Algerian telecom Djezzy sees path forward

Djezzy

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A tax dispute behind it, Djezzy receives approval to expand its 3G network in the fast-growing mobile market.

Djezzy, a long-troubled Algerian telecom, says it is on a path to growth after receiving approval to upgrade its network to 3G nationwide.

The upgrade could put Djezzy on a par with rival companies Mobilis, which offers 3G coverage in all 48 of Algeria’s provinces, and Ooredoo, which offers 3G in 36 provinces.

Djezzy currently has more than 18 million subscribers, almost half the market, but it offers 3G coverage in only 30 provinces. The company, in which the Algerian government has a 51 percent stake, said it would extend service to the remaining provinces this year.

Tax dispute slows Djezzy growth

Algeria’s mobile market is booming. However, Djezzy’s growth has been slowed by a lengthy dispute over back taxes that culminated in the Algerian government’s purchase of a majority share in the company in 2014.

VimpelCom, owned by Telenor ASA of Norway and Russian billionaire Mikhail Fridman, retained the remaining 49 percent of the Djezzy, and continued to operate Djezzy through their Optimum Telecom Algeria.

VimpelCom recently reaffirmed its commitment to the Algerian market.

Company will expand 3G nationwide in 2016

Vincenzo Nesci, executive chairman of Optimum Telecom Algeria, said in March that the company had received government authorization to deploy 3G services in all provinces of the country and would implement the expansion during the during the ‘first months’ of 2016.

The expansion follows a long period of crisis for the company.

The Algerian government barred Djezzy from importing SIM cards and other equipment starting in 2010 and the Algerian central bank blocked overseas transfers of funds – including paying dividends to the parent company – in a dispute over taxes Algeria said the company owed.

The government said Djezzy, at the time the country’s largest operator with 14 million subscribers, owed $600 million in back taxes.

Government buys share of company

Algerian regulatory hurdles also derailed a proposed sale of Djezzy to MTN, a telecom based in South Africa, for $7.8 billion.

Instead, the Algerian government bought a majority stake in Djezzy in 2014, in a deal that provided the parent company with $4 billion in cash and dividends after paying a fine of $1.3 billion to settle the Algerian tax claims.

Djezzy faces competition from two other major mobile network operators, Mobilis and Ooredoo, seeking to serve Algeria, which has a population of about 40 million.

Djezzy leads market, lags in 3G

According to an August 2015 report by Algeria’s Post and Telecommunications Authority, Djezzy leads in the total number of subscribers with 18.6 million, nearly half of the market. Mobilis has 13 million subscribers and Ooredoo has 11.7 million.

However, Mobilis leads in 3G subscribers, with 3.8 million, followed by Ooredoo with 3.4 million. Djezzy brings up the rear in 3G with only 1.25 million subscribers.

The regulatory agency said the market grew by 22.7 percent in 2014, compared to 2013. The total market generated revenues of about $3 billion in 2014, 8 percent higher than in 2013.

One study found that Algeria was one of the fastest growing mobile markets in the region along with the United Arab Emirates and Saudi Arabia, while the market was stagnant in Egypt, Kuwait and Israel.

Mobile revenue in the Middle East and North Africa was expected to grow from a total of $50.4 billion in 2013 to $59.1 billion in 2018. As more people consume information on their mobile devices, the study said primarily spending on handset data would drive growth.

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