INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

EGYPT PUTS WEIGHT BEHIND ORASCOM'S HUTCH STAKE

 THE political sensitivities and shareholding tussle in Hutch Essar Ltd (HEL) have a taken on a new turn. For the first time, the Egypt government has gone on record that if needed, it will give India “the necessary assurances about Orascom's impeccable global business credentials” to defuse concerns relating to India's national security.

The latest developments come in the wake of Egypt based Orascom Telecom's decision to have a representation at the operating subsidiary board level, in this case, HEL. Orascom's move comes by virtue of its 19.3% strategic holding in Hong Kong's Hutchison Telecom International, the principal foreign shareholder that controls just over 49% in HEL. Besides provoking differences between HEL's two biggest shareholders — Hutchison Telecom and Essar Group — in recent months, Orascom's indirect shareholding presence had induced national security concerns in sections of the Indian government, as reported by ET on March 8. More so, as Orascom Telecom runs mobile services in Pakistan and Bangladesh as well.

Talking to ET, on the supposed “security implications” of the Orascom-Hutch deal, Egypt's investment minister Dr Mahmoud Mohieldin said: “Everyone must realise that international investment is a two-way street. Orascom's recent mega deals in the telecom and construction businesses are governed by credentials.”

 “That Orascom operates mobile services in Pakistan and Bangladesh does not, in any way, question the political neutrality of the company. Egypt has good relations with both India and Pakistan and continues to maintain excellent relations with both countries. If required, Egypt will give formal assurances to the Indian government that this (the Hutch-Orascom deal) is only an international business deal based on credentials and returns,” he said.

Elaborating, the minister said: “I also understand that India has a sound telecom regulatory framework in place that protects the interests of local consumers and I'm certain Orascom will respect those rules.” Dr Mohieldin, who is one of the prime architects of the present FDI-related economic reforms sweeping through Egypt, also said the Orascom Group had recently closed several big-ticket deals in the telecom and construction fronts in Belgium, Algeria and Iraq, besides acquiring mobile licences in Pakistan and Bangladesh.

Orascom chose to buy into Hutch Telecom with an eye on Hutchison Essar. “Access to the growing Indian telecom market is considered crucial at Orascom since other wireless markets are experiencing saturation,” said a telecom analyst. The high stakes in the Hutch-Orascom deal have also assumed significance in the backdrop of Vodafone's recent decision to shell out $1.5 billion for a 10% stake in Bharti Airtel — India's largest private telecom company.