Orascom Telecom swoops to conquer in Tunisia

15 March 2002

Orascom Telecom (OT)has been awarded the licence to set up a second GSM network in Tunisia, giving the Egyptian-based firm another important chunk of the regional mobile phone market. OT will pay $454 million for the licence, 50 per cent on signing and the remainder before the end of 2002.

The 8 March announcement of the award by the Tunisian Communications Ministry came after early indications that one of OT's three rivals for the licence - National Mobile Telecommunications Company (Wataniya Telecom)of Kuwait - had submitted the highest headline price (MEED 1:3:02). However, sources close to the deal say that OT's commitment to complete the payment for the licence by the end of 2002 was a factor in the eventual success of its bid. The service is set to start up within six months. The third bidder was Spain's Telefonica.

Investment analysts say the deal will consolidate OT's position as the leading regional GSM operator. It follows on from the recent launch of a service in Algeria, and adds to OT's existing operations in Egypt, Jordan, Syria, Yemen and Pakistan.

Some concern has been expressed about the financial burden the new licence will impose on OT's balance sheet. However, analysts say the costs will be shared by powerful local and regional partners, and the decision to forge ahead with the Tunisian project may be a signal that OT's efforts to raise fresh funds are about to bear fruit.

On the Algerian project, for which the licence cost $737 million, OT's share is 51 per cent. The identity of its partners has not been disclosed. Analysts say they are thought to be prominent Arab institutions and individuals. Cairo press reports have indicated that OT might have a minority stake in the Tunisian venture, something that was catered for in the revised tender documents issued by the government after it cancelled the first bidding round in 2001.

OT said in February that it was in negotiations with a number of regional entities interested in investing in the company through participating in a capital increase and acquiring existing shares. The injection of fresh equity would enable OT to bring down its somewhat high debt-to-equity ratio, analysts say. Another potential source of fresh funds would be the conclusion of the planned sale of OT's 80 per cent interest in sub-Saharan operator Telecel. OT says it has received at least two firm offers (MEED 8:2:02).

Investment analysts are starting to sound more positive notes about OT, particularly in light of the successful start-up of the Algerian operation. 'I was initially sceptical, but I am now convinced that Algeria will be a big success for OT,' says Robin McCartney of JP Morgan Chase & Company. 'I did not appreciate how weak the existing service was and how strong the demand is. Algeria will prove some of the doubters wrong.'

McCartney says it is too early to judge how valuable the Tunisian deal will prove to be. Tunisia is a smaller market, with a stronger incumbent operator, but has higher per capita income and is host to more than 4 million tourists a year.

OT had still to issue a formal statement on the award of the Tunisian licence as MEED went to press.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications