CAIRO: Orascom Telecom (OT) has filed an appeal with Algerian tax authorities for the $596 million allegedly owed by its Algerian subsidiary, Orascom Telecom Algeria or “Djezzy .
Algeria claims that during the 2005-2007 period, the mobile operator failed to keep correct tax records and must now pay back taxes; OT denies the claim, stating that it was exempt from taxes during the period in question.
As of September, Djezzy had a market share of 63.7 percent, or the equivalent of 17.4 million subscribers, according to the Orascom Telecom website. Reuters quoted revenues falling 7 percent to $1.4 billion in the past nine months.
Orascom Telecom’s share price, as traded on the Egyptian Stock Exchange, is down almost 6 percent, from LE 25.02 per share to LE 23.57. Although falling now in the face of uncertainty at the fate of the telecom giant, shares in Orascom Telecom Holding SAE had reached record highs at its announcement in mid-December to raise $800 million in a rights offer. Although officially intended to “strengthen its balance sheet , the funds will cover the nearly $600 million dept to Algeria should the appeal be denied.
The 21 percent surge, pushing stock prices to LE 32.58, was the largest intra-day gain since October 2003, as recorded by Bloomberg. Bloomberg reported that “the issue could total LE 5 billion ($914 million), with each share holder offered new shares for every existing stock at LE 1 each, equal to the nominal value of an ordinary share in the company.
Previously, the Algerian tax regulator had laid claim to $50 million in taxes owed by Djezzy from 2004, which OT is also contending.
Speculations have arisen over the timing of the current round of allegations, coming closely on the heels of the high-tension football match between Egypt and Algeria, when the countries competed to qualify for the 2010 World Cup.
Rasha Ezz Eldin Mohamed, a public relations representative for OT, emphatically stated that the tax claim bears no relation to nationalist hostilities. She stated that the fact that changes in Algerian tax laws happened to coincide with the timing of the match is purely coincidental.
“The tax claim has no relation to the match, she said in exasperation.
In addition, OT is currently locked in another high profile legal dispute with France Telecom (FT) over the share price of Egyptian mobile operator Mobinil, of which FT is attempting to gain majority shares.
Responding to questions about Orascom Telecom’s three-way dispute between FT and now the Egyptian Financial Services Authority (EFSA), Mohamed said that OT has, “submitted an appeal to the EFSA . they will meet as a committee on Thursday Dec. 31 to discuss Orascom’s position.
OT had appealed the decision by the EFSA to authorize FT’s offer to purchase majority shares of OT at LE 245 ($45.40) per share.
Orascom Telecom, the largest mobile phone operator in the Middle East and Egypt’s first multinational company, has had a larger than usual share of the recent spotlight; in both the dispute with France Telecom and that with Algeria’s tax authority, the company has come to symbolize Egypt and Egyptian interests, at least in popular opinion.
After Algeria secured the World Cup slot, animosity between the two countries has led to vandalism and intimidation of both Egypt’s Algerian and Algeria’s Egyptian communities, invoking statements by public figures, including President Hosni Mubarak’s son, Alaa, who condemned the North African country.
Orascom Telecom currently operates mobile services in seven countries across the Middle East and Asia and in Europe under its parent company Weather Investments, which holds Wind Telecommunications.