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Talks over Vimpelcom's Djezzy at delicate stage: source

MOSCOW/CAIRO (Reuters) - Russia-focused telecoms firm Vimpelcom's talks to sell a controlling stake in its Algerian mobile business Djezzy to Algeria are at a delicate stage but have not failed, a source with knowledge of the discussions said on Wednesday.

Algeria wants to nationalize Djezzy and has pushed Vimpelcom into discussing a sale of a 51 percent stake.

A report by Dow Jones earlier said that talks had ended in failure, citing two officials close to the matter.

The source told Reuters that there might be further clarity on the issue in coming days.

Vimpelcom declined comment. Algerian Finance Minister Karim Djoudi, who has been handling the issue, told reporters two weeks ago he would not comment until a deal was concluded.

Vimpelcom took over Djezzy as part of a $6 billion deal agreed in 2010 to buy assets from Egyptian company Orascom to help Vimpelcom diversify outside Russia.

Vimpelcom together with subsidiaries owns 51.92 percent of Orascom Telecom. Djezzy is Orascom's most lucrative asset.

A main point of contention is a ban on foreign exchange transfers enforced by the Bank of Algeria in 2010 on Orascom Telecom Algeria, which operates under the commercial brand Djezzy. The ban prevents it from buying equipment abroad.

The government in March 2012 slapped a $1.3 billion fine on Djezzy for violating the foreign currency regulations, souring the talks and prompting Vimpelcom to announce it would seek to international arbitration against Algeria.

Vimpelcom Chief Executive Jo Lunder said in January that negotiations in Algeria were still in progress. Vimpelcom also said at the time that it hoped to retain an interest in Orascom's Algerian business.

A government source told Reuters earlier in May that the Algerian government would seek a new valuation for Djezzy before acquiring the 51 percent stake.

One possible complication is that Russian billionaire Mikhail Fridman's Altimo group - which owns 47.85 percent of Vimpelcom - in April launched a $1.8 billion offer to buy out minority shareholders of Orascom. Orascom's management last week recommended shareholders reject the offer.

Orascom said on Wednesday it was "not a party to any negotiations between the Algerian government and Vimpelcom concerning the buy offer and the expected agreement." It also said Vimpelcom had not informed the company of any developments in this matter.

A spokesman for Altimo said the company was not a party to the negotiations.

(Reporting By Megan Davies in Moscow and Patrick Werr in Cairo; Additional reporting by Hamid Ould Ahmed and Lamine Chikhi in Algeirs and Anastasia Teterevleva in Moscow; Editing by Douglas Busvine and Jane Merriman)

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