France Telecom, Agility, Take 44% of Korek

France Telecom-Orange and its partner Agility, a leading logistics company, have announced a binding agreement on Monday with the shareholders of Korek Telecom to acquire a 44% stake in the Iraqi mobile operator. France Telecom-Orange will contribute its marketing, commercial and technical expertise to reinforce Korek Telecom’s leading position in the Kurdistan region of Iraq (population of 5 million) and extend its operations in the rest of the country (total population of 33 million).

[To download a copy of the analysts’ presentation, please click here’]

A joint-venture will be formed by Agility (54%) and France Telecom-Orange (46%) which will provide Korek Telecom with new capital against 44% of its equity. Under the terms of the agreement between Agility and France Telecom-Orange, Agility will contribute its existing convertible debt and inject an additional payment of $50 million (36 million euros), in exchange for a 24% indirect stake in Korek Telecom and a $100 million (72 million euros) 4-year shareholder loan to Korek Telecom. France Telecom-Orange will pay $245 million (175 million euros) for a 20% indirect stake in Korek Telecom, and will extend a $185 million (132 million euros) 4-year shareholder loan to Korek Telecom. France Telecom-Orange estimates that the implied EV/EBITDA multiple attributable to Korek Telecom’s Kurdistan operations is below 5 times.

Korek Telecom will use the entire proceeds for the payment of license fees, reduction of outstanding borrowings, and for improvement and expansion of network and services.

In addition, France Telecom-Orange will have the opportunity to exercise an option in 2014 to increase its indirect stake in Korek Telecom to 27% 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-Orange, resulting in France Telecom-Orange’s indirect interest in Korek Telecom increasing up to 39% in 2014 and up to 51% as from 2016.

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