mobilis), Egyptian-owned Orascom Telecom Algeria (Djezzy GSM) and Wataniya Telecom Algeria (Nedjima), a subsidiary of Qatar’s Qtel.

Djezzy Clears Outstanding Taxes

Orascom Telecom’s Algerian unit, which offers GSM mobile services under the Djezzy GSM banner, has paid USD113 million to the country’s tax authority, Reuters reports. It is understood that Orascom has claimed that payment represents the last of the principal that the Algerian authorities had claimed the Egyptian parent owed in back taxes for the 2005-07 period. In addition, Orascom has claimed that a further USD25 penalty has been suspended pending a final court ruling. The latest payment by the Egyptian telecoms group means that it has now paid approximately USD597 million in principal, plus a further USD45 million in penalties.

Orascom however has maintained that Djezzy was tax-exempt for the period in question, and has argued that the tax bill is based on unfounded allegations of improper account keeping for the two-year period. It has said that it may yet still recover the full amount if its appeal against the bill is successful.

Algeria Denies It's Trying to Force Orascom Out

The Algerian government has denied that it is trying to force Egypt's Orascom Telecom Holding to leave the country and says the ongoing dispute with the company is solely over taxes. The company has been disputing a US$597 million tax demand that the government imposed on its local mobile network, Djezzy. The dispute covers the the tax years 2005, 2006 and 2007.

"All the government wants is that the company pays the taxes due," Finance Minister Karim Djoudi told reporters in Algiers. "We are not pressurizing Orascom to leave the country. They are willing to pay."

Relations between Algeria and Egypt have also been strained following football violence following a football match last November.

The finance minister's comments are "positive," Sally Gerges, a telecommunications analyst at Beltone Financial, a Cairo-based investment bank, told Bloomberg News. "It removes some uncertainty regarding the future of this operation and specifically regarding the reassessed taxes."

Pending appeal, Orascom Telecom is not required to pay the full amount of the tax demand. In order to file its appeal, however, Algerian law required the company to pay 20% of the taxes and penalties alleged to be owing, approximately US$120 million. The amount paid will be recoverable if the appeal is successful.

The parent company also has US$257 million of dividends from the Algerian subsidiary frozen until the tax dispute is resolved.

Qtel Abandons Africa Plans, Eyes More Middle East Investments

The CEO of Qatar Telecom (Qtel), Nasser Marafih, says the company is looking into increasing its investments in the Iraqi and Algerian telecoms markets because of the potential for expansion in the two countries, according to a report in The Peninsula.

Qtel controls 36.2% of mobile operator Wataniya Telecom Algeria (Nedjma), via a 71% stake held by Kuwaiti-based Wataniya Telecom (NMTC), a 51%-owned subsidiary of Qtel. The Qatari mobile, fixed line and broadband group also holds 30% of the consortium-controlled cellco Asiacell in Iraq. In Algeria, the second national operator (SNO) fixed line licence is currently vacant; in January 2010 previous SNO Lacom’s licence was officially revoked, potentially paving the way for the concession to be reauctioned later in the year.

Dr Marafih was quoted as saying that the global financial crisis had some positive impact on Qtel’s businesses in the sense that the lowering of licence fees worldwide to a ‘more realistic’ level meant it was cheaper to expand into new markets. The lower prices, the CEO continued, will create further opportunities for Qtel’s acquisitions in the future.

‘We now have control of 14 communication companies in 17 countries,’ he said, but added, however, that Qtel has abandoned any plans for expanding into African markets because of the high levels of competition. It is thought likely he was just referring to sub-Saharan countries; Qtel recently indicated interest in entering Morocco’s mobile sector.

Vivendi Eyes Orascom Algeria

French media conglomerate Vivendi is considering a move for Orascom Telecom's Algerian unit, Reuters reports, citing French daily La Tribune. A member of Vivendi's board of directors, Mehdi Dazi, was reportedly in Algiers last Saturday to meet with local businessmen, including Issad Rebrab, the head of local group Cevital, which holds a 3% stake in Orascom Telecom Algeria.

Vivendi had a USD10.5 billion bid for Zain Group's African assets turned down, but has continued to pursue acquisitions in emerging markets as it seeks to expand its mobile operations.

The company, which also owns operations in France, Morocco and Brazil, could unite with Cevital to launch a takeover of Orascom's local subsidiary which serves more than 14 million mobile telephone customers in Algeria and reported revenue of over USD2 billion last year.

Algerie Telecom Says There's No Need for Privatisation

Algerie Telecom CEO Moussa Benhamadi has announced in a national radio interview that the group had sufficient resources for its development and that it was no longer justified to open up its share capital.

In October last year the executive had said it was the government's decision to make, but that the group may be competitive regionally and internationally in two or three years. Algeria's government has been planning to partially privatise Algerie Telecom for four years. Benhamadi revealed yesterday that the operator would invest EUR 100 million by 2013 to expand the fibre-optic network and to make it accessible to most Algerians, notably in urban areas.

Algerie Telecom aims to have 6 million fixed network subscribers in 2013 and to increase the penetration rate of IPTV. It stood at 10.6 percent in 2008, compared to 5.02 percent in 2000. The operator generated a DZD 60 billion turnover in 2008, and invested DZD 80 billion between 2003-2008, a quarter of which went into upgrading the fixed network, said Benhamadi. He added that the group aimed to provide free local calls from 2013.