CAIRO: France Telecom has prevailed in an arbitration dispute with Egyptian telecom giant Orascom Telecom in a ruling that could force the Paris-based firm to launch a takeover bid of Egypt s top mobile phone service provider, analysts said Monday.
Orascom Telecom and France Telecom said late Sunday that the Arbitration Court of the International Chamber of Commerce ruled in favor of the Paris-based firm in a 2007 dispute in which Orascom wanted France Telecom to transfer its majority shares of the Egyptian phone service provider Mobinil.
The dispute, which neither company detailed, arose from a 2001 agreement focusing on their stakes in the joint venture Mobinil Telecommunications, which in turn holds a 51 percent stake of Mobinil itself.
France Telecom and Orascom, however, issued conflicting statements on the ruling.
FT – which holds a 71.25 percent of Mobinil Telecom – said the decision meant Orascom must sell its 28.75 percent stake, but would retain its direct equity interest in Mobinil itself.
FT said the deal would bring in about ?530 million ($717 million) based on a per share price of LE 441.66 ($78.53).
But Orascom said the deal was valued at $1.7 billion – or LE 273.26 per share ($48.59) – implying that FT had to also purchase OT s direct equity stake. Mobinil s share price at the closing of Sunday s market was LE 150.03 ($26.84).
The discrepancy on what the ruling requires might trigger France Telecom to place a tender offer of 100 percent of Mobinil shares on the (Egyptian) stock exchange, said Sally Gerges, a telecom analyst with Cairo-based investment bank Beltone Financial.
Orascom said the proceeds would be used to enhance and support its future expansion plans. The company already has operations in a number of other countries, including Algeria, Pakistan, Bangladesh, Tunisia, Zimbabwe and North Korea, but those divisions are not affected by the ruling.
The deal would be positive for shareholders of Orascom Telecom, since it would boost the company s overall cash position and enhance its capability to distribute cash dividends, as well as improve its net debt position, Beltone said in a research note.
It said the company s net debt stood at $5.08 billion by December 2008, with a net debt to earnings before interest, tax, depreciation and amortization of 2.1 times.
The main drawback, however, is that if Orascom is forced, or has to comply with the ruling, from an operational point of view it would lose the Egyptian market; a promising market in which it has been positioned as the number one player, and which has been performing strongly, Gerges said.
EFG Hermes, another leading Mideast investment bank, said in a research note Thursday that Orascom management believes that FT management, as per (the Egyptian Capital Markets Authority) rules, will have to launch a tender offer to buy all Mobinil shares, including those of the minorities at the same price of LE 273.26 per share.
Mobinil represented 19 percent of OT s total GSM revenues, which were about $4.8 billion dollars as of December 2008.
FT said in a statement that the ruling gives it full control over the leading mobile operator in Egypt, and would be able to consolidate ECMS s entire financial results into its books, giving it an additional revenue of over ?360 million ($487 million) and ?165 million of earnings before interest, tax, depreciation and amortization. FT s revenues in 2008 were ?53.49 billion.
