France Telecom has finally confirmed rumours that have been circling since December, announcing plans to take a sizeable stake in Iraqi mobile operator Korek Telecom.
Under the deal announced on Monday, France Telecom will form a joint venture with logistics company and investment partner Agility, which will take a 44 per cent stake in Korek. Agility will own 54 per cent of the JV and will contribute its existing convertible debt and inject an additional payment of $50m (€36m), in exchange for a 24 per cent indirect stake in the Iraqi firm, as well as a $100m four year shareholder loan to Korek. France Telecom will own 46 per cent of the JV, and will pay $245m for a 20 per cent indirect stake along with a $185m four year shareholder loan.
Korek will use the entire proceeds for the payment of license fees, reduction of outstanding borrowings, and for improvement and expansion of networks and services. France Telecom will contribute its marketing, commercial and technical expertise to help Korek improve and extend its operations.
In addition, France Telecom will have the opportunity to exercise an option in 2014 to increase its indirect stake in Korek Telecom to 27 per cent and, in the process, gain indirect control of the company, thereby consolidating Korek Telecom in its accounts. If this option is exercised, Agility will be able to sell part of its indirect stake in Korek Telecom to France Telecom.
Stephane Richard, France Telecom’s chairman and CEO, said: “The acquisition of this stake in Korek Telecom is a new step in our policy of expansion outside Europe, and contributes to our stated aim of doubling our revenues in Africa and the Middle East by 2015.”
According to Informa WCIS, Iraq has a penetration rate of 75 per cent as of the end of 2010. Korek is the country’s third placed carrier with just over 3.1 million users, ahead of Sanatel with 627,000. Zain leads the pack with over 12 million subscribers, followed by Asiacell with 8.1 million.