Orascom Telecom has mandated banks for a strategic review of Telecel Globe in a move that could see it sell the sub-Saharan African asset, sources told TelecomFinance.
One source said that Citigroup and Standard Bank have been hired to carry out a…
Orascom Telecom has mandated banks for a strategic review of Telecel Globe in a move that could see it sell the sub-Saharan African asset, sources told TelecomFinance.
One source said that Citigroup and Standard Bank have been hired to carry out a strategic review of Telecel, adding that an information memorandum could be issued very shortly.
“Officially, the mandate is to review Telecel Globe and to possibly bring in a new investor. However, a sale of the entire unit is also likely,” the same source said.
The banker, who is not involved in the transaction, suggested a price tag could range around US$400m to US$500m. He said that Orascom may sell Telecel as a whole or in separate pieces.
Since acquiring Telecel in 2000, Orascom has stripped the group of most of its assets, while expanding some and entering Namibia. Today, the group is a modestly sized player with a total of 1.5 million users across only four small-sized markets – Burundi, Zimbabwe, Central Africa and Namibia. Of these, Zimbabwe is probably the most attractive, not least boasting the largest with a population of ca. 12 million, compared to Burundi (9 million), CAR (4 million) and Namibia (2 million).
Volte-face
With the sale, Orascom is the latest pan-Africa player to consider exiting its sub-Saharan activities, following Zain and – albeit in a slightly different pattern – the Abu Dhabi Group, which recently sold majority stakes to Essar.
Like Zain, Orascom’s exit would be a volte-face for the leadership. The company has been bullish about its plan to become a major African player – it had initially planned to launch in six new African countries in 2009.
Money is likely to be at the heart of any decision to exit. The notoriously indebted group is facing a US$600m the tax lawsuit in Algeria – where it owns its most lucrative unit, Djezzy – which prompted it to carry out its first ever rights issue. The group is also embroiled in a row over its ownership of Mobinil, another profitable operation, with France Telecom.
According to one banker, Orascom may even decide to exit telecoms altogether. “This is pure speculation, but I wouldn’t be surprised if they decide to exit telecom one day to focus on their other activities,” he said.
A minor asset
Another factor behind a sale could be Telecel’s failure to take off on a significant basis. The operator prides itself on its turnaround abilities and has focused on targeting smaller, often troubled operators, in markets where large players such as MTN are absent. However, despite bidding for a range of transactions (including the ongoing privatisation of Sotelgui), the company only made one acquisition in 2009.
As a result, Telecel’s financial contribution to Orascom remains negligible. The unit had a consolidated EBITDA of US$2.7m on sales of US$58m in the first three quarters of 2009. This is out of a total US$1.7bn and US$3.5bn respectively for Orascom’s entire mobile operations.
Similarly, its EBITDA margins linger far behind that of Orascom’s other mobile operations. While the latter had margins ranging from 35.5% to 60% in the first three quarters of 2009, Telecel’s stood at 4.7% over the same period.
Nevertheless, a sale is likely to attract healthy interest, especially if the assets are sold separately. “These are small assets you’re talking about. But I can imagine there’d be quite a lot of interest especially for individual ones, notably in Zimbabwe,” the same banker said.
