VimpelCom investors cautious of Sawiris deal
Shareholders in VimpelCom have cast uncertainty on its $6.6bn deal to buy most of the telecoms assets of Naguib Sawiris, the Egyptian entrepreneur.
According to Russia’s Alfa Group, VimpelCom’s largest investor, it had not decided whether it wanted to proceed with the deal if the Algiers government carried out its threat to nationalize Sawiris’ Algerian mobile business.
Telenor, VimpelCom’s second-largest shareholder, signaled that it was concerned that the deal could provoke regulatory objections in Bangladesh and Pakistan, where both the Norwegian telecoms group and Sawiris have mobile businesses.
Alfa and Telenor settled to team their assets in VimpelCom, and last week it planned to combine with Weather Investments, Sawiris’ private investment company. Weather owns Wind, Italy’s third-largest mobile operator, and has a 51.7% stake in Orascom Telecom, the Cairo-listed telecoms group.
According to Algerian government statements earlier this week, it was planning to hire banks to advice on the nationalization of Djezzy, Orascom’s Algerian business.
According to Mikhail Fridman, Alfa’s chairman, VimpelCom had not yet decided whether it was interested in the Weather deal if Djezzy was nationalized.
Telenor’s concerns with the Weather deal centre on the fact that it already has mobile businesses in Bangladesh and Pakistan.
As per Telenor, it was important there were no regulatory objections to the Weather deal in those countries where the Norwegian group already owned telecoms assets. If regulators did object in a particular country, the Weather deal could fall through. Alternatively, VimpelCom could opt not to buy assets in countries where Telenor was already present.
VimpelCom to focus on cutting debt
As per VimpleCom’s Chief Executive, VimpelCom’s immediate priority will cut its large debt load rather than to increase its dividend, following a deal that could make it the world’s fifth-largest mobile phone operator.
According to reports citing, Alexander Izosimov , VimpelCom’s dividend was likely to be flat over the next two years but held out the prospect of the pay-out rising from 2013.
Last week, VimpelCom outlined plans to buy most of the telecoms assets of Naguib Sawiris, the Egyptian entrepreneur, in a US$6.6 billion deal, excluding debt. VimpelCom is planning to combine with Sawiris’s private investment company, Weather Investments, which owns Wind, Italy’s third-largest mobile operator, and 51.7% of Orascom Telecom, the Cairo-listed telecoms group.
Credit rating agencies responded to the deal by saying they might downgrade VimpelCom’s main operating subsidiary.
VimpelCom group’s net debt is expected to rise from $4bn to $24 billion following the Weather deal, which is due to close in February.
Wind has net debt of $11.2 billion and Orascom has net debt of $4.2 billion, and VimpelCom expects to raise up to $2.5 billion in new debt to help finance the Weather transaction. VimpelCom may borrow another $2 billion this year, partly to cover capital expenditure.
According to UBS analysts, the group’s net debt is set to be 2.5 times its EBITDA following the transaction, which is high by sector standards. The 2.5 multiple compares with 2.1 for European telecoms companies and 0.7 for mobile operators in emerging markets.
According to Mr Izosimov, it was probably a fair assessment to conclude that VimpelCom’s short-term priority would be to reduce its debt. VimpelCom’s dividend would rise in the medium term because the group should be able to tap Wind’s cash once debt has been paid down.
Djezzy would contribute 10% of VimpelCom’s earnings but the Algerian government is considering nationalizing the business. Without Djezzy, VimpelCom would have 159 million customers, making it the world’s sixth-largest operator.
Algerian government strengthens efforts to nationalize Djezzy
The Algerian government has increased efforts to nationalize the country’s largest mobile phone operator Djezzy, controlled by the Egyptian entrepreneur, Naguib Sawiris.
Algiers’ move to employ financial advisers for Djezzy’s nationalization is a hinder for Russia’s second-largest mobile operator, VimpelCom, which had announced plans to buy most of Sawiris’ telecoms assets, including the Algerian business.
VimpelCom is trying to convince the Algerian government to drop its interest in taking ownership of Djezzy, which is part of Orascom Telecom.
But according to the finance ministry advertisement in a newspaper, it wanted to select a partner to assist the Algerian state in the process of acquiring the Orascom Telecom Algeria Company. It set a deadline of November 24 for banks’ proposals.
On Friday, Alexander Izosimov, VimpelCom’s chief executive, cautioned that the company could sue the Algerian government if it made an unfavorable offer for Djezzy.
According to Alexander Izosimov, VimpelCom’s chief executive, a fair price for Djezzy was US$7.8 billion. The Nomura analysts value Djezzy at US$4.5 billion, while Algerian media have quoted government sources as suggesting a price of US$2 billion to US$3 billion for the mobile operator.
VimpelCom desires to avoid an argument with the Algerian government, and according to Izosimov, legal action would be the last resort. He expressed optimism that an amicable solution could be found.
VimpelCom would rather own Djezzy, but one probable compromise could be for the Algerian government to take a controlling stake in the mobile operator. VimpelCom would in that case manage Djezzy and be a minority shareholder.
According to sources, if Algeria remains determined to nationalize Djezzy, the Weather deal could be completed in the first quarter of next year without any clarity on the mobile operator’s future. If Algiers makes acceptable cash offer for Djezzy, VimpelCom could use the proceeds to reduce its debt load. VimpelCom’s net debt is due to increase from US$4 billion to US$24 billion, partly because it is assuming US$14.1 billion of Weather debt.
According to other sources, if the Algerian government makes an unacceptable offer for Djezzy, VimpelCom would likely seek compensation before an international arbitration tribunal.
VimpelCom threatens to file a suit against Algeria
Russian operator VimpelCom is warning it could sue the Algiers government if it seeks to nationalize Algeria’s leading mobile phone operator.
According to Alexander Izosimov, VimpelCom chief executive, they could resort to legal action should Algiers offer an unfavorable price for Djezzy, the country’s largest mobile operator.
VimpelCom has announced plans to protect a controlling stake in Orascom Telecom, the Cairo-listed telecoms group whose most valuable asset is Djezzy.
But the Algerian government immediately responded by saying it wanted to own Djezzy.
On Wednesday, Dmitry Medvedev, Russia’s president, held talks with Abdelaziz Bouteflika, his Algerian counterpart, to try to smooth the way for VimpelCom to own and run Djezzy.
According to Mr Izosimov, who accompanied Mr Medvedev on the Algiers trip, the Algerian government as the position looks now seemed more interested in buying Djezzy.
While Mr Izosimov claimed that VimpelCom’s preference was to own Djezzy, the Russian group was happy to sell it so long as there was a fair price tag of US$7.8 billion.
Mr Izosimov further claimed that VimpelCom would not hesitate to take legal action if the government makes moves or extracts the asset nationalizes and so on they will try and defend the rights. Legal action was a worst-case scenario, and expressed optimism that either the Algerian government would pay a fair price for Djezzy or allows VimpelCom to own and run the mobile operator. One possible compromise option might be for VimpelCom to run Djezzy, with the Algerian government taking a stake in the mobile operator.
VimpelCom had also announced its plans to combine with Weather Investments, the private investment company of Naguib Sawiris, the Egyptian entrepreneur, in a US$6.6 billionn deal that is due to close early next year.
Weather owns Wind, Italy’s third largest mobile operator, and also has a 51.7% stake in Orascom.
Djezzy would contribute 10% of the enlarged VimpelCom group’s EBITDA.
But Mr Izosimov claimed that if the Algerian government insisted on buying Djezzy, it would not kill the proposed deal between VimpelCom and Weather. There are many attractive assets that the company is acquiring. Algeria is just one of them. The benefits for Algeria of letting VimpelCom develop the country’s telecoms infrastructure by investing in Djezzy.
Algerian govt planning to nationalize Orascom Telecom’s Djezzy
If reports are to be believed, Algeria’s government plans to nationalize Orascom Telecom Algeria, or Djezzy. Any change in Orascom Telecoms ownership will not affect commitments already taken to transfer Orascom Telecom Algeria to the Algerian state.
VimpelCom has agreed to merge with Egyptian billionaire Naguib Sawiris’s well indebted telecom assets in US$6.5 billion stock-and-cash deal, changing two regional emerging market companies into one on the global scale. Orascom Telecom Holding SAE is currently the leading mobile operator in the Arab world.
One main barrier is the Algerian unit which has received bills for back tax of US$230 million for the years 2008 and 2009. Orascom has a 90% holding in Djezzy, which has the largest share of the Algerian market and is Orascom’s single biggest revenue source.
Russian President Dmitry Medvedev and VimpelCom executives will be going to Algeria for an investment conference, and the company is expected to repeat that foreign direct investment which is in the interest of Algerian officials.
According to a research note by Beltone Financial, the Algerian government will not allow this deal to proceed till the time it obtains a share of the financial benefit, potentially through acquiring at least a 49% stake in Djezzy as well as the assigning of a capital gains tax on the proceeds from the sale of the remaining stake in Djezzy.
Orascom Telecom faces a new Tax Bill from Algeria
Egypt’s Orascom Telecom has received a new tax bill from the Algerian government – this time for US$230 million. The Reassessment is considered as an initial notification. Orascom Telecom Algeria (OTA) has 40 days to respond to the preliminary notification before receiving the final reassessment. This Reassessment comes despite the fact that OTA had already paid the taxes due for the same years.
According to Orascom Telecom it would take all necessary legal steps to challenge the new assessment, which covers 2008-2009. The reassessment was based primarily on the allegation that the Algeria unit did not keep proper accounts for the two years.
Orascom had ineffectively confronted a previous US$600 million back-tax bill for 2004-2007. The tax issue came to existence after the World Cup qualifier match between Egypt and Algeria turned violent last year.
Sawiris Confirms talks with Vimplecom: Weather Investment
If reports are to be believed, Naguib Sawiris, chairman of Orascom Telecom said his holding company Weather Investments was talking to telecoms group Vimpelcom about a merger and was open to talks with others. This was the first time Sawiris has confirmed the talks after reports about the merger came.
According to Sawiris, the company is not only talking to them, but is talking to anybody. We have two things on our agenda right now – solving the Algerian issue and, second, finding a good partner for the group.
An earlier attempt by Sawiris to sell assets to South Africa’s MTN broke down after Algerian government refused to let Orascom pass on its unit Djezzy.
Djezzy, Orascom’s main revenue earner, was the deal’s crown jewel, and brokers and bankers worry intervention from the Algerian government could overshadow another deal attempt.
Orascom terminates asset sale talks in Algeria with MTN
www.WirelessFederation.com/news: The talks between Orascom Telecom and MTN regarding the sale of some or all of Orascom assets have been ended after the talks failed to yield the desired results. According to the Orascom, it informed the MTN Group on June 9 of its decision to terminate discussions.
The talk between the two African mobile operators began in late April but it was opposed by Algeria’s government, which wanted to buy Orascom’s unit in that country for itself.
For the fourth time in three years, MTN has come up short in attempting to expand beyond its key markets of South Africa, Nigeria and Iran. MTN has also informed its shareholders about the termination of the talk.
Algeria to begin talks with Orascom over Djezzy
www.WirelessFederation.com/news: Algerian government is ready to start discussions regarding Orascom Telecom’s possible sale of its Djezzy unit. Algerian government has issued a letter to Orascom indicating its willingness to begin negotiations with regards to buying the company’s Algerian unit. Orascom Telecom is the largest Arab mobile company by subscribers and Djezzy is 90%-owned by Orascom Telecom directly or through subsidiaries.
In November, Algerian authorities slapped Orascom Telecom with a $600 million tax claim and penalties for fiscal years 2004 to 2007, even though Orascom’s operation was tax-exempt until mid-2007.
The government will also assign representatives on its behalf to negotiate with the company’s (Orascom) representatives. MTN Group, Africa’s largest mobile operator and Orascom Telecom have been in discussion with each other since late April regarding the possible acquisition of certain assets of the Egyptian company’s businesses.
The deal that would see MTN acquire Djezzy has been opposed by the Algerian government and has warned that any transaction could lead to the withdrawal of the business’s telephone license. Largest share of the Algerian market has been occupied by Djezzy and the single biggest source of revenue for Orascom, but at the same time it is also the most troubled unit of the telco. Income from Djezzy amounted to about $1.9 billion in 2009 for Orascom.
The key question which is making the rounds is will Orascom Telecom get a fair price as it still not known whether the parties will appoint an independent party to value the company.
Orascom Telecom’s time in Algeria has been plagued by problems. The violence that erupted after a football World Cup qualifying match between the two Arab countries last November, strained the relation between Algeria and Egypt. A crowd of Algerian football supporters attacked the headquarters of Djezzy, smashing windows and destroying office equipment after the match.
MTN, Orascom deny to comment on takeover bid (Namibia)
www.WirelessFederation.com/news: Both Orascom and MTN are tight lipped about the possible takeover bid of Orascom, the parent company of Leo – Namibia’s second largest telecommunications operator by MTN. The silence is amidst visible signs and media speculation surrounding the takeover bid.
Stanley Similo, spokesperson of Leo denied commenting on the future of the company saying that he was not in a position to comment on the on-going talks between MTN and Orascom’s parent company, Weather Investments S.P.A, which may or may not lead to a transaction.
In a statement by the company, it has been cleared that Orascom is aware that its parent company, Weather Investments S.P.A, is in discussions with MTN Group which may or may not lead to a transaction relating to the acquisition of control of Orascom and/or its businesses by MTN.
Analysts believe MTN is likely to buy Orascom’s Algerian operation, Djezzy and four of its sub-Saharan businesses. Officials at MTN have suggested the shareholders to exercise caution in trading their MTN securities until a further announcement is made concerning a possible deal. MTN which already has a presence in Namibia through its Internet services business is providing both corporate firms and small businesses with Internet solutions after acquiring Verizon SA, which in turn wholly owned Verizon Namibia last year.
According to Johnny Aucamp, general manager of strategic relations and business development, Africa at MTN Business, Namibia is a viable market as there is a considerable demand by organizations for superior service offerings and a competent telecommunications partner.
