France’s Orange moves closer to IPO of MidEast, Africa operations

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France’s biggest telecoms group Orange is bringing its operations in the Middle East and Africa into a single entity, paving the way for a potential listing of the operations that could raise cash to invest in overseas expansion.

The Middle East and Africa, where Orange has a presence in 18 countries, is the company’s fastest-growing market, generating annual sales of about 5 billion euros ($5.6 billion).

The region makes a large chunk of its revenues from payment transfers - a key part of the group’s diversification into financial services.

“Orange has decided to bring together all our regional activities in a single company, OMEA (Orange Middle-East and Africa), to create a separate entity and provide the Group with various options for growth,” Orange said in a statement, following the inauguration of its local headquarters in Casablanca, Morocco.

“An IPO (initial public offering) of OMEA is one of these potential scenarios, and the decision will depend on a number of factors, including strategic opportunities and market orientation, always with the central criterion of accelerating the growth of this business,” it said.

The Paris-based group, which competes with the likes of Vodafone-controlled Vodacom, Airtel Africa and South Africa’s MTN in the region, has been weighing a listing of its operations there for about six years.

At Orange’s last investor day in December, Chief Executive Officer Stéphane Richard said the group was “technically ready” for a potential listing of the combined operations, adding a possible expansion in Ethiopia could be a catalyst for the IPO.

The combined enterprise value of the operations amounts to about 10 billion euros, an analyst said.

That valuation was echoed by a source close to the matter, who confirmed earlier reports that Morgan Stanley and BNP Paribas were working as global coordinators for a listing.

This valuation is based on a OMEA’s yearly core operating profit of 1.7 billion euros in 2018 and a premium to the valuation of Airtel Africa, which trades at 5.5 times its expected core earnings, the same source said.

Morgan Stanley had no immediate comment. BNP Paribas declined to comment.

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