Leo’s Orascom talks to Russia’s Vimpelcom

MOSCOW/LONDON – Mobile phone operator Vimpelcom was expected to unveil a deal to buy control of Egypt’s Orascom Telecom, sole shareholder of Leo in Namibia, and Italy’s Wind yesterday in what could create the world’s fifth-largest mobile operator.

Trading in shares of Orascom was suspended yesterday after speculation of the tie-up drove Orascom’s shares up 4,8 per cent on Sunday, and traders said they expected more gains.
Vimpelcom and Egyptian businessman Naguib Sawiris are poised to combine their telecoms assets in a deal potentially worth US$6,5 billion, sources familiar with the matter have told Reuters, although the deal could yet fall apart.
The main uncertainty surrounding the purchase regards Orascom’s Algerian unit Djezzy, which the Algerian state is trying to nationalise having hit it with hundreds of millions of dollars in back-tax claims.
‘We continue to see the complexity of the deal as an obstacle to its completion. It is not clear to us why Algeria would halt the process of buying out Orascom Telecom Algeria,’ Credit Suisse analyst Richard Barker wrote in a note.
Vimpelcom’s chief executive Alexander Izosimov told Reuters last month that now was a good time for the emerging markets specialist to expand into developed markets – which could include Italy – to target data services growth.
He added the entire telecoms sector was undervalued, making acquisitions ‘more relevant than ever’.
The main motivation for Sawiris in making a sale is seen as lightening his holding company’s debt burden, as well as becoming a player in one of the world’s five biggest telecoms firms – a goal he has talked about since 2006.
The Algerian government last year blocked a plan to sell Djezzy to South Africa’s MTN.
However, analysts say Russian President Dmitry Medvedev’s visit to Algeria on October 6 could help resolve the issue, reassuring Vimpelcom’s investors who fear the lucrative asset – Orascom’s single biggest source of revenue – will not be stripped out from the firm after a deal is done.
‘President Medvedev’s visit to Algeria could be an opportunity to smooth some hurdles to a deal and we cannot rule out that an announcement may come this week,’ Credit Suisse’s Barker said.
Vimpelcom, jointly owned by Russia’s Alfa Group and Norway’s Telenor, could pay with cash and 20 per cent of its shares to Sawiris’s Weather Investment company, according to sources familiar with the matter.
Telenor’s shares were down 2,4 per cent at 90,50 Norwegian crowns yesterday on concerns that a Vimpelcom purchase of the Sawiris assets will weaken dividend payouts. – Nampa-Reuters