CAIRO: Orascom Telecom and France Telecom on Sunday disclosed further details of their Mobinil ownership pact following a request for clarity from Egypt's market regulator. On April 14, the two firms announced a broad deal to end an acrimonious dispute over Mobinil that had dragged through international arbitration and Egyptian courts. Under the deal, the French firm agreed to pay Orascom a $300 million settlement fee. In a joint statement on Sunday, the firms said the fee takes into account accounting changes that will increase the portion of Mobinil's earnings before interest, taxation, depreciation and amortization (EBITDA) recorded on France Telecom's books. The agreement changes the way both firms account for Mobinil in their financial statements: after the signing, France Telecom will fully consolidate while Orascom will use the equity method. Both had previously used proportional consolidation. France Telecom owns 71.25 percent of a holding company that has 51 percent of the Egyptian Company for Mobile Services (ECMS), known by its Mobinil brand name. Orascom owns the remainder of the holding company plus a 20 percent direct stake. The rest of the stock is freely traded. The firms also said the price of a put option available to Orascom was calculated via a weighted average market price and did not constitute either firm's long-term valuation of Mobinil. The put option replaces an earlier framework that allowed for either firm to buy out the other's stake via a bidding process. The Egyptian Financial Supervisory Authority asked last Monday for more detail on how the firms calculated the settlement fee and the put option price, and on how the deal will affect management structure and earnings accounting. It gave the firms a week to respond, and also sought the views of minority shareholders. The firms' joint statement said ownership of Mobinil's trademark, a cause of dispute between the co-owners, would be regularized in the best interest of ECMS and its shareholders, but it did not give further details. Each firm will continue to receive 0.75 percent of Mobinil's revenue as a management fee. The put option, to sell to France Telecom only, is valid from Sept. 15 to Nov. 15 in both 2012 and 2013 and will increase in value from LE 221.70 ($40) at the signing to LE 248.50 at end-2013 for ECMS shares. An Egyptian court in April upheld a block on France Telecom buying out ECMS shares at LE 245 each, an offer minorities were expected to accept, traders said in January. The companies announced a truce less than a week later. Under the terms of this truce, neither company will transfer shares to the other unless the put option is exercised, and Orascom will not seek to increase its direct stake.
