Fastlink sale eases Orascom woes
Orascom Telecom Holdings will now focus on ‘core operations’ in Egypt, Pakistan, Algeria and Tunisia after the sale of Fastlink.<br>
Orascom Telecom Holdings' (OTH's) sale of Fastlink to Kuwait's MTC has considerably eased the Egypt-based company's dire financial situation. Proceeds from the $424 million deal will be used to pay down debt and the company is now free to focus on what it describes as ‘core operations’ in Egypt, Pakistan, Algeria and Tunisia.
“Proceeds from the sale have been used to reduce debt and will help fund OT's existing core operations. The transaction represents the largest steps to date in the implementation of OTH’s plan to restructure its balance sheet,” the company said in a statement.
“As consideration for the stake in Fastlink, OT receives $373.9 million in cash, release from a $20 million loan which MTC has assumed in its stead, and an equity stake in Orascom Telecom Algeria formerly held by Fastlink.”
The deal with MTC values each Fastlink subscriber at around $475, a steal compared to the ridiculous rates European telcos paid for companies in the 1990s. But this is now a buyer's market and OTH’s dire need for cash made the sale inevitable.
In a report entitled, ‘Orascom's sale of Fastlink to MTC’, Arab Advisors notes the fact that Orascom has had to sell off a crown jewel, but that it had no choice if it was to steady its finances. “OTH will use the proceeds of this transaction to reduce its debts and finance other current operations,” says Arab Advisors analyst, Hala Baqain.
"This agreement illustrates another key milestone in the implementation of OTH's plan to restructure its balance sheet. The sale of Fastlink had another bright side to it for the regional operator, OTH. The share price of the operator increased immediately following the announcement of the sale which indicates the investors regaining their trust in OTH following its recent financial problems,” Baqain adds.
Naguib Sawiris, chairman of OTH, also declared himself happy with the deal. “Fastlink has been a tremendous investment for OTH, operating in a business friendly environment. This transaction now allows Orascom Telecom Holding to fully realise the value of one of its mature assets,” he said.
“The proceeds of the transaction will allow OTH to strengthen its balance sheet and substantially reduce its debt obligations. The company will remain focused on its high growth assets in Algeria, Egypt, Pakistan and Tunisia, and should reach a total of 5.4 million controlled subscribers by the end of 2002.”