Algiers/Cairo - Egypt's Orascom Telecom is in talks to sell its Algerian unit Djezzy to MTN Group and the Algerian government takes a positive view of the sale, a senior government source said on Monday.
Two other people familiar with the matter have told Reuters the firms are discussing MTN's purchase of Djezzy plus Orascom's four sub-Saharan assets, grouped under the Telecel Globe brand. They said MTN is likely to end up paying around $8bn for the assets.
"We have been informed," about the negotiations between Orascom and South Africa's MTN, the Algerian government source told Reuters. "Orascom had no alternative but to inform us, and it did that."
Algerian law allows the government to block the sale.
Asked if the Algerian government would approve a deal, the source said: "Having the South Africans in the telecoms sector in Algeria instead of the Egyptians is a good solution for us."
Djezzy is Orascom's most troubled unit, the subject of a disputed tax bill and tension between the government in Algiers and the group of companies controlled by the family of Orascom Telecom's executive chairperson Naguib Sawiris.
The Telecel Globe-branded assets are in Zimbabwe, Namibia, Central African Republic and Burundi. Analysts say they would complement MTN's presence in South Africa, Nigeria, Ghana, Uganda and Rwanda and grant further access to tiny markets with great potential for growth.
MTN last year failed to finalise a $24bn merger with India's Bharti Airtel. Bharti later bought the African assets of Kuwait's Zain for $9bn.
Johannesburg-based MTN is Africa's largest mobile phone operator by subscribers, but it relies on a just a handful of markets - Nigeria, South Africa and Iran - for the bulk of its revenue.
Acquiring Djezzy would give it a foothold in Algeria as it faces tougher competition from former suitor Bharti Airtel, which has made an aggressive push into Africa.
A separate banking source told Reuters on Thursday that MTN was seeking $5 billion to buy some of Orascom's African assets including Djezzy, its biggest source of revenue.
Very structured deal
The two other sources familiar with the matter said one structure under discussion is MTN buying all of Orascom for around $10 billion and then selling back the bits it does not want - Egypt, Tunisia and North Korea among them.
"It would need to be a very structured transaction," one said.
Trading in Orascom Telecom was suspended on Monday. The firm said it would disclose material information on Tuesday.
Cairo-based Orascom's London-listed global depositary receipts (GDRs) have been suspended since Friday, when the Egyptian exchange was closed.
MTN's said on Friday that it was in talks about a potential deal, without naming whom it was speaking with.
Djezzy is seen as an attractive asset despite Orascom's troubles. It has some 60% of a market with 72% penetration and average EBITDA margin of 60% to 63%, according to Ahmed Adel from Naeem brokerage.
Analysts value the unit at between $6bn and $7bn, but say government pressure could lower the price.
Before the suspension, Orascom's shares were ascendant, jumping more than 30% since the start of the month, pushing up the value of the firm to $7.2bn.
Egyptian investment bank EFG-Hermes earlier this month valued a sale of all of Orascom - which runs operations from North Korea to North Africa - at $9 per GDR, a 30% premium on the current share price.
The Cairo-based firm told the Egyptian stock exchange it would make a statement on Tuesday, without providing details. The exchange said it plans to freeze trade on Orascom for the full session on both Monday and Tuesday.
- Reuters