By Hamid Ould Ahmed
ALGIERS, March 29 (Reuters) - No price has been agreed for Algeria’s planned purchase of 51 percent of Vimpelcom’s local mobile phone unit Djezzy and talks, which have already dragged on for over a year, could take several more months, the country’s finance minister said.
The comments came a day after a senior finance ministry source told Reuters Algeria would pay $6.5 billion for a controlling stake in Djezzy, pushing up the New York-traded shares of Vimpelcom.
“We are still in negotiations. Negotiations are ongoing. Until now the price has not been specified,” Karim Djoudi told reporters after a parliament session on Thursday .
“We will work in these negotiations to set the real value.”
Analysts immediately cast doubt on a figure they said far exceeded market expectations. They said the number most likely referred to the valuation of Djezzy as a whole rather than the price Algeria might pay for a controlling stake.
“We would have expected $6.5 billion for the whole asset not 51 percent. We were expecting $4.5-6.5 billion,” Nadine Ghobrial, associate vice president of equity research at EFG-Hermes in Cairo, told Reuters. “I do not think this figure makes sense. I think everyone is surprised.”
Russia-focused Vimpelcom acquired Djezzy last year as part of a $6 billion deal to buy assets of Egyptian firm Orascom Telecom, but the transaction immediately became clouded in uncertainty after the Algerian government demanded a majority stake in the unit.
Djezzy was the most lucrative part of Orascom’s business, but negotiations to buy the firm have dragged on for over a year and have been complicated by a long-running court case mounted against Djezzy by the Algerian central bank over alleged breaches of foreign exchange rules.
Vimpelcom finally agreed in January to sell Algeria a 51 percent stake in the unit. It said at the time it had signed a Memorandum of Understanding with the Algerian government to explore the sale, subject to agreeing an acceptable price.
Algeria’s finance minister said earlier this month the country had received a valuation for Djezzy, which was expected to form the basis of price negotiations with Vimpelcom, but declined to reveal that valuation while talks were ongoing.
In a sign that talks could yet drag on further, Djoudi said on Thursday no deadline had been set to reach a deal
“There is not any timeline to complete the negotiations and reach an agreement on price. This could happen in two weeks or two months, or maybe even months,” Djoudi said.
Orascom’s Cairo-listed shares were down 4.35 percent at 1336 GMT, with the Algerian minister’s comments apparently dashing earlier hopes that a resolution to the dispute was at hand.
The long-running saga over Djezzy has come to symbolise, for many investors, the risks of doing business in Algeria, a North African energy exporter which in the past few years has swung sharply towards economic nationalism.
Analysts and sources say the Algerian government is using the long-running court case against Djezzy as a lever to increase pressure on Vimpelcom and bring down the price.
Djoudi appeared to suggest on Thursday that Algeria was treating the two issues as part and parcel of any deal.
“The negotiations with Vimpelcom include this file (talks over the purchase of Djezzy) and some problems also,” he said.
An Algerian court found Djezzy’s top executive guilty of breaching foreign exchange regulations on Wednesday and ordered him to pay 93 billion dinars ($1.3 billion) in fines.
An Algerian judicial source said the case, in which the Algerian central bank accused Djezzy of “making false statements regarding the import of services”, could also carry a jail term. The criminal ruling was postponed for two weeks, he said.
Both Orascom and Vimpelcom will appeal against the fines. Orascom said its executive in Algeria had acted in compliance with the law and that the lodging of the appeal would suspend the judgment for the time being.
The senior finance ministry source said on Wednesday that the ruling would likely anger Vimpelcom, which he said was eager to resolve the dispute and get on with doing business.
Contacted by Reuters on Wednesday over the $6.5 billion figure, Vimpelcom spokesman Bobby Leach would not comment.