Algeria - On course to nationalise Djezzy by the end of 2010, thwarting its sale to MTN

[bloomberg] The Algerian government expects to buy Orascom Telecom Holding SAE’s unit in the country by the end of the year, Communications Minister Moussa Benhammadi said.

The government wants to buy 100 percent of the unit, known as Djezzy, the minister said in an interview today in Algiers.

“A commission has been set up to evaluate Djezzy with the assistance of an international consultancy to allow the sale to take place,” he said. “The transaction will be completed by the end of this year.”

Benhammadi’s remarks come amid merger talks between Weather Investments SpA, which controls Orascom, and Russian operator VimpelCom Ltd. Analysts including ING Groep’s Dalibor Vavruska have questioned whether the two companies can reach an agreement without clarity on the future of Djezzy.

The Algerian government thwarted MTN Ltd.’s bid to buy a number of Orascom’s assets this year in a transaction that analysts valued at $10 billion. The government objected to the inclusion of Djezzy, which was the biggest contributor to Orascom’s revenue in 2009.

The government has told Orascom, the biggest mobile-phone operator in the Middle East by users, that it has formed a team to negotiate the possible purchase of the unit and talks may start soon, a person familiar with the matter said Aug. 31.

The valuation of Djezzy will not take more than two months, Al Khabar newspaper reported on Aug. 31, citing an unnamed senior government official.

“Anything above $4.5 billion would be good given the circumstances and government pressure” on Orascom, said Amr Elalfy, director at CI Capital Research in Cairo, who values the unit at about $5 billion. “In better circumstances in could have got a better premium,” he said by telephone.

The government ordered Djezzy to pay $596 million in back taxes last year. Orascom said in April that it paid the disputed amount, pending an appeal.

Orascom rose 0.9 percent to 5.4 Egyptian pounds at the 1:30 p.m. close in Cairo trading today, valuing the company at 28.3 billion pounds ($4.96 billion).

Algeria Sees Djezzy Purchase from Orascom Telecom This Year, Minister Says