Orascom Telecom eyes Telekom Austria, Egypt indexes slip

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CAIRO: Egyptian telecoms operator Orascom is looking at buying Telekom Austria and has been in touch with the company and the Austrian government, its main shareholder, a newspaper reported on Monday.

Austrian daily Kurier said the deal could be structured as a merger of Orascom and Telekom Austria under which Austria s government holding company OeIAG would keep a stake in the merged company.

The report said Orascom was looking at working with private equity group Weather Investments for financing.

Weather Investments spokesman Stefano Songini said he could not comment on whether talks about Telekom Austria had taken place. He told Reuters that in general Weather Investments had been talking a number of large telecom operators.

OeIAG owns 28 percent of Telekom Austria on behalf of the government and would need approval for a sale of the stake.

Shares in Telekom Austria AG surrendered an early gain on Tuesday as investors proved reluctant to buy into the acquisition report. Telekom Austria shares were trading up 0.9 percent at ?15.19 by 0946, after rising as much as 4 percent earlier in the session.

Orascom Telecom fell 0.8 percent to LE 46.96, a two-year low in intra-session trade as investors punish the telecom operator after downgrades from a number of investment houses following weaker-than-expected results.

It s a continuation of a downtrend, says Teymour El-Derini, a trader from Beltone Financial. The telecom sector as a whole is not very attractive globally.

Goldman Sachs downgraded OT to neutral from buy on Sept. 5, and UBS lower its price target for the London-listed shares to $57 from $65 last month.

Telekom Austria, which owns several mobile operators in eastern Europe in addition to its domestic fixed line and mobile franchise, has been the subject of takeover speculation for years after a deal with Swisscom AG failed in 2004.

Its availability for sale crucially depends on the Austrian government s stance on privatization. The outgoing left-right coalition government did not agree on a further sale of its stake, but new elections on Sept. 28 could bring into power a more privatization-happy administration.

Credit Suisse analyst Justin Funnell said in a note that even with a new privatization mandate in place, it would be difficult for OeIAG to sell to Orascom, even though the Egyptian company has affiliates in Italy and Greece.

Whether Orascom would be in front of the queue to buy Telekom Austria is unclear, he said. Politics will be an important factor in a sale … and selling to a more established European name might be less controversial with voters.

Austria reported a slip of 26 percent in its second quarter profits recording ?96.3 million, down from ?130.6 million in the same comparable period last year.

Orascom owns telecom operators in Africa and the Mediterranean, including Italy and Greece, and is seeking further expansion opportunities.

Telekom Austria Chief Executive Boris Nemsic said in an interview last month he was open but neutral on possible strategic partnerships with other telecoms operators.

In other news, OT bought back 587,530 of its own global depositary receipts (GDRs) last month, the company said. The company, the biggest Arab mobile phone operator by subscribers, said in a statement seen on Tuesday that it had bought the GDRs between Aug. 13 and 18 and would consider further buybacks in the future.

The GDRs were equivalent to 2,937,650 local shares, OT said.

Egypt s two main stock indexes ended lower on Tuesday as Orascom Telecom extended losses after the downgrade and investors took profits from real estate firm Talaat Moustafa, traders said.

Since the release of [OT’s] financials … it has been declining, said Wafik Dawood, a senior account executive at Naeem Brokerage. We are not seeing any purchasing power or liquidity injected in the stock.

The shares traded as low as LE 46.55 ($8.60) and closed at LE 46.86, just above a two-year closing low of LE 46.51 set on Sunday.

The benchmark CASE 30 index lost 0.93 percent to close at 8,401.79 points. The Hermes index dipped 0.16 percent to 732.62 points, while the broader CIBC index rose 1.54 percent to 422.55 points.

Talaat Moustafa Group was another main mover, with large trading volumes pushing the stock down 7 percent as investors took profits, traders said.

Shares in the firm have ridden a rollercoaster in the last week, falling sharply after the arrest of the company s former chairman in connection to a murder case, then rising steadily for four straight days until Monday. -Reuters

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By Reuters
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