France Telecom fights on in Egypt

In yet another twist in the long struggle between France Telecom and Orascom Telecom over control of Egypt’s biggest mobile operator, ECMS, France Telecom said it will use all national and international legal channels to challenge the Egyptian market authorities' rulings and re-establish its rights.

Yesterday the Egyptian Capital Market Authority (CMA) rejected the proposal made by France Telecom on 19 May for a tender offer to ECMS shareholders at 237 Egyptian pounds per share (€30.32).

In response, the French incumbent says it will no longer pursue its offer for ECMS shares.

In a statement, France Telecom said the price represents a 58% premium on the 5 April 2009 closing price (the last price before the arbitration ruling was announced) and a 43% premium on the latest six month weighted average.

In March, France Telecom won an arbitration case, obliging Egypt’s Orascom to sell its 28.75% stake in Mobinil, a holding company that owns 51% of ECMS, to France Telecom. The French operator was to pay Orascom €530 million ($699 million) for it. FT already owns 71.25% of Mobinil but, under the terms of a shareholder agreement with Orascom, the French company did not control ECMS.

The International Chamber of Commerce in Geneva set a deadline of 10th April for the exchange to take place, but FT failed to come up with the money on the grounds it had not received the securities. Orascom extended the deadline, but FT then insisted that in accordance with the ruling, Orascom must also pay it a fine $50,000 for every day it held onto the securities after the deadline.

Orascom declined, blaming FT for the delay.

France Telecom’s statement continued, “The Egyptian market authorities have decided on the one hand to block the execution of an enforceable arbitration ruling by the International Chamber of Commerce, and on the other hand to reject the proposed public offering on a highly questionable basis, despite the fact that it is based on a price determined following talks with the market authorities themselves.

“In addition, France Telecom highlights that as the arbitration ruling was not challenged within the required legal deadlines, it is consequently "executable in its form and substance" as confirmed on 7 May by the District Court of Geneva, the same jurisdictional district as the Arbitration Court.”