By Abdel Latif Wahba and Mahmoud Kassem

April 15 (Bloomberg) — France Telecom SA and Orascom Telecom Holding SAE agreed to end a 2 1/2-year-old legal dispute about their ownership of the Egyptian Co. for Mobile Services.

The two companies, which jointly control the telecoms operator better known as Mobinil, will implement a new shareholder agreement without changing the company’s ownership structure, they said in a statement. “We have agreed to end the legal dispute,” Hani Serie-el Din, Orascom’s lawyer, said in Cairo after a meeting between the two companies yesterday.

The accord puts into question France Telecom’s plan to buy out minority shareholders in Mobinil, Eqypt’s largest mobile- phone operator by subscribers. The move would have brought France Telecom Chief Executive Officer Stephane Richard closer to his ambition of doubling emerging markets sales in the next five years. Richard said this month that France Telecom may spend as much as 7 billion euros ($9.6 billion) on deals in Africa and the Middle East in that period.

“The end of this 2 1/2-year-long dispute is a relief to Orascom Telecom’s shareholders with their company retaining its ownership in Mobinil,” Cairo-based investment bank CI Capital said in a research report today. “We tend to think that Orascom Telecom has managed to keep its ownership in the Egyptian Co. for Mobile services intact and strengthen its stronghold.”

Orascom Telecom shares rose 2.7 percent to 7.52 Egyptian pounds at 11:30 a.m. in Cairo trading, valuing the company at 47.8 billion pounds ($8.7 billion). Mobinil dropped 2.2 percent to 221 pounds while France Telecom declined 0.6 percent to 17.36 euros in Paris.

Clear and Sufficient

France Telecom owns about 71 percent of Mobinil Telecom, which controls Egyptian Co. for Mobile Services with a 51 percent stake. Orascom owns 29 percent in Mobinil Telecom and 20 percent in Egyptian Co.

France Telecom was told by regulators it had to bid for the outstanding shares of Egyptian Co. to implement an arbitration ruling to buy Orascom’s stake in Mobinil Telecom.

France Telecom had said it would pay 245 Egyptian pounds apiece for about 49 million shares owned by minority investors, a price Orascom rejected as too low. On April 10, an Egyptian court ruled that France Telecom’s $2.2 billion bid for minority shares in Mobinil was too low, because it was less valuable than an offer made to Orascom in an arbitration accord last year.

“We needed a clear and sufficient agreement and this is very good,” said Khaled Bichara, chief executive officer of Orascom, at a media conference in Cairo after his meeting with Jean Yves Larrouturou, France Telecom’s deputy chief executive officer, yesterday.

Accounting Change

France Telecom will change its accounting method to fully consolidate Mobinil under the agreement, which will also “avail Orascom operational rights commensurate with its co-owner and strategic partner position, in addition to significant protection and liquidity rights,” according to the statement. Orascom will consolidate its participation in Mobinil through “equity method.”

Cairo-based Orascom, headed by Egyptian billionaire Naguib Sawiris had said it won’t sell its stake at the earlier offered price.

France Telecom and Orascom, whose Egyptian partnership goes back to 1998, had been locked in an ownership dispute since December 2007.

The agreement, which will be completed in the coming weeks, include settlements for all the disputes between the shareholders, the statement said.

Lazard Ltd. advised France Telecom and Orascom.

To contact the reporter on this story: Matthew Campbell in London at mcampbell39@bloomberg.net; Abdel Latif Wahba in Cairo at alatifwahba@bloomberg.net

Source: Bloomberg.com

Orascom Telecom