Monday, Feb 13, 2012

- France Telecom's deal may be worth EUR1.5B - source

- Operation is part of France Telecom's strategy to focus on fast-growing emerging markets

- OTMT would retain 5% stake in ECMS

By Max Colchester and Inti Landauro

Of DOW JONES NEWSWIRES

(Adds comments from source, details from France Telecom and background.)

PARIS (Dow Jones)--France Telecom SA (FTE.FR) said Monday that it is in advanced discussions with Egyptian mobile operator Orascom Telecom Media and Technology Holding SAE (OTMT.CI) to increase its stake in their Egyptian telecom joint venture, a deal which could be worth up to EUR1.5 billion.

The French telecom company has made a non binding offer of 202.5 Egyptian Pounds a share for most of the stake that OTMT owns in the mobile joint venture called ECMS, a Cairo-listed company commonly referred to as Mobinil.

In a statement, France Telecom said it would then launch a tender offer the same price for the 29% of ECMS that is floated on the market. OTMT will keep 5% of ECMS, the same voting rights as before the deal and have a representative on the board of the mobile company.

As it stands, France Telecom owns 36.4% of ECMS, while OTMT controls 34.6% of the company.

At current exchange rates it would cost France Telecom around EUR1.5 billion to buy out OTMT's stake and the remaining free float, according to a person familiar with the matter.

The deal comes as France Telecom looks to consolidate its position in Egypt, one of its largest emerging market operations. Orascom has the right to exercise an option in September which would force France Telecom to buy its stake at a price around 240 Egyptian pounds a share. To avoid this, France Telecom is looking to close a deal before the option could be exercised.

Mobinil, which generated 10.58 billion Egyptian Pounds in 2010, has been a source of controversy for France Telecom in the past. During last year's Arab uprisings France Telecom was criticized after the Egyptian army forced Mobinil to send texts to its customers warning them not to protest against the government. In an attempt to avoid further political turbulence, France Telecom wants to shore up the remaining stake in the company while allowing OTMT to continue to have a say in the running of the company, a person familiar with the matter said.

-By Max Colchester and Inti Landauro, Dow Jones Newswires; +33 1 4017 1740; inti.landauro@dowjones.com

(END) Dow Jones Newswires

13-02-12 1027GMT