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VimpelCom open to sharing ownership of Djezzy with Algerian government

One of the key bones of contention in the VimpelCom – Orascom merger has been the Algerian government’s claim that it was promised ownership of Orascom’s Algerian operations, branded Djezzy.

Although negotiations between the Egyptian operator and the Algerian government have stalled, a solution to the dispute could be in sight, as one of VimpelCom’s major shareholders has suggested that the Russian operator and the Algerian authorities could share ownership of Djezzy.

The issue has threatened to delay the US$6.6 billion merger between VimpelCom and Orascom’s parent company Weather Investments, and shareholders are evidently keen to find a solution. The suggestion comes from Alexei Reznikovich, the CEO of Altimo, a branch of VimpelCom shareholder Alfa Group that deals with telecoms investment.

Reznikovich is reported to have deemed a shared ownership agreement between VimpelCom and the Algerian government to be “reasonable”, adding that “VimpelCom could be present in the Algerian market in some way as well.”

The Altimo CEO declined to offer an opinion on the strained negotiations between Orascom and the Algerian government, but intriguingly suggested that tensions might be assuaged and the process eased by the intervention of the Russian state, saying "the Russian government's support would be useful, but the problem is complicated."

Orascom had intended to sell Djezzy prior to the announcement of the VimpelCom merger; the Algerian authorities rejected this, claiming that the local operator should be nationalised. Relations deteriorated further when Orascom was issued a tax bill for US$230 million by the Algerian state.

The issue has been cited by many observers as the key reason that the merger agreement has not yet been signed, although the original deadline was for the end of November. However, Reznikovich has stated that “it looks realistic that the deal may be closed in the middle of the first half of 2011”, following VimpelCom’s announcement that it expects the agreements to be signed this month.

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