VimpelCom in talks to sell its Algerian operations

10 January 2012 | Kavit Majithia


VimpelCom is in talks to sell off its Algerian operations to the Algerian government following increasing pressure by the state to nationalise its largest mobile network operator, Djezzy.

The Russian-based telecoms group acquired a stake in Algeria’s Djezzy last year as part of its $6.5 billion deal to buy a controlling stake in Egyptian operator Orascom. The deciding price for the sale of Djezzy is still undecided, but the Financial Times reports it could be worth over $4 billion.

The resolution of the future of Djezzy, which has been subject to controversy throughout 2011 after Algeria said it wanted the mobile arm nationalised, will be seen as a major step forward for VimpelCom shareholders in integrating its other interests in the Orascom group.

Reuters newswire further reports that VimpelCom has now reached a Memorandum of Understanding with the Algerian government to establish a suitable price for the unit, with rumours circulating that VimpelCom were originally seeking $7 billion for the sale. Djezzy is considered the most valuable part of Orascom, generating annual earnings worth an estimated $1.1 billion.

As part of the expected deal, VimpelCom will remain as an operator in Algeria as it continues its strategy towards expansion in emerging markets. VimpelCom’s 51.7% stake acquisition in Orascom expanded its reach out beyond Russia and into Italy and parts of North Africa, making it the sixth largest global operator by subscriber share.