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Orascom thinks it has lost control over N. Korea's mobile network provider Koryolink

2015/11/23 08:04

By Chang Jae-soon

WASHINGTON, Nov. 22 (Yonhap) -- Egyptian telecommunications firm Orascom, which launched North Korea's first mobile network provider Koryolink in 2008, believes it has now lost control of the joint venture with Pyongyang, the company's latest financial results report showed.

The assessment underscores the difficulty in doing business in and with North Korea, one of the world's most closed nations that is known for flouting international norms and has long been under a string of international sanctions for its nuclear and missile programs.

Orascom has struggled with a series of problems in the North, including its inability to bring profits out of the heavily sanctioned nation. Adding to Orascom's woes, the North's government has also launched a competing local telecom operator wholly owned by the state.

Orascom has been in talks to merge the two operators, but Pyongyang wants to take control in case of a merger.

"In the group's management view, the control over the Koryolink's activities was lost," Orascom said in its third-quarter financial results report released last week, citing "a disagreement from the Korean side to grant the management the rights to control in case of the merger."

   Orascom has a 75 percent stake in Koryolink, with the North's communications ministry holding the rest.

Since starting the service in 2008, the number of subscribers has grown steadily to 3 million today, an impressive number considering that the North is one of the poorest nations in the world and government permission is necessary to buy mobile phones.

But the Egyptian firm has been unable to transfer its profits home due in part to international sanctions on Pyongyang and in part to problems associated with huge gaps between the government-set official exchange rate and the black market rate.

The North's government maintains the official exchange rate at about 100 won per the U.S. dollar, more than 80 times higher than black market rates, which are seen as the real value of the North Korean won.

At the official rate, Orascon's holding at the end of last year was worth $585 million, but it's worth only about $7.2 million at black market rates, according to Martyn Williams, a U.S. expert who operates North Korea Tech, a website specializing in North Korean affairs.

The dilemma is the North can neither pay the money at the official rate nor recognize the black market rate.

Orascom's "problem is that conversion at the official rate is only possible with permission from the government, and the government clearly doesn't want to let such a large amount of money leave the country and might not even be able to afford it," Williams said in an article on his website.

Still, Orascom Chairman Naguib Sawiris held out hope for a resolution.

"We are very proud of the success of our operation Koryolink. We have around 3 million people today carrying our phones in the DPRK," he said in a statement last week. "We are still hopeful that we will be able to resolve all pending issues to continue this successful journey."