June 26, 2019 / 3:54 PM / a month ago

UPDATE 1-VEON settles Egypt tax liability, paving way to buy Global Telecom shares

(Adds details, analyst comment)

By Patrick Werr

CAIRO, June 26 (Reuters) - Telecoms operator VEON Ltd has settled a tax dispute with Egypt, the finance ministry said on Wednesday, clearing the way for its potential purchase of the 42.3% stake in its Egyptian subsidiary Global Telecom Holding it does not own.

Amsterdam-based VEON has secured approval from Egypt's Financial Regulatory Authority to buy the outstanding 42.3% stake in Global Telecom for $600 million, or 5.08 Egyptian pounds per share, after agreeing to settle the tax liability for $136 million, the finance ministry and VEON said.

The share purchase could give the market a boost ahead of share offerings planned by the Egyptian government, analysts said.

"The wider expectation is that this will move the market," said Wael Ziada, head of investment company Zilla Capital.

"It will infuse a significant amount of cash into the market by taking out a stock with significant capitalisation and replacing it with cash that will start getting allocated to the existing stocks."

The mandatory tender offer must still be approved by other Global Telecom shareholders at a meeting scheduled for Aug. 27.

VEON has telecom operations in Russia and in Asia and North Africa.

It holds a 55.6% stake in Global Telecom, which operates the Djezzy network in Algeria, Mobilink in Pakistan and Sheba Telecom in Bangladesh. Global has negligible Egyptian operations despite its listing on the Cairo bourse.

VEON acquired Global Telecom's assets in 2011 when, as Vimpelcom, it took control of Egypt's Orascom Telecom.

It has sought to buy out the remaining portion of Global Telecom since 2013 but has stumbled on the question of outstanding tax liabilities, said Allen Sandeep, head of research at Naeem Brokerage.

"(The purchase) is crucial because it will unlock 10.1 billion Egyptian pounds ($607 million) that is held by local investors and foreign hedge funds," Sandeep said.

Egypt has announced that it will offer shares in several state-controlled companies, including Alexandria Container and Cargo Handling Co and Abu Qir Fertilizers and Chemical Industries Co. The offerings were delayed after turbulence in emerging markets in 2018. ($1 = 16.6500 Egyptian pounds) (Gdynia Newsroom; Editing by Susan Fenton)

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