Orascom Telecom drops case against France Telecom

Theodore May
4 Min Read

CAIRO: The legal battle between Orascom Telecom (OT) and France Telecom (FT) had dozens of twists and turns that had investors and analysts alike scratching their heads over the past several months.

But now it’s finished.

Egypt’s telecom giant OT announced this week that it would drop charges in its ongoing dispute with France Telecom (FT) over ownership of leading Egyptian mobile operator Mobinil.

OT had filed in an Egyptian court to protest the terms under which FT sought to acquire Mobinil. Since dropping the charges, OT issued a statement saying that its legal pursuits “are no longer necessary in light of recent public pronouncements by FT, which make it clear… FT has no intention of extending a public tender offer on the same terms as those contained in the award.

The dispute arose over a court order demanding that OT sell its 28.75 percent stake in Mobinil Telecom, which is the holding company for Mobinil.

OT said that it had dropped the case because FT was no longer positioned to buy the Mobinil shares under the terms determined by the courts.

The terms of the sale were the largest point of contention between the two sides with OT demanding that FT pay a price per share that far exceeded the price on the market.

Analysts initially saw OT’s possible sale of Mobinil as a mixed blessing. They said that the sale would bring a tremendous cash boon to OT and that the success of the sale would be determined by how OT used the cash.

Losing Mobinil would mean that OT would have to part with one of its largest and most stable sources of income.

Despite mixed reactions from analysts, investors swooned over the possible sale and over OT’s protestations against the terms. They sent OT stocks significantly higher in the early days of the conflict.

As the battle wore on the outcome remained uncertain, investors backed off, and analysts reaffirmed their wait-and-see attitude towards OT.

Mobinil stocks trailed off slightly by the end of June.

So for now, at least, it looks as thought OT and FT, which has been bruised in the dispute, will have to continue to govern Mobinil together.

OT said that dropping charges against FT was an “amicable gesture, though there is concern that acrimony between the two parties could increase the challenge of running Mobinil.

OT also recently concluded another legal challenge, this one in Chad, over a 2004 ruling by the Chadian government that canceled the purchase by OT of 51 percent of TchadMobile. OT was awarded $4.9 million at the end of June.

OT’s various legal episodes come at a time in which it has struggled to find new markets into which it can expand. These efforts to grow are largely part of an effort to expand its revenue base and diversify given that some of its operations, like those in Pakistan, are viewed as risky given political instability.

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