France Telecom SA will seek Egyptian regulators' approval to buy out the remaining publicly traded shares in its local wireless venture with billionaire Naguib Sawiris in a 1.5-billion-euro ($2 billion) transaction.
France’s biggest phone company agreed on the final terms of the deal with Egyptian partner Orascom Telecom Media & Technology Holding SAE, including a 202.5 Egyptian pound-a-share ($33.56) offer to acquire Cairo-listed Egyptian Company for Mobile Services, the companies said today. They reached an initial pact in February on Mobinil, as the operator is known.
Mobinil rose 1.7 percent to 179.97 Egyptian pounds at the 2:30 p.m close in Cairo after surging 9.6 percent yesterday. Orascom jumped 6.7 percent to 1.43 pounds. Mobinil has risen 130 percent so far this year. France Telecom dropped as much as 2.9 percent to 10.23 euros in Paris today.
France Telecom is refocusing its business on fast-growing emerging markets as mobile revenue in Europe stalls. Egypt, the Arab world’s most populous with more than 80 million inhabitants, is among the largest developing economies in which France Telecom has a presence, and represents a key part of its Middle Eastern strategy, which includes operations in Jordan, Tunisia, and Bahrain.
“To further enhance ECMS’s integration in the Egyptian economy, France Telecom intends to ensure that, if the conditions allow it, up to 15 percent of ECMS’s shares are held by Egyptian shareholders, whether these are private or public companies, or individual shareholders,” France Telecom Chief Executive Officer Stephane Richard said in the statement.
Depending on the results of the tender offer, France Telecom’s ownership of Mobinil will be in a range of 66 percent to 95 percent. Orascom Telecom will own 5 percent, though it will indirectly hold voting rights of about 30 percent.
France Telecom has three options to keep 15 percent of the company in Egyptian hands, said Amr Elalfy, director and co-head of research at Cairo-based investment bank CI Capital, who predicts the deal will go through.
“They can buy all the shares and sell them back at the market, which is unlikely because they can lose money, or raise capital without subscribing to it,” he said. “The third option is to agree with an Egyptian partner to take this stake.”
A France Telecom spokesman said it was too early to say which options the company would pursue.
The deal may provide support for Egypt’s foreign-currency reserves, which tumbled more than 50 percent since last year’s uprising to $15.1 billion in March. Egypt’s economic growth slowed to 0.4 percent in the final quarter of 2011 from 5.6 percent a year earlier and the budget deficit is likely to be near 10 percent for a second year, according to government forecasts.