UPDATE 2-Orascom Tel shares slump on new Algeria conditions

* Algeria says won’t pay for unit until liabilities settled

* Row over Algeria unit jeopardising deal with Vimpelcom

* Orascom Telecom shares reach lowest level in 19 months

(Recasts, adds Orascom share price, analyst)

Hamid Ould Ahmed

ALGIERS, Oct 31 (BestGrowthStock) – Algeria on Sunday told Orascom
Telecom (ORTE.CA: ) it must fulfil 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 nationalisation
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.
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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
nationalisation of Djezzy and that it recognised 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 nationalise 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)

UPDATE 2-Orascom Tel shares slump on new Algeria conditions