ALGIERS: Algeria said on Monday it was seeking investment banks and consultancies to advise on a nationalisation of Djezzy, the local unit of Egyptian group Orascom Telecom and its biggest source of revenue.
Russian mobile phone operator Vimpelcom had hoped to acquire Djezzy as part of a $6.6 billion deal to gain control over Orascom Telecom assets, but Algeria’s announcement suggested that possibility was receding.
A notice in Algeria’s official El Moudjahid newspaper said the ministry of finance wanted "to select a partner to assist the Algerian state in the process of acquiring the ‘Orascom Telecom Algeria’ company". It said the deadline for bids was Nov. 24 and the winner would be announced the same day.
A deal between Vimpelcom and Orascom Telecom chairman Naguib Sawiris would create the world’s fifth biggest mobile phone operator, but analysts have said uncertainty over Djezzy could scupper the deal.
"Interviewing potential advisers makes a compromise (with Vimpelcom) less likely," said Dalibor Vavruska, emerging market telecoms analyst at ING. "If the Russians (do not get Djezzy) they should really rethink their position towards the entire deal."
A spokeswoman at Orascom Telecom’s headquarters in Cairo declined to comment on Algeria tendering for advisors.
If Algeria proceeds with the nationalization then the only remaining outcome for Vimpelcom — provided its deal to acquire Orascom Telecom assets does not collapse — would be to take whatever money Algeria’s government agrees to pay for Djezzy.
However, there is likely to be a gap between what Algeria considers a fair price for the unit and the parent company’s expectations.
Algerian industry and government sources have said they believe a price for Djezzy of between $2 billion and $3 billion would be fair.
Vimpelcom CEO Alexander Izosimov has said he expected Djezzy to be worth seven times its earnings before interest, taxation, depreciation and amortization — which would value the unit at about $7 billion.
Since the end of last year Djezzy has been the subject of a bitter dispute with the Algerian authorities, during which it has been hit with millions of dollars in back taxes, barred from moving cash overseas and investigated over currency violations.
Earlier this year, Algeria vetoed the sale of Djezzy to South African telecoms firm MTN and said it was exercising its right to buy the unit for itself.
Algeria still considers Orascom Telecom as Djezzy’s owner and will not negotiate its future with Vimpelcom, an Algerian newspaper quoted an unnamed government source as saying last week.
The deadline for the Algerian government to select advisers on the nationalization indicated that there was unlikely to be clarity on Djezzy’s future for some months, but analysts said that time-frame was expected.
"We were always looking at around year-end anyways," said Mike Millar, head of research at Naeem Brokerage in Cairo. "But it is still possible that they could cook something before year-end." –Additional reporting by Victoria Howley in London and Dina Zayed in Cairo
