Are Orascom and MTN about to seal some kind of deal?

A deal between two of the Middle East and Africa's largest telcos certainly makes sense when you look at their geographical footprints

Tags: EgyptMTN GroupOrascom Telecom HoldingSouth Africa
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By  George Bevir Published  April 22, 2010

Are we about to see another major bit of M&A activity in the region's telecom sector?

According to a report in the Financial Times, which you can read here, Egypt's Orascom Telecom could be about to announce a tie-up with South African telecom group MTN.

The UK newspaper says that Orascom is gearing up to make an announcement to Egypt's stock market, and it quotes one unnamed source who says that the suggestion that MTN is involved is "on the right track".

A second source declined to confirm MTN's involvement but confirmed "something is going on".

As you would expect, Orascom isn't saying much about the speculation. It declined to discuss the rumours, while an MTN spokesman would not comment on "specific corporate activity."

There certainly seems to be appetite from both sides for a deal of some kind, if past performance and comments are anything to go by.

MTN has been looking for a partner for some time, having twice failed to forge an alliance with India's Bharti Airtel.

And now, if Bharti's deal with Zain to take on the vast majority of the Kuwaiti telco's African assets concludes, MTN will find itself doing battle with its former suitor across the continent.

An alliance of some kind with Orascom could give it extra scale which would help it see off a challenge from the Indian operator.

If you compare the geographical spread of MTN and Orascom it is easy to see why they may be interested in securing some kind of tie-up.

The two operators' assets dovetail perfectly, without any overlap. MTN already has a presence in 16 countries in Africa, but Orascom's operations in Namibia, Zimbabwe, Burundi, Central African Republic, Algeria, Tunisia and Egypt slot into place around MTN's operations like the missing pieces of a jigsaw.

And the neat fit continues further east, with Orascom's operation in Pakistan sitting next to MTN's in Afghanistan and Iran.

The chairman of Orascom, Naguib Sawiris, has made it clear that he thinks telecom operators that want to remain global players need to form alliances.

He said recently that he believed there would be large scale consolidation in the telecom sector, and he has said that Orascom could be a party to that consolidation, or play the role of consolidator.

"All small and medium-sized operators are looking for appropriate M&A deals to be able to secure themselves a place on the new world map of telecom players," Sawiris said, predicting that by the year 2011, the operator market will look "significantly different".

It could be coincidence, but Orascom seems to have been tidying up a few loose ends lately; it settled its differences with France Telecom in the long-running dispute over Egyptian mobile operator Mobinil, and it also paid off a tax claim from the Algerian authorities relating to its mobile operator, Djezzy.

"Our interest when we consider M&As," Sawiris said at Mobile World Congress in February, "is to search for the partner who would provide the most synergies with our group to ensure maximum value addition through this marriage."

Could it be that in finding each other, MTN and Orascom have now found their perfect partners?

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