VimpelCom Sells 51% Stake in Algeria's Djezzy to Settle Long Running Dispute
Published on: 18th Apr 2014
Note -- this news article is more than a year old.
By: Ian Mansfield
VimpelCom has finally settled the long running dispute over the ownership of the Algerian mobile network it acquired when it bought from Naguib Sawiris's Orascom Telecom in 2010 in a USD6 billion deal.
That deal was modified to take into account the difficulty of the situation in Algeria, where the government was seeking to nationalise the Orascom's local subsidiary, Djezzy in a tax dispute.
The matter has finally been resolved.
As a result, Djezzy will be allowed to make a long delayed dividend payment to its Egyptian owners, Global Telecom Holding (formerly Orascom Telecom) of USD1.86 billion.
Global Telecom Holding (GTH) will then sell a 51% stake in the Algerian mobile network, Djezzy to the Algerian government for USD2.64 billion.
The total dividends and proceeds due to GTH at Closing are expected to amount to USD4 billion, net of all taxes and after the settlement of all outstanding disputes between the parties and the payment of associated fines.
That is about what Vimplecom had always asked for, as it had previously indicated that it would not accept less than USD7.8 billion for the entire company.
All proceeds will be used to pay down the outstanding shareholder loans provided by VimpelCom to GTH.
Although the Algerian government will own a majority stake in Djezzy, it will continue to be managed by GTH and, as a result, both GTH and VimpelCom will continue to fully consolidate Djezzy in their financial accounts.
Jo Lunder, Chief Executive Officer of VimpelCom, commented: "This favorable long-term agreement and settlement represents a successful outcome for all stakeholders. For VimpelCom and GTH, this value accretive transaction releases USD 4.0 billion in cash proceeds to pay down gross debt. For GTH and Djezzy, it resolves our dispute in Algeria and allows us to solidify our strong leadership position in Algeria by enabling us to further invest in a high speed 3G network to take full advantage of the potential for mobile data growth in the country."