Orascom Telecom: Risks of Internationalization

Orascom Telecom Holding S.A.E. (OTH) was established in 1998 in Egypt and had grown exponentially to become one of the major players in the global telecommunications market. OTH was considered to be among the largest and most diversified network operators in the Middle East, Africa and South Asia.

Orascom Telecom Algeria (Djezzy) was launched in February 2002 and it grew to become the market leader in terms of both subscriber numbers as well as the quality of telecommunications services provided. Djezzy served more than 14.7 million subscribers on its network and had a 62.9 per cent market share.

After the great success Orascom had realized in Algeria, Orascom wanted to further expand. The manager thought that India could also be a great opportunity in which Orascom could expand its business. In 2006, OTH agreed to acquire a 19.3 per cent stake in Hutchison (HTIL) to penetrate the Indian market. India was an excellent opportunity as there were strong complementary similarities between Orascom and Hutchinson Telecom: both were successful operators offering mobile services in countries with large populations and low penetration levels of telecommunications services. However, despite this appearing to be an excellent opportunity, Orascom was not able to complete this operation because it did not consider the expenses in an accurate way and many factors were ignored, concentrating only on the positive aspects.

The purpose of the Orascom case is to help students understand the risks of internationalization and to develop a way of critical thinking in order to assess the requirements of a business to be successful.

The case is used to assess the risks of internationalization in different contexts. Orascom Telecom Company witnessed two very different failures. However, there was something in common: both incidents reflected the risks of internalization. With these two failures in mind, the purpose of this case is to develop an overall strategy to deal with the risks of internationalization that Orascom might face in the future. What lessons should be learned from this experience? What should be done to prevent similar risks to Orascom's further internationalization?