Algeria has said it will block a proposed deal in which South Africa’s MTN Group would acquire the Algerian assets of Orascom Telecom Holdings.

“The government is opposed to the planned deal between MTN and Orascom with regard to the company OTA [Orascom Telecom Algerie],” said a statement from the Algerian telecommunications ministry.

The ministry warned that “any transaction concerning OTA will be null . . . and could lead to the withdrawal of the . . . licence granted to the company”.

The ministry said Algeria had decided to exercise its “right of pre-emption to the entire capital of this company”, and said that any attempt to circumvent its decision could lead to “expropriating the current OTA shareholders”.

OTH has confirmed that it is in negotiations with MTN and that the talks.

Orascom’s Algerian operation has been the biggest earner for the group, accounting last year for more than half of its EBITDA from its telecoms operations. Total EBITDA amounted to was US$2.24 billion of which Algeria contributed US$1.07 billion.

MTN is understood to be interested in OTH’s other African assets, though Algeria had stood out as the South African operator’s primary target.

South African mobile operator MTN Group is in talks with Naguib Sawiris’ Orascom Telecom with respect to purchasing the latter’s African mobile phone businesses.

The talks are said to have begun as discussions about MTN buying Orascom’s Algerian mobile operator but expanded to include most of Orascom’s African businesses, according to people familiar with the situation.

Sawiris predicted consolidation of the telecom market in Africa, and said his company would be willing to participate in the process should the right opportunity presented itself

MTN, Africa’s largest mobile operator, confirmed in a statement on April 22 that it was in talks that “may or may not lead to a transaction”. It did not identify the other company.

Trading in Orascom’s global depositary shares in London was suspended pending an announcement by the company.

MTN’s move on Orascom, which has a market capitalisation of US$7 billion, reinforces Sawiris comments recently that the telecom market was set to consolidate and that he would be willing for his company to participate in that process.

MTN is reported to be considering buying most of Orascom’s African assets, including Algeria, Tunisia, Burundi, Central African Republic, Namibia and Zimbabwe.

It is understood that MTN is not interested in Orascom’s minority stake in ECMS, Egypt’s leading mobile operator. MTN is also not interested in Orascom’s mobile businesses in Canada, Pakistan, Bangladesh and North Korea.

Djezzy, Orascom’s Algerian business, is the biggest profit generator of its African assets, though Sawiris has been considering selling it since the Algerian government issued Djezzy with a US$597 million tax bill last year.

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Emirates Integrated Telecommunications Company (Du) announced today that it proposes to raise AED 1 billion (US$272 million) through a rights issue. The capital raised will fund an accelerated growth strategy.

An Extraordinary General Meeting (‘EGM’) will be held on May 11 to approve the increase in the company’s share capital and the issue of new shares to shareholders on a pro rata basis. The rights issue subscription period is expected to start on May 27 and end on June 8. The subscription price will be determined by the board on or about May 11, subject to final approval by shareholders at the EGM, at a price of up to AED 1.91 per new share.

Transaction rationale

· Deliver on commitment to customers by continuing to enhance network capabilities and expand fixed and mobile infrastructure;

· Invest in the next phase of growth by accelerating Du’s capital expenditure programme to become the preferred integrated telecommunications provider in the UAE; and

· Transform the company from a high growth early stage venture to a more mature company with efficient management of future funding requirements.

The founding shareholders of Du (Emirates Investment Authority, Mubadala Development Company and Emirates Communications and Technology LLC), holding approximately 80 per cent of the company, fully support the rights issue and have agreed to vote in favour of the resolutions to be proposed at the EGM. The founding shareholders have also agreed to take up their rights in full and oversubscribe for any new shares remaining after all other shareholders have had the opportunity to take up their rights and oversubscribe for additional new shares.

JP Morgan is acting as rights issue co-ordinator and bookrunner and Mashreqbank is acting as lead receiving bank for the rights issue.