France Tel, Agility to buy stake in Iraq's Korek
Paris, March 14, 2011
France Telecom and Kuwaiti logistics group Agility are to acquire a 44 per cent stake in fast-growing Iraqi mobile operator Korek Telecom, the groups said in a joint statement on Monday.
The two groups will form a joint venture, 54 per cent-owned by Agility, to control the stake, they said.
France Telecom, which said the move was in line with a strategy to expand in Africa and the Middle East, will pay $245 million for its 20 per cent indirect stake in Korek and will also extend a $185 million four-year loan to the Iraqi operator.
Agility will contribute existing convertible debt and will inject an additional $50 million for its 24 per cent indirect stake.
The Kuwaiti group, which is embroiled in a legal dispute with the U.S. government, saw its shares hit a one-month high on the news.
'The Iraqi market still has high growth potential and it only has three players. The deal seems attractive on a valuation point of view,' Nomura analyst Scott Darling said.
He estimated the valuation at 4.7 times enterprise value relative to 2011 earnings before interest, tax, depreciation and amortisation.
France Telecom has an option to increase its stake to 27 per cent in 2014. It would also be able to buy some of Agility's stake and control up to 51 per cent of Korek by 2016.
'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,' France Telecom chief executive Stephane Richard said in the statement.
The French group last year solidified its control of Egypt's Mobinil by settling a long legal war over ownership with its partner Orascom. It also spent 640 million euros ($889.7 million) to buy 40 per cent of Moroccan telecoms operator Meditel.
Korek, which is based in the semi-autonomous region of Iraqi Kurdistan, holds one of the country's three national mobile licences. It began a countrywide expansion in 2008 and has almost 3 million subscribers.
The group said it would use the proceeds for the payment of licence fees, reduction of outstanding borrowings and for improvement and expansion of network and services.
Shares of France Telecom slipped 0.3 per cent to 15.43 euros versus a 0.6 per cent drop in France's CAC 40 index.-Reuters