Neither France Telecom nor Orascom Telecom is willing to let go their hold of MobiNil telecommunications, Niveen Wahish reports In a surprise move this week the Egyptian Financial Supervisory Authority approved the tender offer represented by Orange Participations, a fully owned subsidiary of France Telecom (FT), to buy up to 100 per cent of the Egyptian Company for Mobile Services (ECMS). FT will be paying LE245 per share. The surprise emanates from the fact that EFSA had previously turned down three tender offers by FT since the beginning of the year. The whole issue dates back to earlier this year when in March following a ruling by the Court of Arbitration of the International Chamber of Commerce (ICC), Orascom Telecom (OT) was required to transfer all its shares in Mobinil Telecommunications (MT) to France Telecom (FT). MT owns 51 per cent of the Egyptian Company for Mobile Services (ECMS), the current provider of the mobile phone service offered under the brand name MobiNil. The court decision meant that OT had to sell its 28.75 per cent holding in MT to FT. This would have resulted in FT becoming the majority shareholder in ECMS. And according to Egyptian capital market laws, becoming the majority shareholder of ECMS meant that FT was obliged to make a tender offer for the remaining ECMS shares. These include 20 per cent owned by OT and 29 per cent in free float. EFSA's approval of the tender offer came as a shock to OT. In reaction OT said in a statement issued earlier this week that the EFSA decision "to approve the mandatory offer contradicts three previous decrees issued by the authority." In fact, EFSA had previously demanded that the tender price should not fall below the LE273 per share offered to OT for its shares in Mobinil Telecommunications. OT stated that EFSA had said "that having a different purchase price for shares in Mobinil Telecommunications and shares in the ECMS is unjustifiable." But what has made EFSA change their mind? The opposition Al-Dostour newspaper came out with a hypothesis that high level political pressure had been exerted on the Egyptian regulator. On Tuesday a Mubarak-Sarkozy summit took place in Paris. And last week France's Minister of Foreign Trade Anne-Maried Idrac was on a four-day official visit to Cairo. But Minister of Trade and Industry Rachid Mohamed Rachid denied any such political intervention. According to Bloomberg, "France Telecom's justification of the price rested on liquidity available at Mobinil Telecom and the evaluation of financial resources for Mobinil Telecom's shareholders as a result of management services for which Egyptian Co. is obliged to pay 1.5 per cent of its revenue." Hisham El-Alaily, France Telecom's vice-president for Africa, Asia and the Middle East told Al-Ahram Weekly in a telephone interview that through discussions between FT and EFSA the points of controversy were cleared and the tender offer was accepted. With the tender offer having now been accepted and becoming effective as of 15 December through 14 January 2010, it is not clear what should happen next. In a statement FT said that what had been stopping the execution of the arbitration ruling of ICC had been the acceptance of the tender offer by EFSA. "Today, this condition has been fulfilled," the statement said in reference to EFSA approval of the latest tender offer. That means that OT should be transferring its shares in Mobinil Telecommunications over to FT. However, in an answer to questions e-mailed by the Weekly OT said "the conditions for the sale to FT and its affiliates of the shares owned by OTH in MobiNil, in accordance with the terms of the award and within the period specified in the award, have not been fulfilled. Accordingly, any public tender offer by FT or its affiliates is independent of any sale of OTH's shares in Mobinil." OT also said that under the current circumstances, OT said it does not intend to sell its 20 per cent share in ECMS. On Tuesday OT submitted an appeal contesting the EFSA decision. OT told the Weekly they hope that this will lead to putting a hold on the tender offer. It is not yet clear when the appeal will be looked into but OT believes that the circumstances imply a fast track process. In the meantime, Naguib Sawiris was scheduled to meet yesterday with FT representatives to explore opportunities for an amicable solution. While FT welcomed the dialogue with OT, as El-Alaily said, they are not conceding their right to the implementation of the arbitration award, namely to have majority control over ECMS by acquiring 100 per cent of Mobinil Telecommunications. "Once we get control [of ECMS] we can discuss amicable solutions with OT," he said. He also stressed that FT was not intending to make a tender offer for the rest of ECMS shares but was obliged to do so to comply with Egyptian law in order to execute the arbitration award. Yet, he clarified that shareholders are not obligated to sell. El-Alaily said that the OT argument that the ICC award should have been implemented within 30 days is unfounded. In fact, an FT statement said "the arbitration ruling, which has not been subject to any appeal within the legal timeframe, is binding, as confirmed on 7 May by the District Court of Geneva, the headquarters of the Arbitration Court." And as proof of FT's good will, El-Alaily said that it does not have the intention to compel OT to pay the $50,000 per day that the ICC had stipulated as a fine were OT not to implement the arbitration ruling within 30 days of its day of issuance on 10 March. For further details see the Market Report below.