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Orascom vs. Algeria

 In a lingering conflict that underscores lack of transparency and weak business rules, the case of Orascom Telecom Algerie (OTA), which has raised a great deal of concerns in foreign investor circles, has not been settled yet. It underscores that the rules of engagement when doing business in Algeria are still unclear and that many leaders of foreign companies remain dangerously ignorant of operating conditions and the business environement in the North Africa country.

Not understanding the culture surrounding business affairs there could lead to unexpected outcome. The country is one of the most und
 erperforming economies in the world due to stifling bureaucracy, inefficient administrations, arbitrary actions, and a legal system in need of a major overhaul, among other things. And nationalistic sentiments often surpass logical economic factors given the political climate. Although in this report, we are not necessarily siding with Orascom given that many key facts are still unknown, there is no doubt that Algeria’s substandard, inefficient and costly business environment are part of the problem and feed into the feud pitting Algeria against Orascom one way or another. 
 In broad terms, Orascom Telecom is not in a terminal phase at present, despite news of it seeking to contract loans of $350 million to refinance debt. Indeed, the Egyptian firm released its first quarter 2011 results showing a relatively good performance. The quarter was solid despite the political crises affecting the region with financial improvements attributed to the sale of its stake in a Tunisian holding and a growth in revenue in its Algerian unit.

The published figures show that sales reached $949 million, increasing by 5% over the same period last year as a result of strong growth in all GSM operations. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) grew 11% year on year to US$ 437 million due to what the company considers to be a solid performance across all the GSM subsidiaries. Group EBITDA margin stood at 46%, an increase of 2% compared to Q1 2010. It stood at 59.4% for its Algeria unit Djezzy, Mobilink with 40.3%, Banglalink with 35.7%, and Koryolink 87.6%. 

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