September 27, 2010 / 6:41 AM / 7 years ago

Algeria hits Orascom unit with new back taxes-sources

3 Min Read

<p>A Telkom Kenya employee arranges new mobile phones at one of their outlet in the capital Nairobi, September 17, 2008.Antony Njuguna</p>

ALGIERS (Reuters) - Algeria has decided to demand new back-taxes from Orascom Telecom's local unit, industry and government sources said, deepening the firm's problems as it prepares to sell the unit to the Algerian state.

Algeria's central bank has also notified justice officials about a suspected false declaration by the Director-General of the Algerian unit relating to its financial operations, the same sources told Reuters.

An Orascom Telecom spokeswoman at the company's headquarters in Cairo and a spokesman for the Algerian unit, Djezzy, both said they had no comment when contacted by Reuters about the back tax demand and the central bank complaint.

Orascom Telecom agreed to talks on selling Djezzy to the Algerian state after the unit was hit with previous back-tax claims totalling over $600 million and the Algerian government blocked a plan to sell it to South Africa's MTN

Orascom Telecom's chairman Naguib Sawiris has accused the Algerian authorities of pressuring Djezzy, but Algeria's Telecommunications Minister last week denied that and said his government was only upholding the law.

Asked by Reuters about the back tax demand, an Algerian Finance Ministry official declined to comment. An official with the Banque d'Algerie, or central bank, said no one was available to comment.

"A decision has been taken to impose new back taxes on Djezzy. Notification will be received in the next few days. We are talking about several million dollars," said a source close to Algeria's telecoms industry.

"A complaint has been lodged by the Banque d'Algerie against the director-general of Djezzy," said the source, who did not want to be identified.

Wrangling

The new back tax claim and the central bank complaint were confirmed by a government official with direct knowledge of Djezzy's dealings with the government, who spoke on condition of anonymity.

The government official declined to give a figure for the size of the back-tax claim.

Djezzy has been Orascom Telecom's biggest single source of revenue, but after months of wrangling the Egyptian firm agreed to talks on selling it to the Algerian government.

Analysts have predicted a new battle over the sale price. Orascom Telecom previously valued Djezzy at $7.8 billion, while the Algerian government has appointed a local accountancy firm to make a valuation.

Sawiris is in talks to merge his holding company Weather Investments, which owns just over half of Orascom Telecom as well as operators in Italy and Greece, with telecoms group Vimpelcom. But analysts say uncertainty around Djezzy could scupper the deal.

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