Egyptian court blocks regulator decision allowing France Telecom to make offer on Mobinil

By Tarek El-tablawy, AP
Wednesday, January 13, 2010

Egypt court blocks France Telecom’s Mobinil offer

CAIRO — An Egyptian court on Wednesday blocked a decision by a regulator that would have allowed France Telecom to buy all outstanding shares of Mobinil’s operator, the latest development in a battle over ownership of Egypt’s largest mobile phone service provider.

Orascom Telecom, which along with Paris-based FT are the largest shareholders in Mobinil, had last month appealed a ruling by the Egyptian Financial Services Authority opening the door for FT subsidiary Orange Participations to buy the Egyptian Company for Mobile Services at a price of 245 Egyptian pounds — or roughly $44.60 — per share. ECMS operates under the brand Mobinil.

The regulator’s ruling was a blow to Orascom, which had argued that FT’s offer was too low.

But on Wednesday, Cairo Administrative Court Judge Hamdi Yaseen sided with Orascom Telecom, ordering a halt to the implementation of the regulator’s ruling. The court referred the matter for further legal review and opinion before another hearing scheduled for Feb. 13.

France Telecom issued a statement saying it regretted the Egyptian court decision.

“France Telecom also reaffirms its desire to obtain the full respect of its rights both before international and Egyptian law, and remains open to engage in constructive dialogue with its partner,” the statement said.

In its Wednesday ruling, the Egyptian court said the regulator violated the rules of Egypt’s Capital Market Authority by not waiting at least six months from a prior FT offer before approving the new offer, Egypt’s official Middle East News Agency reported.

ECMS’s shares dropped almost 3.4 percent to 229 Egyptian pounds at the close of business on the Cairo stock exchange.

The financial regulator, in a statement posted on the Cairo stock exchange’s Web site, said it would abide by the ruling.

The fight stems from an arbitration court ruling in March that the French company says requires Orascom to sell its 28.75 percent stake in Mobinil’s holding company to FT. Orascom, however, argued that the ruling meant FT must also extend a mandatory tender offer for all of Mobinil’s shares, not just the shares in Mobinil’s holding company.

Under a complicated ownership structure, FT holds the remaining 71.25 percent stake in Mobinil’s holding company, which, in turn, controls a 51 percent stake in ECMS. Orascom holds a 20 percent direct equity stake in ECMS, while the rest of the shares are free floating.

Orascom has said before that FT must offer 273 pounds per share, the price set by the arbitration court last year.

The Egyptian regulator had blocked FT’s request three times before, and its decision to approve the offer last month came as a surprise to both Orascom and analysts.

Sally Gerges, a telecom analyst with Cairo-based Mideast investment bank Beltone Financial, said Wednesday’s ruling provides Orascom with some breathing room.

“If it weren’t for this ruling today, the tender offer would have been fully exercised tomorrow,” Gerges said, referring to the Jan. 14 deadline for the ECMS offer.

The ruling allows either FT or the EFSA to appeal before the Supreme Administrative Court.

Should an appeal not be filed, or be unsuccessful, then FT would still have the opportunity to execute the deal by submitting a new tender offer at a new price, Gerges said.

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