Bloomberg News

VimpelCom Banks on New Services From Golden Telecom

February 12, 2008

OAO VimpelCom (VIP:US), Russia's second- largest mobile-phone company, is banking on new services such as video-on-demand after its $4.3 billion purchase of Golden Telecom Inc. creates Russia's first integrated phone operator.

``Video on the handset and video through Internet, video-on- demand, will certainly be part of the exercise,'' VimpelCom Chief Executive Officer Alexander Izosimov said in an interview at a technology and media conference in Barcelona late yesterday.

Moscow-based VimpelCom, along with domestic competitors OAO Mobile TeleSystems and OAO MegaFon, is looking to provide new services to sustain growth in Russia's saturated market. VimpelCom, present (VIP:US) in six former Soviet countries beside Russia, with more than 63 million subscribers, needs fixed-line provider Golden Telecom to branch out into services such as broadband.

VimpelCom wants to capitalize on both fixed-line and mobile broadband. Izosimov declined to provide a timeline or any other details for such services. He said voice usage in Russia will continue to expand, providing ``double-digit growth'' over the next few years.

Deutsche Bank AG raised its price recommendation on VimpelCom today by 9 percent to $47 on the Golden Telecom deal. VimpelCom shares (VIP:US) rose as much as 7.7 percent and traded 6.9 percent up at $37.05 as of 11:06 a.m. in New York, valuing the company at $38 billion.

`Broadband Boom'

``The acquisition would boost VimpelCom's earnings growth profile, with its new integrated business model making it a major beneficiary of the unfolding broadband boom and continued strong corporate demand growth in the Russian regions,'' the Moscow- based unit of Deutsche Bank said in a note to investors today.

Golden Telecom will give VimpelCom more than $1 billion in additional annual revenue, more than 400,000 new broadband Internet customers and a foothold in fixed-line services. Russian Telecommunications Minister Leonid Reiman said yesterday he expects broadband subscribers to double this year, from 2007's 4.8 million in Russia.

ABN Amro Bank NV, Barclays Plc, BNP Paribas SA, Calyon, Citigroup Inc., HSBC Holding Plc, ING Groep NV and UBS AG agreed last week to provide $3.5 billion in loans to finance the Golden Telecom purchase, according to a U.S. Securities and Exchange Commission filing dated Feb. 8.

To contact the reporters on this story: Marcel van de Hoef in Amsterdam at mvandehoef@bloomberg.net Lyubov Pronina in Moscow at lpronina@bloomberg.net.

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net.


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Companies Mentioned

  • VIP
    (VimpelCom Ltd)
    • $7.96 USD
    • -0.23
    • -2.89%
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