OT gives France Tel Wednesday deadline for Mobinil deal

Theodore May
5 Min Read

CAIRO: Orascom Telecom (OT) Chairman Naguib Sawiris reiterated yesterday that Wednesday April 15 would be the final day for France Telecom (FT) to buy out OT’s shares in mobile phone company Mobinil.

This announcement comes as the wrangling between the two companies in the wake of an arbitration court’s decision floods into its second week. Still, the defiant tone struck by the OT chief was a clear signal that the company doesn’t plan to roll over in the face of an unfavorable court ruling. “If they continue ignoring our laws, Sawiris said of FT, “and the fake laws they are bringing, they will not execute. The dispute dates back to 2001, when OT and France Telecom entered into an agreement governing their respective shares in Mobinil. OT argues that FT must purchase the share’s direct equity stake in Mobinil in addition to its 28.75 percent share in the company, putting the price for the rest of its shares at LE 273.26 per share. France Telecom argues that’s not the case, saying any tender offer for the remainder of Mobinil would be voluntary. Further complicating the matter is the fact that OT has a 51 percent stake in the holding company. This has all led the two sides to haggle over the court’s ruling and what stock it means OT must cede. Now that the conflict has lingered in the international arbitration court for some time, the end appears to be in sight. France Telecom was expected to pay for the shares by an April 10 deadline, but that day came and went on disagreements over the price per share. OT officials said that France Telecom never paid, while the French company argued that Orascom refused to release the shares that give it a minority holding in the company. Even though both sides decided to give a little more time to negotiate a settlement, Sawiris made it clear today that the Wednesday deadline was absolute. “It’s done. We won’t accept it, he told Reuters, addressing speculation that the deadline may be further pushed back. Mobinil makes up more than 19 percent of OT’s annual revenue. This is largely because the company has extended its reach, doing business in countries including Algeria, Tunisia, and Pakistan. Despite the hit that Orascom’s bottom line might take in the sale of its Mobinil, the stock has made strong gains over the past week on investors’ appetite for the cash inflow that the sale might mean. “We believe that the sale of Mobinil, in return for a cash consideration of $1.7 billion, would be positive for shareholders of Orascom Telecom, since it would boost the company’s overall cash position and enhance its capability to distribute cash dividends, as well as improve its net debt position, which stood at $5,084 million (LE 28,117 million), said Reham ElDesoki of investment bank Beltone Financial in a note to investors. Shares of OT are up almost 35 percent since the arbitration court passed down its ruling. The dispute reached a new level of volume over the weekend as FT executives claimed that Orascom should be paying $50,000 in fees per day since April 10 as a penalty for missing the court-ordered deadline to sell its Mobinil stake. But however things turn out, some analysts view OT’s position as a particularly strong one despite losing the court ruling. “We believe that OT is, either way, in a win-win situation; if it sells Mobinil (ECMS), it would receive a considerable cash injection, over and above the $1.0 billion that it is aiming to increase in its free cash flow by this year, and if it does retain its stake in Mobinil (ECMS), it would maintain its operations in Egypt, which is one of its strongest markets, said ElDesoki in a statement. OT does, however, have to walk a thin line. It’s bolstered investor confidence and seen its stock price rise dramatically. Any missteps over a deal that has serious implications towards its revenue stream could send investors fleeing.

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