MOSCOW, March 25 (Reuters) - Russian mobile firm Vimpelcom may soon reach a deal to sell a controlling stake in its Algerian business, Djezzy, to Algeria after the government decided to lift a ban on foreign exchange transfers, Vedomosti reported.
Vimpelcom took over the Algerian mobile company as part of a $6 billion deal agreed in 2010 to acquire assets from Egypt’s Orascom. Algeria wants to nationalise Djezzy and has pressured Vimpelcom into discussing the sale of a controlling stake.
A main point of contention, however, is a ban on foreign exchange transfers enforced by the Bank of Algeria in 2010 on Orascom Telecom Algeria, which operates under the commercial brand Djezzy. The ban prevents it from buying equipment abroad.
The government in March 2012 slapped a $1.3 billion fine on Djezzy for violating the foreign currency regulations, souring the talks and prompting Vimpelcom to announce it was going to international arbitration against Algeria.
The Algerian government has decided to lift this foreign currency ban, the Russian daily newspaper Vedomosti reported on Monday, and Vimpelcom may soon part with its stake.
Following the transfer, Djezzy will be renamed Optimum Telecom Algeria, the report said, citing Algerian newspaper Al-Fadjr.
A source with knowledge of the negotiations said, however, that discussions were continuing and a deal had not yet been reached. The source said it was unclear whether the Algerian government had reached a decision on the money transfers.
A spokesman for Vimpelcom declined comment.
Vimpelcom Chief Executive Jo Lunder said in January that negotiations in Algeria were still in progress and that it aimed to start investing in Algeria later this year. Vimpelcom said at the time that it hoped to retain an interest in the Algerian business.
The Russian company has been reviewing its asset portfolio to focus on its most profitable businesses as part of efforts to boost cash flow and reduce debt and is also looking at options for its Canadian unit Wind Mobile.
VTB analyst Ivan Kim said in a research note that if the Algeria deal is resolved and there is a sale of the Canadian business, there could be a “good run” in Orascom’s stock and that the news would also be positive for Vimpelcom. He estimated Djezzy could be worth $5 billion.