Bloomberg News

France Telecom Said Near Deal to Boost Mobinil Stake

February 22, 2012

(Removes reference to Mobinil’s ranking by revenue in third paragraph of story published Feb. 13.)

Feb. 13 (Bloomberg) -- France Telecom SA is in talks to purchase part of billionaire Naguib Sawiris’s stake in their Egyptian mobile-phone venture, increasing the French company’s control, according to a person familiar with the situation.

While details of the deal are still being discussed, Sawiris may keep a small interest in the company that controls Egyptian Co. for Mobile Services, known as Mobinil, while selling a 20 percent direct stake in the operator to France Telecom, said the person, who declined to be identified because the talks are private. Sawiris, Egypt’s richest man, also may retain enhanced voting rights, the person said.

Mobinil has a market value of about $2.3 billion and competes with Vodafone Group Plc’s local unit. It was the subject of an ownership dispute between Sawiris and France Telecom Chief Executive Officer Stephane Richard’s predecessor that was settled shortly after Richard took over in 2010.

“France Telecom has been looking to expand in the region for a while and striking a deal now may mean a cheaper price than if they were to wait,” Amr El-Alfy, deputy director of research at Cairo-based Commercial International Brokerage Co., said in an interview.

Sawiris declined to comment, as did Tom Wright, a spokesman for France Telecom, which owns about 71 percent of Mobinil Telecom Co., the holding company that controls 51 percent of Mobinil. Sawiris’s Orascom Telecom Media & Technology Holding SAE, which owns 29 percent of the holding company as well as a 20 percent stake in Mobinil, said yesterday it was in advanced talks with France Telecom “regarding the future” of Mobinil.

Swiss, Austrian Disposals

The Cairo-based company will make a joint statement with France Telecom on the issue before trading starts on the Egyptian Exchange today, it said in a regulatory filing.

France Telecom is refocusing its business on fast-growing emerging markets as mobile revenue in Europe stalls. The Paris- based company has announced the sale of its units in Switzerland and Austria, and in the past two years struck deals to enter Morocco, Iraq and the Democratic Republic of Congo.

In 2010 Richard set a goal of doubling emerging market revenue by 2015, from about 3.3 billion euros ($4.4 billion) in 2009. Revenue in Egypt has suffered as the economy stalls following last year’s violent ouster of former president Hosni Mubarak and subsequent clashes between pro-democracy activists and the interim military government.

Put Option

Still, the country -- 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.

“They are looking at the long-term potential of this market, so current instability is a short-term factor,” El-Alfy said.

As part of the April 2010 Mobinil settlement, Sawiris gained an option to sell his stake in the company to France Telecom during windows beginning in September 2012, at a price that would increase over time from 221.7 Egyptian pounds per share later this year to 248.5 pounds next year. The shares, which have been suspended from trading pending an announcement, have jumped about 76 percent in the past month.

For his part, Sawiris has become an important political figure in post-revolution Egypt, founding the pro-business Free Egyptians political party and criticizing Islamist influence in politics. He has recently pursued investments in Switzerland, where he bid for France Telecom’s local unit, and Austria, where he has teamed with investor Ronny Pecik to take a more than 20 percent stake in Telekom Austria AG.

--With assistance from Alaa Shahine in Dubai and Marie Mawad in Paris. Editors: Dan Liefgreen, Kenneth Wong

To contact the reporters on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net; Matthew Campbell in London at mcampbell39@bloomberg.net; Ahmed A. Namatalla in Cairo at anamatalla@bloomberg.net

To contact the editors responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net


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