The Algerian government has said it will block efforts by MTN to acquire the Algerian assets of Orascom in a move that could potentially derail negotiations between the two firms. “The government is opposed to the planned deal between MTN and Orascom with regard to the company OTA [Orascom Telecom Algerie],” said a statement from the Algerian telecommunications ministry, reports the Financial Times. It added that “any transaction concerning OTA will be null… and could lead to the withdrawal of the… licence granted to the company.” The ministry said Algeria had decided to exercise its “right of pre-emption to the entire capital of this company” and said that any attempt to circumvent its decision could lead to “expropriating the current OTA shareholders.” A spokeswoman for Orascom chairman Naguib Sawiris said he had asked to meet directly with the Algerian prime minister to clarify the issues raised by the Algerian authorities.

Orascom confirmed yesterday that it was in negotiations with MTN and that the talks “may or may not lead to a transaction relating to the acquisition of control of Orascom and/or its businesses by MTN.” MTN made a similar statement last week. The talks are understood to include most of Orascom’s African footprint, which also includes assets in Tunisia, Burundi, Central African Republic, Namibia and Zimbabwe. However, the Financial Times notes that Orascom’s Algerian operation has been the biggest earner for the group, accounting last year for around half its earnings (EBITDA) at its telecoms unit. Total EBITDA was US$2.3 billion with Algeria contributing US$1.1 billion. However, the Algerian network – which operates under the Djezzy brand – has run into problems recently. It was hit by a US$597 million tax bill, which negatively affected Orascom’s fourth-quarter results for 2009 (Orascom lost its appeal against the bill this month), while its shops in the country were targeted by rioters following the high-profile World Cup qualifier between Egypt and Algeria last year.