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The Algerian government and VimpelCom have agreed a non-binding memorandum of understanding to explore the sale to the Algerian state of a controlling interest in mobile operator Djezzy.
The government intends to take control of a 51% stake in the operator, known also as Orascom Telecom Algerie, and VimpelCom said it agreed to consider selling the majority stake. The Algerian ministry of finance and VimpelCom will now undertake a process to agree on the valuation of the business.A statement said any such transaction would be subject to, among other things, definitive documentation and mutual agreement on price. Recent reports rumoured a valuation of US$4bn for the business which has annual EBITDA of US$1.1bn.
Should the deal be agreed, Vimplecom is expected to continue running the business for the government. However, the two sides have also agreed to consider alternative acquisition scenarios that could be mutually beneficial to both parties.
Ownership of Djezzy has been the subject of dispute since the Algerian government signalled its interest in nationalising the company and VimpelCom acquired most of the assets of Orascom Telecom for US$6.5bn. VimpelCom owns 51.7% of OrascomTelecom, which in turn owns 96.81% of Djezzy. VimpelCom said that the aim is for governance and management control of Djezzy to be structured so that it can continue to consolidate the Algerian company.
VimpelCom shareholders, which include Norway’s Telenor, will be eager to be suitably recompensed for the sale of a stake in Djezzy, especially as a number of them, including Telenor, objected to the takeover of Orascom. The deal made VimpelCom, which is listed in New York but based in the Netherlands and with a Russian business focus, the sixth-largest global telecoms operator by subscriber numbers.
Djezzy was the most valuable part of the Orascom deal, generating annual earnings before interest, tax and depreciation of around US$1.1bn.
ResolvingDjezzy’s future is also seen as critical to consolidate the overall business structure of VimpelCom, which has been going through a long integration process following the takeover. Orascom’s emerging markets telecom portfolio also included operations in Pakistan, Bangladesh and several African countries.