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Orascom Telecom Concludes a Joint Venture with
Korek Telecom to Operate in Iraq
3.9.2007
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September 3, 2007
Cairo, ,-- Orascom Telecom Holding S.A.E. ("OTH"
or “Orascom Telecom”) announced today that it has
entered into a binding agreement to form a joint
venture ("JV") with Korek Telecom; the incumbent
Kurdish operator which was granted one of the three
long term licenses in Iraq.
Under the agreement, OTH and Korek shall contribute
the assets of Iraqna and Korek respectively into the
JV where OTH shall hold an equity interest of 70%
and Korek shall hold the remaining 30%. Moreover,
under the agreement, OTH shall not be obliged to go
below 51% of equity at any point in time. Whereas,
Korek Telecom will have a call option on 18% of
OTH's equity interest to be executed on or before
November 2nd, 2007.
For the purpose of the valuation of OTH's equity
interest in the JV, the combined entity was valued
at US$ 2.2 billion. The finalization of the
transactions contemplated under the JV Agreement
will be subject to the approval of the
Communications and Media Commission of Iraq and the
conclusion of a shareholders agreement.
OTH announced earlier that it has dropped out of the
auction process for Iraq's mobile license. At US$
1.25 billion; OTH considered that this opportunity
would not meet its targeted equity rate of return in
Iraq, and announced that it will be evaluating
offers to join one of the license parties, the
combined equity return of this venture would be
considerably higher than the standalone model. |
Korek cell operate in
Iraq’s Kurdistan region |
The combined assets shall have immediate access to
the Northern region of Iraq; a region which has not
been explored fully by other mobile operators due to
the lack of licenses in Kurdistan. The combined
assets shall have 4 million subscribers; 2.8 million
IraQna subscribers and 1.2 million Korek Telecom’s
subscribers. As a result, the combined assets will
have a market share of over 40% and therefore will
be expected to be the market leader.
There will be strong synergies derived out of the
combination of assets; namely CAPEX reduction
through OTH’s frame agreements, reduction on
security overhead and recruitment of needed
resources for the operation while maintaining its
existing presence in the central and Southern
regions of Iraq.
Naguib Sawiris Chairman & CEO of Orascom Telecom
stated "This transaction improves the returns back
to the levels that reflect the risks we undertake
investing in Iraq. The improved market share and the
traffic generated between the two networks will
increase the revenues and the margins in this very
successful operation in addition to the finalization
of a 15 year license instead of a monthly renewed
license"
londonstockexchange com
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