Orascom Telecom's (OT) chairman said late Wednesday that South Africa's MTN had offered $7.8 billion for Orascom's lucrative Algerian unit before Algeria's government scuppered the deal. The Djezzy unit was a key part in a broader deal that could have made MTN the world's third-biggest mobile operator. Below are some questions and answers about the state of Orascom's negotiations to sell and what the talks could yield:
Where do Orascom's talks with MTN stand? Algeria stymied talks to sell Orascom assets to MTN in April when it said a law enacted in 2009 gave it the right to buy Djezzy - the deal's crown jewel - before any foreign buyer. The Egyptian firm, yielding to weeks of pressure from Algerian authorities, said last week it would enter talks to sell the unit to the state. No date seems to have been fixed. Without Djezzy, Algeria's mobile market leader by number of subscribers, analysts say it is far more likely MTN would walk away from any possible purchase of Orascom assets. Talks with MTN have continued, but Orascom Executive Chairman Naguib Sawiris has said they were not yet settled.
How much could Orascom get for Djezzy now? Djezzy has been Orascom's main revenue earner, netting $1.9 billion last year. Sawiris has said he would have preferred not to sell Djezzy, suggesting he does not want to sell it cheaply. Still, the $7.8 billion price tag Sawiris put on MTN's offer for the operator comes above the high end of what analysts estimated Djezzy was worth. Analysts see a fair value for the company between $5.5 billion and $7 billion. It is difficult to predict what Algeria will offer. Analyst guesses have ranged from $500 million to $7 billion. Analysts say Sawiris may have made the MTN offer public to deter Algeria from making offers near the low end of the range but say it is far from clear whether Algeria will pay heed.
What could happen to Orascom's other assets? Even with Djezzy out of the picture, Orascom could still sell MTN other assets including a collection of African operations such as its Telecel Globe-branded sub-Saharan units and its 50 per cent stake in a Tunisian operator. Speculation that such a sale would go through helped spark a 12 per cent rise in Orascom's share price on Sunday. One scenario suggested by analysts could see MTN buy some of Orascom's African and other assets, while the Algerian government buys Djezzy. Algiers could then sell a stake - but not a controlling interest - in Djezzy to MTN or another firm. Any deal would likely exclude Orascom's stake in Mobinil, which has the biggest share of subscribers in Sawiris's home market, Egypt. Orascom also has operations in Pakistan, Bangladesh and North Korea. It also has an indirect stake in a wireless carrier in Canada and a management contract with an operator in Lebanon.
What's next for Sawiris and Orascom? An injection of cash into Orascom from the sale of Djezzy or other assets could give it ammunition for other acquisitions. Sawiris stepped down as Orascom chief executive last year, saying he wanted to focus on strategy during consolidation in the global telecoms market in the coming years. There are many possibilities. Sawiris has telecom assets on four continents and has entered tough markets such as Iraq and North Korea. But much of the speculation has focused on Europe. Sawiris's investment vehicle Weather Investments, Orascom's parent, also owns Italy's No. 3 mobile phone operator Wind Telecomunicazioni and Greece's Wind Hellas. Italy's Wind said last month it was open to acquisitions in the the Italian telecoms market and would be interested in BT's business if it were put up for sale. Orascom's name has also surfaced as a possible bidder on stake sales in Poland's Polkomtel and Serbia's Telekom Srbija. Talks to sell Orascom assets have centered mostly on its African units, suggesting Sawiris may be less inclined to expand on that continent in the near future. But Sawiris has said he was interested in entering the Syrian market, which he previously exited.
