Algeria to Nationalize Orascom Algeria’s Mobile Phone Unit
The North Africa Journal | The Algerian government is slated to take over a majority stake in the mobile phone operator Djezzy. Previously owned by the Egyptian Orascom, then sold to Russia’s Vimpelcom, the company is likely to be 51% under the control of the State of Algeria after a long battle pitting Orascom CEO Naguib Sawiris against Algeria. The news of the takeover was announced by the Algerian postal and technology minister on Saturday, January 8, 2012.
The information was not fully confirmed by the finance ministry but rumors are circulating about the existence of a confidential deal between Algeria and Vimpelcom on an equity sale. It is still unclear how much Algeria will pay, since Vimpelcom has been insisting on a $7.8 billion price tag, while Algeria says its valuation of the company by an independent firm is more like half that value. By opting for a buyback of 51% of the Djezzy, the government seems to want to see an end to a crisis that has lasted for over two years. Vimpelcom, the new owners of Djezzy, had to make several trips to Algiers to try to unlock a situation that became untenable and difficult to resolve. Ultimately, the Algerians have agreed to settle for 51% of capital and to entrust the management of the company to the Russians. Vimpelcom has indicated that it favored such an option, according to sources close to the case.
The Algerian government had consistently refused to receive Naguib Sawiris, former owner of OTA. This disturbing case with political and diplomatic undertone has undergone several developments. The Bank of Algeria, as a civil party in the case against OTH had claimed compensation of $193 million. Media sources, including Al Watan newspaper say the Bank of Algeria requested that Djezzy would pay a fine for violating the rules of currency transfer in favor of its Egyptian owners.
In making this pre-announcement through a junior minister, the Algerian authorities may be signaling their willingness to end this conflict but Analysts warn that the move could be damaging in the long run. A return to a semi-public monopoly in telecommunications, with the mobile operators Mobilis and Djezzy in the State domain "will be harmful for the Algerian consumers and would send the wrong signal for the investor community about Algeria’s economic openness,” says an Expert. From The North Africa Journal’s perspective, the issue has raised concerns from international investment circles and banks, which have been worried about a potential wave of nationalization in the Algerian economy. Although we did not expect such an outcome, the prospect of nationalizing a private company could do more harm than good.
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