MTN in Takeover Talks With Orascom Telecom’s Owners

MTN Group Ltd., Africa’s largest mobile-phone company, said it’s in negotiations to buy all or part of Cairo-based competitor Orascom Telecom Holdings SAE.

The talks with Orascom parent Weather Investments SpA may lead to the purchase of the Egyptian company or “certain of its businesses,” Johannesburg-based MTN said today in a statement. In a separate statement, Orascom confirmed that negotiations are 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 Plc, seek expansion in Africa to counter slowing revenue growth in Europe. Orascom is under pressure to cut debt, analysts including African Alliance’s Randolph Oosthuizen have said.

Orascom is in advanced talks to sell assets worth $10 billion to MTN and is seeking to resolve regulatory obstacles in Africa and the Middle East that may scuttle a deal, three people familiar with the situation said yesterday. Algerian Finance Minister Karim Djoudi said today he would object to a takeover of Orascom’s Algerian unit by MTN.

MTN has “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 in a phone interview today. “But for me, it will always depend on the price they are going to pay.”

MTN closed 2.5 percent lower at 106.78 rand in Johannesburg. Orascom rose 0.1 percent to 7.57 pounds in Cairo.

Alternative Deals

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

A sale of Orascom’s Algerian unit, which operates under the name Djezzy, would allow the company to exit the country after a tax dispute and damage to its infrastructure in November following riots after a soccer match between Algeria and Egypt. Algeria’s government ordered the unit last year to pay $596 million in back taxes, which Orascom said it would appeal.

MTN would need the approval of Algerian regulators for any transaction, Sean Gardiner, an analyst at Morgan Stanley in London, said yesterday via phone.

Algerian Opposition

“The law is clear: the Algerian government has the right to take 51 percent of shares if any transaction is done,” Algeria’s Djoudi said today.

Emirates Telecommunications Corp., the largest phone company in the United Arab Emirates, is considering purchases in six countries including Algeria, Chairman Mohammed Omran said in Abu Dhabi on Feb. 22. On April 8, France Telecom SA’s Chief Executive Officer Stephane Richard said the company may invest as much as 7 billion euros ($9.2 billion) 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 via phone today.

Orascom operates in North Korea, Bangladesh, Pakistan, Egypt, Algeria, Tunisia, the Central African Republic, Burundi, Namibia and Zimbabwe.

A simple acquisition by MTN of units owned by Orascom may have a better chance of success than a complex merger, such as a proposed deal with Bharti Airtel Ltd. that the South African company abandoned last year, Steve Minnaar, a fund manager with Cape Town-based Abax Investments Ltd., which manages the equivalent of $5.1 billion, including MTN stock, said April 23.

Failed Bharti Merger

MTN and India’s Bharti failed for the second time last year to conclude a $23 billion merger that would have created the world’s third-largest mobile-phone company by subscribers. The transaction would have been done in two steps, with Bharti getting a 49 percent stake in MTN in a cash and stock offer and MTN acquiring a 36 percent holding in the New Delhi operator.

MTN’s Chief Executive Officer Phuthuma Nhleko has said the Indian Basin, Middle East and Africa are areas the company will look for acquisitions. He said on March 1 that a transaction before he leaves in March 2011 “could happen.”

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