CAIRO: The Algerian government has been holding up talks between South African-based MTN Group and Orascom Telecom Holding SEA (OT), the Middle East’s biggest mobile phone company in terms of subscribers, for Djezzy, its unit in Algeria, in a deal worth $9 billion.
The deal would make MTN the world’s third largest mobile phone operator. But without striking an agreement, it would prevent it from realizing its drive for further expansion.
The conditions put forth by the Algerian government for the completion of the agreement have reportedly become an obstacle in its conclusion.
Telecommunications Minister Hamid Bessalah was quoted as saying,
“The schedule of conditions (of the operating license) provides that any change of ownership … must be done with the authorization of [state telecoms regulator] the ARPT and the authorities.”
It has even been reported that it may seek to purchase Djezzy itself. The government has cited a law passed last year, which gives state or state-owned companies right of refusal on a 51 percent stake in a sale, according to Reuters.
In such a scenario, MTN could take a 49 percent stake of Djezzy. This however would place the firm in a precarious situation vis-à-vis the government.
Teymour El-Dirini, head of Middle East and North African sales at Naeem brokerage firm, said that the danger for MTN in this situation is that, “even if it is able to acquire Djezzy from OT, it could find itself in the same situation that OT is now in,” with the Algerian government setting the terms of the agreement — or worse would it could appropriate the firm.
“This would be a terrible nightmare for MTN,” he added.
Moreover, should the government attempt to buy a significant part of Djezzy, “[its] valuation would decrease,” as the Algerian government would “squeeze the seller,” El-Dirini explained.
The Algerian government has urged OT to contact them; OT’s chairman has reportedly been seeking a meeting with the government, according to Reuters.
Regarding when an agreement would be finalized, “it is very difficult to say when the conclusion of the deal will take place,” a spokesperson from Orascom Telecom based in Cairo commented over the phone.
Confirming the current stand-off, El-Dirini explained that “it seems that no one knows when a deal can be expected, because of the Algerian government’s interference.”
The OT spokesperson was unable to comment on whether there had been any further developments in the current deadlock between the government and OT.
This deal represents a perfect opportunity for MTN, which is seeking a high-growth unit to add to its repertoire. Acquiring Djezzy is an ideal chance for MTN, “because there are few other growth services such as this one available in Africa” for MTN to capitalize on, commented El-Dirini.
“Notwithstanding, Djezzy being OT’s biggest profit creator in Africa, it has been seeking to off-load the unit because it has been unable to exploit its full potential,” he added.
If the deal goes through between Orascom and MTN, the former will find itself with a flush of cash that it can use to invest in other potentially more profitable projects, while MTN will enhance its current market position, especially in Northern Africa.
