Orascom Telecom EGM agrees $800 mn rights issue

CAIRO, EGYPT: Shareholders of Egypt's Orascom Telecom (OT) on Sunday backed an $800 million rights issue to strengthen the firm's balance sheet as it works to resolve a dispute with Algerian tax authorities.

Market heavyweight Orascom had said it would use the proceeds to cover any cash shortfall after Algeria ruled the firm owed $596.6 million in back taxes and penalties.

Orascom, whose Algeria unit operates a network under the brand name Djezzy, will put up 20 percent of the disputed amount as a legal step that will allow it to appeal against the ruling, spokeswoman Manal Abdel Hamid said.

But the funds for the payment of roughly $119 million will come from Djezzy's cash balances and not from the capital increase, she said.

"It is a prerequisite to discuss the rest," she said, adding that the company would file the appeal shortly. "It is possible for the entire 20 percent to be refunded in full".

RIGHTS ISSUE

Shareholders gave Orascom's board authorisation to make the rights issue in a hand vote, a Reuters correspondent present at the meeting said. The cash call still needs Egyptian regulatory approval before it can go ahead.

Orascom board member Alex Shalaby said the new capital will tide the company over while it carries out already planned expansion. Algeria is responsible for more than 50 percent of Orascom's cash flow, he said.

Djezzy had revenue of $1.8 billion in 2007.

"There's Canada, there's growth in Bangladesh. There are lots of opportunities," Shalaby told Reuters. "Anticipating maybe some potential difficulty in financing the growth, the board decided to ask the general assembly for approval of this rights issue."

Orascom earlier this month won approval in Canada to go ahead with a startup wireless operation called Globalive, in which it owns an indirect stake.

Orascom said earlier that its parent company Weather Investments had committed to subscribing to 51 percent of the capital increase and would cover any shortfall.

Weather Investments is the ownership vehicle of billionaire businessman Naguib Sawiris, and controls 50.6 percent of Orascom, according to Reuters data.

Orascom runs mobile phone operations from North Africa to North Korea.

Algeria, in its tax ruling, said Orascom had not kept proper accounts in 2005-2007. Orascom said at the time the ruling was based on an "unfounded and unacceptable allegation" and that it would challenge the assessment.