Orascom gives up India hopes

Egyptian firm to divest 5-7.3% in Hutch Telecom International.

In a move that signals its withdrawal from India, Egyptian mobile operator Orascom is planning to divest around 5-7.3 per cent of its stake in Hutchison Telecom International, the joint venture partner of Indian mobile service provider Hutchison Essar.

Orascom holds a 19.3 per cent direct stake in Hutchison Telecom International, and a 10 per cent indirect stake in the Indian operations. But with this move Orascom's indirect stake is expected to decline to around 7-7.5 per cent in Hutchison Essar ""the Ruias hold 33 per cent while Hutchison and its associates hold 67 per cent.

The move is significant in the light of growing tension between the Ruias and Hutchison on their joint venture in India, over the role of Orascom. The Ruias have approached the government, raising security concerns arising out of the fact that Orascom has operations in Pakistan.

Orascom's earlier moves to increase its stake in Hutchison Telecom International to around 23 per cent were stymied after opposition from the Ruias.

Even though Orascom cited change in valuations as the reason, sources said a failure to raise its stake in Hutchison Telecom International had led Orascom to sell its stake to around the 12 per cent level.

"Orascom has the first right of refusal to buy equity in Hutchison Telecom International provided it maintains a 12 per cent stake. With its failure to hike its stake in the company it made sense for Orascom to divest part of its equity as having 12 per cent or 19 per cent does not make any material difference," a source close to the two groups said.

While Orascom bought the shares at around HK $11, the prevailing price of the shares is HK $16, the source added.

When contacted both Hutch and Essar executives declined to comment.

Earlier in the day, Orascom said in a filing with Cairo and Alexandria Stock Exchange that it intended to review its holding in Hutchison Telecom International and would look at offloading a partial stake.

Orascom also stated it would retain all its existing rights, including first refusal for future stake sales by Hutchison Whampoa.