CAIRO: MTN Group Ltd., Africa's largest cellphone network operator, was unable to tie the knot with Egypt's Orascom Telecom in buying its Algerian assets. MTN issued a statement saying discussions with Orascom's parent company, Weather Investments SpA, had been terminated. Nozipho January-Bardill, MTN's executive for corporate affairs, said the breakdown related to the regulatory challenges posed by a potential deal. Mr. Mabbut said that, for Orascom, the critical issue now is whether it can sell its Djezzy unit to the Algerian government and at what price. The failure to communicate would have extended the Johannesburg-based company's reach in the growing African market is another blow for Phuthuma Nhleko, MTN's chief executive, who was also unable to conclude a tie-up with operators in India in three previous attempts. In April the company had confirmed the talks aimed at buying control of Orascom or some of its businesses, although people familiar with the matter were skeptical. They said a deal was unlikely due to the complexity of assets held in a number of different countries. Algeria's government said it would block any attempt by MTN to buy Orascom's local Djezzy unit, which has the largest share of the Algerian market and is also Orascom's single biggest source of revenue. Orascom Chairman Naguib Sawiris needs to sell some of the company's assets to raise cash, and to settle problems with the Algerian government. In November, Algerian authorities whacked Orascom with a $600 million tax claim and penalties for fiscal years 2004-2007, even though the company's operation was tax-exempt until mid-2007. Algeria has also halted dividend repatriation from Djezzy. Orascom last week said Algeria's government was ready to begin discussions regarding a possible deal for Djezzy. Orascom in a separate brief statement confirmed talks between parent Weather Investments and MTN had failed. Africa is one of the last regions for cellphone subscriber growth. A full takeover of Cairo-based Orascom would have added subscribers in Algeria, Pakistan, Egypt, Tunisia, Bangladesh and North Korea as well as operations in Burundi, the Central African Republic, Namibia and Zimbabwe through subsidiary Telecel Globe. Orascom has a market capitalization of about $5.4 billion. MTN, which has a $24.1 billion market value, had 123.58 million subscribers by the end of March across operations in 21 African and Middle Eastern countries. Mr. Nhleko, who plans to step down as MTN's CEO by March, has greatly expanded the company since he took over in 2002. Earlier this year, he said a further 20 million customers would be added before the end of the year. His largest deal to date was the $5.5 billion acquisition in 2006 of holding company Investcom LLC, which brought with it operations in 10 countries. However, shareholder disputes and government concerns thwarted Mr. Nhleko's attempts in the last two years to conclude merger agreements with Indian cellphone operators Bharti Airtel Ltd. and Reliance Communications Ltd. The board of Reliance Communications on Sunday approved in principle the sale of up to a 26 percent stake in the company to strategic or private-equity investors to raise funds to reduce about $6.2 billion in debt. Last fall, Egypt and Algeria broke off diplomatic relations for a short time after fights broke out in both countries between their citizens over a World Cup qualifying match that saw Algeria advance to next month's finals. Algeria's minister for communications technology, Hamid Bessalah, complained in early May about the “audacity” of holding talks with MTN, arguing that Orascom was required under Algerian law to “notify the country's regulators.” Medelci said that turning the page on the MTN-Djezzy scenario “does not signify that South African companies, and in particular MTN, won't have the possibility of working in Algeria.” BM
