Egypt’s Orascom Telecom could secure US$6-7 billion if it chooses to sell its Algerian unit Djezzy, but might have to accept much less if forced out by the government, analysts say.
A senior Algerian government official on Tuesday told Reuters that Algiers wanted the regional operator to leave, further evidence of Algeria’s move to protect local industry to the detriment of international investors.
While cautious on whether the latest comments reflect concrete policy, analysts say they point up the deteriorating ties between the government and Djezzy, which has the largest share of the Algerian market and is Orascom’s single biggest revenue source.
Orascom’s shares were down 7.3 percent in Cairo, weighing on the main Egyptian index which was off 1.26 percent at 1312 GMT.
Should Orascom quit Algeria, a big oil and gas exporter, it is likely to find plenty of Algerian and regional interest in Djezzy, though this could depend on the manner of any departure.
"We do not believe that the Algerian government could forcibly evict Orascom Telecom from Algeria," Delta Rasmala analyst Shrouk Diab said. "However it can effectively create an extremely hostile and difficult business environment."
Cairo-based investment bank Beltone Financial said it values Djezzy at US $6.7 billion, or 51 percent of its valuation for all of Orascom, but expressed concern that government interference may force a sale at a lower price or to a preferred bidder.
Algeria has deterred some foreign investors in recent years with bureaucratic delay, ownership limits, import restrictions and tax demands.
Orascom is currently appealing against a US$597 million tax bill Algeria says Djezzy owes and is in the process of raising $800 million via a rights issue to cover any cash shortfall.
If it sells, analysts see Orascom left with a hole in its revenue and a pile of cash it will find difficult to spend.
"From a longer-term operational perspective, we view very scarce acquisition opportunities for (Orascom) in the current global telecommunications market," Beltone said.
Orascom’s rivals in Algeria, Nedjma and Mobilis, are seen as potential buyers of Djezzy if the government shows a heavy hand, while cash-rich regional firms are expected to show an interest depending on how risky they see the Algerian investment climate.
State-owned Mobilis has 11 percent of the market and Nedjma, majority held by Kuwait’s Wataniya, has 26 percent.
Kuwait’s Zain is in line to receive US$10.7 billion from India’s Bharti Airtel for the sale of its African assets, excluding the firm’s Moroccan operations.
As well as operating in Egypt, Abu Dhabi-listed Etisalat works in several African states via its Atlantique Telecom unit, Beltone Financial noted.
Vivendi, named last year as a potential suitor, said on Wednesday it was not interested. A France Telecom spokeswoman had no comment.
"Algeria is not really a growth story from the point of an acquirer, in my opinion," said Delilah Heakal, a Cairo-based analyst at Pharos Securities.
"But at the same time, it is a relatively high margin market and it complements any company’s strategic footprint in the region," she added.
