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Tunisia: Orascom negotiating with MTN. Can it really sell its shares in Tunisiana?

MTN group, Africa’s largest cellular services provider, was in negotiations to buy all or part of Cairo-based competitor Orascom Telecom Holdings, the company said .

The talks with Orascom parent Weather Investments might lead to the purchase of the Egyptian company or “certain of its businesses”, MTN said.

In a separate statement, Orascom confirmed that negotiations were taking place.

MTN wants to add new markets to its 21 businesses across the Middle East and Africa as some of the world’s largest operators, including Vodafone, seek expansion in Africa to counter slowing revenue growth in Europe.

Orascom is under pressure to cut debt, according to analysts, including African Alliance’s Randolph Oosthuizen.
Orascom was in advanced talks to sell assets worth $10 billion  to MTN and was seeking to resolve regulatory obstacles that might scuttle a deal, three people familiar with the situation said yesterday. Regulators in Africa and the Middle East are complicating negotiations, according to the people, who declined to be identified.

MTN had “been looking for an opportunity for a while now, and there is not a lot of geographic overlap, which is good”, Mohamed Loonat, an investor with Element Investment Managers holding MTN shares, said yesterday. “But for me, it will always depend on the price they are going to pay.”
MTN lost 2.5 percent to R109.50 in Johannesburg at the close of trade yesterday, while Orascom declined 1.85 percent to 7.42 Egyptian pounds (R9.82) in Cairo.

Orascom was talking about alternative deals with a European phone company with a presence in emerging markets and with a regional operator, a person familiar with the company said yesterday, declining to elaborate.

Emirates Telecommunications, also known as Etisalat and the largest phone company in the United Arab Emirates, was considering purchases in six countries, including Algeria, chairman Mohammed Omran said on February 22. On April 8, France Telecom chief executive Stephane Richard said the company might invest as much as e7 billion (R69bn) in deals in the Middle East and Africa in the next five years.

Vodafone spokesman Simon Gordon and France Telecom spokesman Tom Wright declined to comment yesterday.
Orascom operates in Tunisia through Tunisiana, North Korea, Bangladesh, Pakistan, Egypt, Algeria, Tunisia, the Central African Republic, Burundi, Namibia and Zimbabwe.

So far, only the Algerian government Algeria has reacted to these statements, not yet confirmed or denied by the potential dealer which is the SawirIss group that holds indeed , 50% of Tunisiana shares along with Qatar’s Qtel Group.

At first, it must be reminded that the license had been granted by the Tunisian authorities to Egyptian Orascom group. It had to require the Tunisians go ahead to sell 50% of the assets to   the Kuwaiti Watanya and a second time for Kuwaiti shares buying out by the Qatari Qtel. 

 The question therefore arises whether Orascom, if the deal with MTN would be finalized, may transfer Tunisiana which is operated under a license granted by the Tunisian authorities to the Egyptian operator.

Any change in the capital Tunisiana, which is a company set under Tunisian law, requires the approval  of the Tunisian higher Commission of investment .

A first opportunity was provided for changing Tunisiana capital structure, through the hypothetical listing in stock market, and the Tunisian government has not agreed and would not even have received a formal request in this respect from  Orascom.
Similarly to Algerians, the license agreement between Orascom and Tunisia had  certainly  provided for such cases, and we do not think it can provide for less than  withdrawal of the license or  exercise of preemption right  on all or part of the capital of Tunisiana.

So there is no rhyme nor reason for l this media hype, both over the listing of Tunisiana in Stock Exchange and the possible and unlikely buy out of  Orascom  shares in Tunisiana by the South Africa’s MTN, which had already tendered unsuccessfully to enter the capital  of Tunisie Telecom, having  made  the lowest financial proposal?

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