VimpelCom Completes Wind Merger and Plans Spinoffs of Units
April 15, 2011, 2:46 PM EDTBy Diana ben-Aaron
(Updates with Altimo plan to end shareholder agreement in 14th paragraph.)
April 15 (Bloomberg) -- VimpelCom Ltd., Russia’s third- largest wireless carrier by subscribers, completed its merger with Wind Telecom SpA to create the world’s sixth-largest phone company by subscriber numbers.
Operations in Egypt and North Korea will be spun off to shareholders in Wind’s Orascom Telecom Holding SAE unit, North Africa’s biggest mobile network operator, while the company will work to keep Orascom Telecom’s Djezzy unit in Algeria, Amsterdam-based VimpelCom said today in a statement. Wind Chief Executive Officer Khaled Bichara will become president and coordinate actions aimed at cost savings of $2.5 billion.
“If we show a semblance of success, which I’m sure we will, that will probably motivate other companies to follow in our path” of creating bigger phone operators, VimpelCom CEO Alexander Izosimov said today in a telephone interview.
VimpelCom announced its plan to buy assets from Egyptian billionaire Naguib Sawiris on Oct. 4. The deal, valued at about $6.5 billion at the time, doubles VimpelCom’s mobile-customer base to about 181 million in 20 countries, adding subscribers in Italy, Pakistan, Bangladesh and Zimbabwe, as well as a shareholding in Globalive Wireless Canada.
The company issued new stock representing 20 percent of outstanding shares and 31 percent of the voting rights to investors in Wind, in addition to $1.5 billion in cash. VimpelCom now owns 51.7 percent of Sawiris’s Orascom Telecom and all of the Italian division, Wind Telecomunicazioni SpA. Orascom Telecom shareholders approved the merger yesterday.
Telenor Arbitration
An arbitration proceeding that began earlier this year with VimpelCom shareholder Telenor ASA, which objected to the deal, is continuing, the company said. Telenor, which held more than 39 percent of VimpelCom under a shareholder agreement that formed the company, would own 25 percent of the combined phone operator, according to the plan published in January.
“At the moment, we don’t have any changes in the shareholder agreement,” Izosimov said. Any board changes, which are “entirely in the hands of” the nominating committee, would be proposed for the next shareholder meeting in June, he said.
Dag Melgaard, a spokesman at Telenor, declined to comment.
VimpelCom targets cost savings in equipment procurement, financial operations and agreements that enable customers to use other operators’ services during travel, as well as in relationships with global Internet companies, Isozimov said.
Algerian Dispute
Algeria’s government has sought control of Djezzy, Orascom Telecom’s biggest revenue contributor, and asked the unit to pay backdated taxes. VimpelCom, which is contesting the tax bill, is asking the government to let it keep Djezzy.
“We signaled our interest to the Algerian government a long time ago so they know exactly where we stand, but we couldn’t formally approach them because we hadn’t closed the transaction,” Izosimov said. “Next week we’ll initiate the process.”
The company said today that it has a backup plan under which Weather II, a holding company controlled by Sawiris, would pay VimpelCom “the lion’s share of the shortfall” should it have to sell the division for less than a pre-agreed price.
VimpelCom was formed after Fornebu, Norway-based Telenor, the biggest Nordic phone company, and Russia’s Alfa Group agreed in October 2009 to merge their stakes in Russia’s OAO VimpelCom and Ukraine’s ZAT Kyivstar. The company, which also has assets in Kazakhstan, Uzbekistan, Georgia and sub-Saharan Africa, established trading in American depositary receipts and a headquarters in Amsterdam.
Altimo Agreement
Altimo, the telecommunications arm of Alfa Group that holds the shares in VimpelCom, said it plans to initiate the termination of its shareholders agreement with Telenor and VimpelCom by selling some of its own preferred shares to bring its voting rights in VimpelCom to less than 25 percent.
“After the merger with Wind, VimpelCom becomes a global leading telecommunications company and its corporate governance rules now need to adequately protect its diverse shareholder base,” Evgeny Dumalkin, an Altimo spokesman, said in an e-mailed statement.
VimpelCom also plans to spin off the Wind International Services SpA unit of the Italian operations as well as “certain other less significant assets,” the company said. It didn’t specify a time frame for those plans.
“I am confident that our minority shareholders in Orascom Telecom will benefit from the synergies created from the combination of the two entities and by the overall strengthening of the Orascom Telecom balance sheet,” Sawiris said in the statement.
--Editors: Tom Lavell, Robert Valpuesta, Simon Thiel.
To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net
To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net
