QTel, Princesse to buy Orascom's Tunisiana stake

Qatar Telecom QSC, the country’s largest company, and Princesse Holding of Tunisia agreed to buy Orascom Telecom Holding’s 50 per cent stake in Tunisiana for $1.2 billion, enabling the Egyptian company to cut debt.

Qatar Telecom, which is looking to expand outside its home market, said in an e-mailed statement today its unit Wataniya Telecom signed an accord with a group led by holding company Princesse to buy the stake. Wataniya already holds 50 per cent of Telecom Tunisie, or Tunisiana, as the North African nation’s biggest private telecommunications company is called.

The deal will allow Orascom Telecom to cut debt ahead of a planned $6.5 billion merger between its parent company Weather Investments SpA and Russia’s VimpelCom Ltd. to create the world’s fifth-largest mobile-phone company by subscribers. Egyptian billionaire Naguib Sawiris-controlled Weather and VimpleCom said today that they support the Tunisian deal.

“It was not Tunisia that VimpelCom was seeking out of the deal with Weather,” said Alexander Kazbegi, equity analyst at Moscow-based investment bank Renaissance Capital. “I don’t think it will make it (the VimpelCom-Weather deal) less attractive. Sawiris clearly bought some time. He gets cash now.”

Orascom Telecom rose as much as 5 per cent in Cairo trading and was 2 per cent higher at 4.5 Egyptian pounds as of 11:27 a.m., valuing the company at 23.6 billion pounds ($4.1 billion). Qtel stock fell 0.1 per cent to 182.3 riyals at 12:26 in Doha.

Some analysts said the deal enhances Sawiris’s position by showing that he can do deals outside the VimpelCom transaction.

Better deal
Sawiris “is really trying here to create an alternative to the VimpelCom deal,” said Dalibor Vavruska, an analyst at ING Groep in London. Sawiris may consider whether it’s better to sell assets “patiently, one by one.”

Orascom is selling the Tunisian holding at a multiple of 6.7 times 2009 earnings before interest, taxes, depreciation and amortisation, higher than the 6.2 multiple for VimpelCom deal, Vavruska said. The numbers were confirmed by VimpelCom.

“Disposal of assets where VimpelCom has the potential to end up with limited control is in line with our strategy,” said Elena Prokhorova, a spokeswoman for Vimpelcom. “In the case of Orascom’s Tunisian operations, there was no clear path to gain full operational control.”

Manal Abdel-Hamid, spokesperson for Orascom, couldn’t immediately be reached for comment.

Cutting debt
Proceeds from the sale will be used to repay Orascom Telecom’s borrowings, reducing the amount of debt that will need to be refinanced by VimpelCom, Weather Investments and VimpelCom said in a release today.

Sawiris’s Wind Telecommunicazioni SpA had net debt of 8.29 billion euros ($11.4 billion) as of June 30, while Orascom Telecom had $4.61 billion.

Increased competition at home is driving Middle Eastern telephone companies such as Qtel and Emirates Telecommunications Corp., or Etisalat, of the United Arab Emirates to expand into markets in Asia and Africa. In September, Etisalat, offered to buy a controlling stake in Kuwait’s Zain for about $11 billion.

“Wataniya will finance its portion of the transaction with a mixture of existing cash and debt, and now will control the board and management of Tunisiana,” according to Qtel.

The existing management of Tunisiana will be left in place, a Qtel spokesman said, declining to be identified, in line with company policy. BNP Paribas SA and Standard Chartered advised Qtel, he said.

‘Growth opportunities’
“Qtel has a strategy of trying to increase its stake in subsidiaries where it sees strong growth opportunities,” said Akber Khan, director at Al Rayan Investment in Doha. “Tunisiana is the market leader in a growing market with steady profits so strategically this is a good transaction.”