The planned takeover of Egypt’s Orascom Telecom Holding (OTH) by Russia’s Vimpelcom is in the balance, while the Algerian government is deliberately trying to jeopardise the company’s operations in Algeria, according to OTH executive chairman Naguib Sawiris.

Orascom’s market share 
Algeria (Djezzy) 59.1
Egypt (Mobinil)  40
Tunisia (Tunisiana)  52.9
Pakistan (Mobilink)  32
Bangladesh (Banglalink)  26.9
Source: Orascom

Weather Investments, which owns a 51.7 per cent stake in OTH, announced on 4 October that it had agreed a deal to merge with Vimpelcom, but the deal could fall through if it is not backed by Norway’s Telenor, which holds 36 per cent of the voting rights in the Russian telecoms group.

“I have my doubts about the deal because of the position of Telenor,” said Sawiris, speaking to MEED on 8 November. “There’s a 50:50 chance that it will go through.”

The future of Djezzy, Orascom’s local mobile operator in Algeria, could be crucial to the deal. In April, the Algerian government blocked the sale of the unit to South Africa’s MTN, and insists that it will exercise its pre-emptive right to purchase any shares set to be sold in the firm.

“The Algerian position is not a part of the terms,” says Sawiris. “We are not relying on that – we are going on regardless.”

Local analysts say Algiers is unlikely to offer more than half the $7.8bn offered for Djezzy by MTN, which could affect Telenor’s appetite for the deal.

Algiers has imposed several punitive measures on OTH in recent months, including a series of bills for unpaid taxes, which are disputed by the Egyptian company, and restrictions on the company’s repatriation of dividends and import of network components.

“It is very obvious that they [the Algerian government] are trying to reduce the value of Djezzy so they can buy it cheaply,” says Sawiris. “We believed that [the Vimpelcom deal] could help in solving the problem, but it turns out not to be the case.”