Egypt telecoms: At first glance it sounds like the sort of haggling over price that ends in compromise. But accusations are flying fast across the Mediterranean in the row between France Telecom and Egypt’s Orascom group, the industrial conglomerate controlled by billionaire Naguib Sawiris. The quarrel could damage the reputation of both groups in each other’s home base.
France Telecom owns 71 per cent of holding company Mobinil. Orascom has the remaining 29 per cent. Mobinil in turn owns 51 per cent of Egyptian mobile operator ECMS. The two sides argued about strategy and referred their dispute to an international arbitrator. It ruled that France Telecom could buy out Orascom at a price set at EGP273 a share – a total expenditure of more than E500 million.
End of story? Not quite. France Telecom so far hasn’t been able to acquire Orascom’s shares, because the Egyptian market watchdog has ruled that it should also buy out the holders of the remaining 49 per cent of ECMS. Orascom is an interested party in that dispute, as the largest minority shareholder of ECMS. Its direct stake is 20 per cent. If France Tel paid the same price to ECMS minority holders as it has been ordered to pay for Orascom's stake in Mobinil,, it would have to shell out some E1.7 billion. The French group has balked, but recently suggested it could make an offer at EGP230, a premium of about 15 per cent to the current share price. Everything points to a compromise price of around EGP250 a share. But for now the recriminations and legal challenges just keep coming.
Cooler heads should prevail. France Telecom has a large research operation in Egypt employing several thousand engineers. It doesn’t want to run afoul of Egyptian authorities. The authorities should care about how their decisions will be interpreted by international investors. And Sawiris can’t afford to damage his reputation in France, where he has grand designs.
There may be a conflict of principles amidst all the legalese. But it’s in everyone’s self-interest to find a compromise.
