Orascom said to face complications over NK merger

20 Aug 2015

North Korean operator Koryolink's plan to merge with new operator Byol is reportedly facing complications due to sanctions and red tape.

Koryolink's parent company, Egypt's Orascom, disclosed last month that the company is facing competition in North Korea in the form of a second mobile operator. This operator was subsequently revealed to be cable broadband ISP Byol.

While Koryolink revealed it was discussing a possible merger with the new operator, analysis of financial statements by Deloitte suggests that this may prove difficult, UPI reported.

As disclosed by Orascom, the company is facing difficulty transferring its profits outside of North Korea due to financial sanctions, coupled with the fact that the fixed exchange rate does not reflect the true value of the North Korean won.

The official exchange rate is 100 won to the dollar, while the true value is estimated at around 8,200 won to the dollar. This could pose problems with the operator seeking to pay for the acquisition.

A merger would also have reduced Orascom's revenue share from Koryolink. The Egyptian operator owns 75% of its North Korean subsidiary. Koryolink's cash reserve is estimated at around $630 million – a significant cash pile that cannot easily be taken outside the country.

The terms of the proposed merger would reportedly have kept Byol's mobile operations separate to break Koryolink's monopoly.

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