Algerian events burden Orascom’s Q4 results

Orascom Telecom Holding (OTH) posted a net loss of US$46.4 million during the quarter ending December 31, 2009, largely impacted by recent unfavourable events in Algeria. The group reported a net profit of US$318 million for the full year, 26 per cent lower than 2008. Annual revenues declined by 4.9 per cent to US$5.06 billion.

Executive chairman Naguib Sawiris said the company would reconsider its investment in Algeria, if it becomes clear its investment is not wanted there

The operator ended the year with 92.85 million subscribers, a growth of 19 per cent over the previous year’s figure of 78 million. This is broken down by subsidiary as follows: Mobilink Pakistan 30.8 million; Mobinil Egypt 25.4 million; Djezzy Algeria 14.6 million; Banglalink 13.9 million; Tunisiana 5.2 million; Telecel Globe (Burundi, Central African Republic, Namibia, Zimbabwe) 1.8 million; Alfa Lebanon one million; and Koryolink North Korea 91,700.

ARPUs declined by 13.4 per cent in 2009 from US$6.60 to US$5.70.

The recent riot events in Algeria following the football match between Algeria and Egypt incurred significant losses for the firm. OTH estimates the impact of the riots on fourth quarter 2009 EBITDA to be around US$55 million, made up of loss of revenue opportunity, damages to stock (SIM and scratch cards, handsets) and provision for taxes.

In addition, the company is still involved in a dispute with the Algerian government over a backdated US$600 million tax bill for the fiscal years 2004 to 2007. On March 7, Algerian tax authorities rejected an appeal from OTH filed in December for a tax reassessment. OTH intends to file an appeal before the Central Commission, which under Algerian law requires payment of 20 per cent of the balance of taxes and penalties alleged to be owing, equating to around US$110 million.

Executive chairman of OTH Naguib Sawiris commented, “We are keen to stay in Algeria; it is one of our main assets and until this incident we were very happy there. However, we need to understand if our investment is welcome there or not. If not, we will consider other options. As always, we consider our strategic position in each country in which we operate to maximise shareholder value.”