CAIRO: Orascom Telecom (OT) has agreed to pay $3 million in back taxes by the end of 2010 to Burundian authorities out of a total of $8 million in back taxes it currently owes for its local unit Telecel Global, according to an SIS report published Sunday. OT's tax arrears for Telecel Global date back to both 2008 and 2009. The news follows a Financial Times report last week which indicated that VimpelCom's investors may be “weary” over a deal with OT parent company Weather Investments that is estimated to be worth $6.6 billion. According to the report, the Telenor firm — which has the second largest amount of VimpelCom's voting shares at 36 percent — believes that the firm may be paying an excessive amount for Weather Investments' assets. Moreover, Telenor, a Norwegian operator, is “concerned” that the deal may result in regulatory objections in both Bangladesh and Pakistan — two countries where Norweigan and Russian operators are quite active in the mobile telephone market, the report stated. VimpelCom's board is preparing to meet in Amsterdam on Dec. 21 to approve the Weather Investments deal. Amr Elalfy, the director of research at the leading Cairo-based investment firm CI Capital, stated that it is likely an agreement over the deal will eventually be reached given the number of months that negotiations have been taking place. “If VimpelCom wanted to turn down the deal, they would have backed out long ago,” Elalfy stated. “Why would [VimpelCom] wait this long [just to reject the deal]?” VimpelCom first announced its intentions of striking a deal with Weather Investments last August. In Elalfy's view, two scenarios are likely. Either the deal will go through as originally planned, or Djezzy, OT's unit in Algeria, must be removed from the bargaining table. According to Elalfy, either of these outcomes is “equally possible.” Djezzy has been a thorn in OT's side during the negotiations process with VimpelCom, as the Algerian government has demanded OT to pay $230 million in back taxes before completing any dealings with other companies. Beltone Financial, an investment bank in Cairo, wrote in a note that “it is still unclear how the … complications in Algeria [will] impact the inclusion of Djezzy in the OT-Vimpelcom deal, and the fate of this deal as a whole.” The note added that “Weather Investments' significant debt is another concern for VimpelCom's shareholders. This might prompt [the shareholders] to decide not to proceed with the deal.” Should the deal be unsuccessful — which would be Weather Investments' second major merger and acquisition flop — Beltone believes that it is “an alarming fact, meaning that the group will not be able to close any deals unless it reaches a resolution with the Algerian government.” In regards to OT's Telecel Global unit, which operates in Burundi and three other countries, Elafly noted that Telecel Global's Burundian activities only represent 2 percent of OT's valuation and is thus an issue of “little concern.” Furthermore, Elalfy stated that Burundi only represents 25 percent of Telecel Global's operations, which demonstrates the relatively small degree to which the issue will likely impact Telecel Globals' multinational conglomerate parent company, OT.
