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Orascom Telecom, the fast-growing Cairo-based telecoms operator, is taking a stake of just under 20 per cent in Hutchison Telecom, a unit of Hutchison Whampoa, as part of a strategic agreement designed to combine the two companies’ mobile operations in many emerging markets.

The deal is a coup for Naguib Sawiris, chief executive of Orascom, whose stated aim is to emulate Vodafone by building a mobile empire. The combination with Hutchison means the two groups have a combined subscriber base of 40m but an addressable footprint of 2bn in markets where penetration is generally still low.

The established western mobile operators, including Vodafone, are now desperately looking for growth in emerging markets as their core western markets reach saturation point. Vodafone recently overpaid in an auction to beat Middle Eastern rivals, including Orascom, to buy Telsim, Turkey’s second largest operator, for $4.6bn.

Mr Sawiris told the FT the deal was the first step towards taking a bigger stake in Hutchison Telecom. “There are no more greenfield markets today. Our logic for this acquisition is simple. [Hutchison has] done a great job of getting to places we want to go, but we were too late. This deal is about getting into these markets with a long-term partner whose focus is not necessarily on telecoms.”

The two groups will combine procurement and sign roaming agreements bet-ween all the mobile operations, which are complementary – for instance, Hutch-ison has operations in India and Sri Lanka, while
Orascom has businesses in Pakistan and Bangladesh.

Orascom said on Wednesday it would pay $1.3bn for a 19.3 per cent stake in Hutchison Telecom. As part of the deal, the two partners have agreed to a two-year standstill period after which both parties will have rights of first refusal on any sale. Orascom also has the first call if Hutchison Whampoa chooses to sell down more than 10 per cent in Hutchison Telecom.

As a result of the deal, Hutchison Whampoa, which also owns 3, a separate mobile business, will see its holding in Hutchison Telecom fall to 49 per cent, with the remainder of the shares listed.

Copyright The Financial Times Limited 2017. All rights reserved.
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