x Abu Dhabi, UAEWednesday 24 January 2018

Orascom clinches deal with Adic

The transaction will illustrate the role that private equity can play in assisting market-leading businesses.

Egypt's Orascom Telecom Holding (OTH), one of the Arab world's largest telecommunications companies, has sold part of its business to a subsidiary of the Abu Dhabi Investment Company (ADIC). ADIC MENA Partners, a fund managed by the private equity division of ADIC, paid US$180 million (Dh661.4m) for OrasInvest, which provides technical and managerial support services to mobile networks in the Middle East and Asia. Half the payment will be made in cash, with a 12-month, $90m interest-bearing note funding the remainder.

OrasInvest was established in 1998 and fully acquired by Orascom in 2003. The company is a service provider to Orascom's operations, which stretch from Canada to Pakistan. It will continue serving Orascom's businesses as part of a special service agreement included in the sale contract. The investment is ADIC's first move into the technology and telecommunications sector. It comes as Orascom looks to raise cash and focus its operations to weather an economic downturn that is beginning to batter the emerging markets that it specialises in serving.

"We are confident this transaction will illustrate successfully the role that private equity can play in assisting market-leading businesses like Orascom Telecom to achieve their goals for corporate realignment," said Robert Wages, the executive director of ADIC's private equity group. "Orascom Telecom Holding is looking at disposing of its non-GSM [Global System for Mobile communications] businesses and the sale of OrasInvest represents the first step in this direction," said Naguib Sawiris, the chairman of Orascom. "OrasInvest has been instrumental to the growth of OTH."

Orascom is facing a tough year ahead as its exposure to high-risk emerging markets - one of its major selling points in better times - subjects it to investor flight and downgrades from credit rating agencies. In Pakistan, once a major growth engine for the business, political and economic turmoil threaten the future of its Mobilink network. The country's deepening crisis tragically took the life of Mobilink's Egyptian chief financial officer, Tarek Foudah, who died in the bombing of Islamabad's Marriott Hotel in September. The Mobilink chief executive was replaced earlier in the month. In statements accompanying third-quarter results, Orascom said it was reconsidering its future investment plan for the Pakistani market.

In Algeria, where Orascom's Djezzy network leads a fast-growing market, an increase in Islamist attacks against the central government has raised the country's risk profile, while a resurgence of economic nationalism by the government has led to stalled privatisations and unpredictable policies towards foreign investment. Last week, Orascom and its joint-venture partner, Telecom Egypt, pulled out of their newly established fixed-line business, claiming that unfair government practices favour the state-owned Algerié Telecom.

The sale of OrasInvest, which brings much-needed cash into the company, failed to stop a tide of selling in Orascom stock that has pushed the company's valuation down 77 per cent his year. Orascom shares dropped 7.4 per cent in trading yesterday, closing at a four-year low. tgara@thenational.ae