Thursday, May 28, 2009

Egypt rejects France Telecom bid for Mobinil

By Alastair Sharp and Cyril Altmeyer

PARIS/CAIRO, May 27 (Reuters) - Egypt's market regulator has rejected France Telecom's (FT) bid for outstanding shares in mobile phone firm Mobinil, over which FT and the other main shareholder Orascom Telecom (OT) are in dispute.

The head of international activities at France Telecom told Reuters on Wednesday that his group planned to appeal the ruling in Egypt in the coming days.

Jean-Yves Larrouturou also told Reuters in a phone interview that France Telecom, which was not considering changing its offer, wanted to continue discussions with the Egyptian government, with which it had "excellent" relations.

But France Telecom might consider reducing its investments in Egypt if it discovered that the country had strayed outside international law, he added.

"If we were to find out that the situation is outside international law, we could ... consider reducing the scope of our investments in Egypt," he said.

Mobinil, Egypt's largest mobile phone operator by subscribers, is the focus of a shareholder dispute between Cairo-based Orascom Telecom and France Telecom.

The Egyptian Company for Mobile Services (ECMS), a mobile phone operator known by its trade name Mobinil, is 51 percent owned by a holding company in which France Telecom has a 71.25 percent stake and OT has 28.75 percent.

In addition, OT has a 20 percent direct stake in ECMS.
That structure gives OT an overall stake of about 35 percent and FT about 36 percent, analysts say. The remaining 29 percent of the group is traded on the Egyptian stock exchange.
OT and FT have been at loggerheads over the price the French firm should pay for the outstanding shares since an arbitration court ruled on April 5 that FT should buy OT's stake in the holding company at a price equivalent to 273.26 Egyptian pounds ($48.62) per share.
OT and the regulator both said this decision obliged FT to offer for the entire company at a similar price. FT has said any offer would be voluntary.
Egypt's Capital Markets Authority, which rejected as too low an earlier FT bid for the minority stake, said on Wednesday it "had rejected the obligatory purchase offer as it violated the principle of giving equal opportunity" to all shareholders.
The CMA did not give the offer price, but FT said on May 20 its offer stood at about 1.5 billion euros ($2.1 billion), equating to about 239 pounds a share based on Reuters data.
FT sees emerging markets as key to its growth as revenues stagnate in mature markets including France and Britain. The firm hopes to raise its stake in Senegal's state telecom company and has expressed interest in a third mobile license in Tunisia.
Rival Vivendi is strong in the North African region, with a majority stake in Morocco's main operator.
Mobinil shares, which had been suspended since May 19 pending the CMA ruling, fell as low as 183 pounds in intraday trade and ended 4.78 percent lower at 190 pounds.
In its ruling the CMA disputed the ownership of assets FT claimed made its stake more valuable, cited disputes over the distribution of retained earnings and trademarks, and did not accept an FT claim that management fees paid to the holding company increased its value because these fees had not been disclosed to shareholders.
"(The rejection) is going to put some negative sentiment on the whole market. I don't know how long it will last. It could be short term. I don't think it will last too long," said Hashem Ghoneim, vice chairman of Pyramids Capital.
OT shares, also suspended since May 19, shed 5.49 percent to end at 33.75 pounds.
Orascom posted a 66 percent drop in net income after the close of trade on Tuesday, sharply lower than two analysts had forecast.

(Reporting by Alastair Sharp and Cyril Altmeyer; Additional reporting by Edmund Blair in Cairo and Cyril Altmeyer in Paris, editing by Will Waterman, Erica Billingham and Richard Chang)

($1 = 5.6226 Egyptian pounds) Keywords: MOBINIL/REGULATOR (alastair.sharp@reuters.com; Cairo newsroom +20 2 2578 3290)