Monday, April 13, 2009

Arbitration court orders Egypt's Orascom Telecom to sell MobiNil stake to France Telecom

TAREK EL-TABLAWY | AP Business Writer | April 6, 2009

The chief executive of Orascom Telecom said Monday he expects France Telecom to launch a tender offer for Mobinil, Egypt's top mobile phone service provider.

Naguid Sawiris' comments came a day after the Paris-based Arbitration Court of the International Chamber of Commerce sided with France Telecom in a 2007 dispute in which Orascom wanted FT to transfer its majority shares of Mobinil Telecom. That company holds a 51 percent stake in the Egyptian Company for Mobile Service, which operates Mobinil in Egypt.

France Telecom and Orascom, however, had issued conflicting statements on the ruling. FT, which holds 71.25 percent of Mobinil Telecom — said the decision meant Orascom must sell its 28.75 percent stake, but would retain its 20 percent direct equity interest in ECMS itself. Orascom said France Telecom will have to launch a tender offer as a result of the acquisition of Orascom's stake in Mobinil.

"There is no discrepancy," Sawiris told The Associated Press late Monday. "From our point of view, and we are backed on this point by three legal opinions ... there must be a mandatory tender offer."

"It's not a voluntary tender offer, and it has to be on the same price that is granted to us (by the ruling)," Sawiris said. "France Telecom has to abide by Egyptian laws, and in the case that they want to execute the arbitration ruling, they need to launch a tender offer for 100 percent of the company."

FT, in a statement released Sunday, said the deal would bring in about euro530 million ($717 million) based on a per share price of 441.66 Egyptian pounds ($78.53).

But Orascom said the deal was valued at $1.7 billion — or 273.26 Egyptian pounds ($48.59) per share — implying that FT had to also purchase OT's direct equity stake in ECMS. Mobinil's share price at the closing of Sunday's market was 150.03 Egyptian pounds ($26.84).

Earlier Monday, analysts had speculated that the differing takes on the ruling could force France Telecom to launch a takeover bid for Mobinil.

The discrepancy on what the ruling requires "might trigger France Telecom to place a tender offer of 100 percent of Mobinil shares on the (Egyptian) stock exchange," said Sally Gerges, a telecom analyst with Cairo-based investment bank Beltone Financial.

"We have no doubts that this should be the outcome because that's what our (Capital Markets Authority) law is," said Sawiris.

The deal is seen as a boon for Orascom, whose net debt stood at $5.08 billion by December 2008, with a net debt to earnings before interest, tax, depreciation and amortization of 2.1 times. In a research note, Beltone said the deal "would be positive for shareholders of Orascom Telecom, since it would boost the company's overall cash position and enhance its capability to distribute cash dividends, as well as improve its net debt position."

Sawiris said it was an opportunity for the Egyptian company, which also has operations in Algeria, Pakistan, Bangladesh, Tunisia, Zimbabwe and North Korea, to strengthen its balance sheet and expand.

Asked what it meant for the company, Sawiris summed it up succinctly, saying: "It means a check for $1.7 billion and we are out of ECMS."

It's "an emotional loss and a financial gain," he said of the possibility of the company shedding the brand that it pioneered in Egypt at the infancy of the cell phone boon in the Arab world's largest nation.

"I'm sure that when we see the $1.7 billion check, I will forget my grief," he said. The funds, he added, would make Orascom Telecom "one of the cash richest telecos in the region on their balance sheet, and (it) will have very strong new firepower to conduct major acquisitions."

He said the firm was eyeing a deal in Morocco and two others in Asia, but declined to provide details.

Mobinil represented 19 percent of Orascom Telecom's total GSM revenues, which were about $4.8 billion dollars as of December 2008.

FT's revenues in 2008 were euro53.49 billion.