MTN Said to Seek $5 Billion to Purchase Orascom Units
By Nicky Smith and Mahmoud Kassem
April 22 (Bloomberg) -- MTN Group Ltd., Africa’s largest mobile-phone operator, approached banks for $5 billion to help fund the acquisition of units from Egypt’s Orascom Telecom Holding SAE, three people with knowledge of the plan said.
The acquisitions may include Orascom’s operations in Egypt, Algeria, Zimbabwe and Tunisia and the total transaction may be valued at as much as $10 billion, two of the people said. The people didn’t want to be identified because the talks are private. Talks are still at an early stage and may not lead to a transaction, a fourth person familiar with the plan said. The list of countries isn’t final, a fifth person said.
“Orascom is heavily geared so it would make sense to sell off some assets,” said Randolph Oosthuizen, an analyst with Johannesburg-based African Alliance, who has a “buy” rating on MTN’s stock. “There is not much overlap between the portfolios and either African or Middle Eastern operations may fit quite nicely with MTN’s footprint.”
MTN and India’s Bharti Airtel Ltd. 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 in terms of subscribers. MTN wants to add new markets to its 21 businesses across the Middle East and Africa.
Shares Drop
MTN, based in Johannesburg, said in an e-mail that while it can’t comment on specific corporate activity, the company “continues to seek value-accretive expansion opportunities in emerging markets.” Manal Abdel- Hamid, Orascom’s Cairo-based spokeswoman, declined to comment.
MTN shares fell as much as 3.9 percent to 106.05 rand. The stock closed at 107.51 rand in Johannesburg, giving MTN a market value of 198 billion rand ($26 billion). Earlier, Orascom dropped 2.6 percent to 7.56 Egyptian pounds in Cairo.
Bharti on March 30 said it bid $9 billion for 15 of Zain’s African assets. The transaction pressures MTN to execute its strategy for growth and consolidate its position on the continent, Oosthuizen said. Bharti is expected by analysts, such as Informa Telecoms & Media and IHS Global Insight, to cut call prices in Africa. MTN has walked away from deals before; in 2008, talks about a tie-up with Indian mobile operator Reliance Communications Ltd. ended without an agreement.
France Telecom SA and Orascom ended a 2 1/2-year legal dispute about the ownership of Mobinil, Egypt’s largest mobile phone operator by subscribers, on April 15.
‘Could Happen’
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”.
Orascom operates in North Korea, Bangladesh, Pakistan, Egypt, Algeria, Tunisia, Central African Republic, Burundi Namibia and Zimbabwe. MTN has operations in 21 countries. “MTN is a natural suitor given Orascom’s positions in the Tunisian and Algerian markets,” Andrew Kingston, a fund manager with Sanlam Investment Management, which holds MTN shares, said in an interview from Cape Town today. “Any of those countries are countries of size that will make a meaningful difference for MTN. Algeria is an attractive market with penetration rates at about 70 percent. It would be a good fit. It would depend on price.”
--Editors: Vernon Wessels, Jeffrey St. Onge.
To contact the reporter on this story: Nicky Smith in Johannesburg at nsmith38@bloomberg.net Mahmoud Kassem in Cairo at mkassem1@bloomberg.net
To contact the editor responsible for this story: Jeff St.Onge at jstonge@bloomberg.net |
