By Gugulakhe Lourie and Alastair Sharp
JOHANNESBURG/CAIRO (Reuters) - South Africa's MTN confirmed it is in talks to buy Egypt's Orascom Telecom, a $9 billion deal that could include Algeria's top mobile phone firm, extending MTN's reach beyond its core markets.
Purchasing all of Orascom, which has a market capitalisation of $7.2 billion and almost 93 million subscribers, would give Africa's biggest mobile operator access to fast-growing markets in Algeria, Pakistan and untapped North Korea.
Egyptian investment bank EFG-Hermes has valued Orascom at about $9 billion. The deal would make MTN, which relies on South Africa, Nigeria and Iran for the bulk of its revenue, the world's fourth-largest mobile phone operator. Currently, it ranks as the world's No.11, with 116 million subscribers.
MTN said talks with Weather Investments, which owns 51 percent of Orascom Telecom and is majority-owned by Egyptian tycoon and Orascom executive Naguib Sawiris, may or may not lead to a transaction. It added that it could take control of the Egyptian telecoms firm or some of its businesses.
David Lerche, a telecoms analyst at Johannesburg-based Avior Research, said MTN appeared to be mostly interested in the Orascom's Algerian unit, Djezzy.
"The Algerian business is a jewel in the crown at Orascom, because of its size and margins they made and market share".
Djezzy is Algeria's largest mobile phone operator and Orascom's biggest source of revenue but the company has been involved in a tax dispute with Algerian sources adding that the government wants Orascom out of Djezzy.
Lerche said Orascom's North Korean unit would also offer MTN excellent growth potential, because it is one of the most underpenetrated markets in the world.
The acquisition of the whole of Orascom, however, would propel MTN past its former suitor and current rival, India's Bharti Airtel. Like MTN, Bharti has been keep to capitalise on African growth and recently sealed a $9 billion for the African assets of Kuwait's Zain.
Shares in MTN fell more than 3 percent soon after the start of trade in Johannesburg, but had pared some of their losses and were down about 2.0 percent at 107.3 rand at 1013 GMT.
Orascom shares, which had been suspended on the Egyptian bourse on Monday and Tuesday, jumped 3.3 percent after resuming trade at 0830 GMT but were flat. Its London-listed global depositary receipts were down 2.8 percent at $6.85.
MTN declined to comment further with regard to its announcement.
But analysts believe a share swap could be on the cards, citing the involvement of parent Weather Investments. Weather also owns mobile phone operations in Greece and Italy.
"The big question is why is Weather involved. If it was a straight sale of assets from Orascom Telecom then Weather need not be involved," Cairo-based telecom analyst Mike Millar from Naeem said. "However, the statement tends to suggest that a sale of all of OT or a share swap with MTN may be in the offing".
A source told Reuters on Tuesday sale talks between Orascom and MTN were advanced, but that Orascom was also talking to two others over its African assets.
Reuters Africa
