Orascom Tel shares slump on new Algeria conditions

Hamid Ould Ahmed

ALGIERS (BestGrowthStock) – Algeria on Sunday told Orascom Telecom (ORTE.CA: ) it must fulfill new conditions before it can settle a damaging row over its Algerian mobile phone unit, sending shares in the Egyptian firm to a 19-month low.

The latest Algerian demands are likely to create fresh doubts about the viability of a $6.6 billion deal for Russia’s Vimpelcom (VIP.N: ) to buy Orascom Telecom assets, creating the world’s fifth-biggest mobile telephone operator.

Orascom Telecom has agreed to talks on the nationalization of its Djezzy unit, an outcome that may be the group’s best hope of extricating itself from a once-lucrative relationship now marred by back-tax claims and mutual recriminations.

But Algerian Prime Minister Ahmed Ouyahia said on Sunday Algeria will not conclude a deal to buy Djezzy from Orascom until the company settles all its liabilities in Algeria — a process which could take many months and be very expensive.

Djezzy is Orascom Telecom’s biggest single source of revenue and some analysts have said Vimpelcom should walk away from its deal to buy Orascom assets unless uncertainty over Djezzy’s future is resolved soon.

On the Cairo stock exchange, Orascom Telecom’s share price declined 3.6 percent to 4.33 Egyptian pounds ($0.8 per share), its lowest since March 17, 2009.

“There is fear and uncertainty over OT (Orascom Telecom),” said Tarek Abaza, head of trading at Naeem Brokerage in Cairo.

“People don’t know what’s going to happen — how much the government will take (Djezzy) for. Some are saying $3 billion, some are saying $1.5 billion. People don’t know what’s going on,” Abaza said.

Company officials at Orascom Telecom’s headquarters in Cairo were not immediately available to comment.

LIABILITIES

Speaking in parliament, the Algerian prime minister confirmed that his government would go ahead with the nationalization of Djezzy and that it recognized only Orascom Telecom — and not Vimpelcom — as the owner.

He said experts were evaluating the value of the unit, after which talks would start on the sum Algeria will pay Orascom Telecom to nationalize Djezzy.

“The day we reach an agreement on the price, Orascom Telecom Holding will have to clear its (liabilities with the Algerian government) before we conclude the deal,” Ouyahia told lawmakers.

He said those liabilities included $230 million in back-taxes, plus penalties, $190 million in fines to the central bank for alleged currency violations, and a dispute with former employees who claim they are owed wages.

Both the back-taxes and the central bank fines had previously been reported but Algeria had not previously made them a condition of concluding a deal on Djezzy’s future.

Algerian Telecommunications Minister Moussa Benhamadi, speaking later to reporters in parliament, said that if there was no agreement on the price for Djezzy, the Algerian government would seek arbitration.

But he did not say if he meant international arbitration, a forum Orascom Telecom has said it may eventually turn to itself to settle its disputes with the government.

(Additional reporting by Lamine Chikhi in Algiers and Shaimaa Fayed and Alexander Dziadosz in Cairo; Writing by Christian Lowe; Editing by Michael Shields)

Orascom Tel shares slump on new Algeria conditions