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Egypt Rejects France Telecom Bid For Mobinil

The Associated Press

CAIRO (AP) — Egypt's market regulator has rejected France Telecom's bid to buy outstanding shares of mobile phone service provider Mobinil, saying the purchase offer was unfair to the various shareholders.

The decision by the Capital Market Authority, posted Wednesday on its Web site, marked the second time the regulatory body had rejected the Paris-based company's offer in a drawn-out dispute with Egyptian telecom giant, Orascom Telecom over Mobinil, Egypt's largest cell phone service provider by subscriptions.

The CMA said that after reviewing the bid submitted by FT unit Orange Participations, it found that the offer "was in violation of the principles of affording equal opportunities" to shareholders.

FT and OT have been at odds over Mobinil since an arbitration court ruled in France Telecom's favor, requiring Orascom to transfer its shares in Mobinil Telecom, a holding company which holds a 51 percent stake in the Egyptian Company for Mobile Services. FT owns 71.25 percent of Mobinil Telecom while Orascom holds the remaining 28.75 percent. Orascom holds a direct 20 percent stake in ECMS while the remaining 29 percent is divided among other shareholders.

Orascom, backed by the CMA, had said the arbitration court ruling in March meant FT must submit a mandatory purchase offer for all of ECMS, which is Mobinil's operator. It said this also meant FT must pay the same price — 273 Egyptian pounds per share — for all the shares, including Orascom's minority stake in ECMS. That put the deal at $1.7 billion.

France Telecom initially disputed the assessment, and later submitted an offer for the entire company but at a lower price. That bid was rejected by the CMA.

In a statement issued after the CMA's latest decision, France Telecom said it would "use all national and international legal channels to challenge obstructive rulings by the Egyptian market authorities."

"In these circumstances, France Telecom is no longer able to pursue its proposed tender offer for ECMS shares," the company said. It also said that since it did not receive Mobinil securities held by Orascom by the April 10 date set by the arbitration, OT must pay France Telecom a fine of $50,000 per day until the transfer of the securities."

Orascom officials could not be reached for comment.

But the company had previously rejected the penalty claim, saying FT was at fault because it refused to submit payment for the shares before they were to be handed over.

France Telecom said the offer it submitted was based on a share price of 237 pounds, or a 58 percent premium to the April 5 closing price — the last before the International Chamber of Commerce arbitration ruling.

In rejecting the latest offer, the CMA said it was not "assured" by the argument and supporting documentation submitted by Orange.

The CMA also said that given its rejection of the offer, it was lifting its halt on trading on Mobinil's shares, which were suspended since May 19 while the regulatory body studied Orange's proposal.

Mobinil's stock was down roughly 7.3 percent — to 190 pounds — by Wednesday afternoon on the Egyptian stock exchange, and analysts said a further slide was likely.

"Something fundamentally has changed on how investors perceive Mobinil," said Shrouk Diab, a telecom analyst with Beltone Financial, a Cairo-based Mideast investment bank. "It could weaken in price, but probably not to the level before the tender offer. It rallied based on the price of 273, and everyone expected it would be sold at this price. "

Orascom, with operations in Algeria, Pakistan, Tunisia, North Korea and Bangladesh, on Tuesday night posted a 66 percent decline in net profits in the first quarter of the year, missing some analyst expectations.

Net income dropped to $72 million from $210 million the same period a year earlier, dragged down by foreign exchange losses of about $62 million, Orascom said.