Orange and Agility to buy 44% stake in Korek
The binding deal is part of the Iraqi mobile operator’s expansion plans in the country
French incumbent, Orange Group, and its partner Agility, plan to acquire a 44% stake in Iraq's third mobile operator, Korek Telecom. The two companies have signed a binding agreement with Korek Telecom.
Orange and Agility are to form a 46:54 joint venture that will provide Korek Telecom with the new capital from its 44% equity. The closing of the deal is subject to approval of the Iraqi Communications and Media Commission, and is expected to take place in the next few weeks.
Under the terms of the agreement, Orange is to contribute its marketing, commercial and technical expertise to Korek Telecom in the already operational Kurdistan region of Iraq while also extending it to the rest of the country. The population of the Kurdistan region and the rest of the country total 5 million and 33 million respectively.
Stephane Richard, chairman and CEO of Orange, said: "The acquisition of this stake in Korek Telecom is a new step in our policy of expansion outside Europe, and contributes to our stated aim of doubling our revenues in Africa and the Middle East by 2015."
The deal will see Agility contributing its existing convertible debt and injecting an additional payment of $50 million, in exchange for a 24% indirect stake in Korek Telecom and a $100 million 4-year shareholder loan to Korek Telecom. While Orange will be paying $245 million for a 20% indirect stake in Korek Telecom, it will also extend a $185 million 4-year shareholder loan to Korek Telecom.
Korek Telecom is to use the entire proceeds for the payment of license fees, reduction of outstanding borrowings, and for improvement and expansion of network and services, according to a company release.
It is stated that in 2014 Orange will also have the opportunity to exercise an option to increase its indirect stake in Korek Telecom to 27%, which will allow the operator to gain indirect control of the company. This option, if it materialises, will enable Agility to sell part of its indirect stake in Korek Telecom to Orange, resulting in Orange's indirect interest in Korek Telecom increasing up to 39% in 2014 and up to 51% as from 2016.
Korek Telecom was awarded the license to be Iraq's third mobile operator in 2007 along with Zain Iraq and Asiacell.