The local Orascom Telecom (OT)is playing down the implications of an announcement by Motorola on 13 August that the Cairo telecommunications company is in default on a $101 million payment due in February for the US firm's stake in Egyptian Company for Mobile Services (ECMS), operator of the MobilNil GSM service and other assets.
The issue emerged in a filing by Motorola to the US' Securities & Exchange Commission (SEC) which referred to a receivable default worth $101 million due from an unnamed firm, later identified as OT. 'The company is in negotiations to reschedule the payment terms associated with this receivable and also to enhance its current collateral position,' Motorola's filing said. 'There can be no assurances that an agreement will be reached. Based on current information available to the company, the company believes that it has adequately provided for any losses relating to this receivable at this time.'
Responding to the report on 14 August, an OT spokesman said that it had reached a tentative agreement to reschedule the payment. However, Motorola subsequently challenged the impression that a settlement had been reached. 'We are not aware that agreement between Motorola and Orascom has been reached concerning a rescheduling of the repayment of the $101 million that is owed,' Motorola spokesman Scott Wyman told MEED in a written statement.
The default is connected with a payment due for the sale in January 2001 of 29 per cent of Motorola's investment in ECMS. OT also bought assets in Jordan and Pakistan from Motorola in the deal which was valued at $171 million (MEED 26:1:01). Bankers familiar with OT say that the Motorola default is a blow to the company's creditworthiness, but is less serious than a default declaration by a bank which might trigger cross-default conditions in loan agreements with other creditors.
Analysts in Cairo reacted calmly to the news. The price of OT shares closed on 14 August at £E 9.60 ($2.07), 1.4 per cent down on the day.