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VimpelCom Ltd. (VIP), Russia’s third- largest wireless company by subscribers, is seeking partnerships in its markets to rein in capital expenditure and improve the ratio of debt to profit.
The company reported a fourth-quarter net loss of $386 million, compared with profit of $461 million a year earlier, and targeted “mid-single digit” revenue growth through 2014. Operations in Vietnam and Cambodia had impairment charges of $527 million, Amsterdam-based VimpelCom said in a statement today. The company added debt to buy Wind Telecom SpA last year.
The margin for earnings before interest, taxes, depreciation and amortization in Russia, the largest unit, narrowed to 39.4 percent of sales from 46.4 percent as the company invested in networks to draw new customers. Moves such as tower sharing, outsourcing and consolidation within markets will help the company to cut capital spending and improve profitability, Chief Executive Officer Jo Lunder said.
“You will see this happening with VimpelCom in the next two to three years as part of the initiative to reduce capex,” Lunder said in an interview today. “We have opportunities in Russia, Asia and Italy. There are ongoing discussions.”
The company is also considering tower sharing in Pakistan, Lunder said. He targets capital expenditure of less than 15 percent of sales by 2014, compared with 21 percent in 2011.
Vimpelcom is the world’s sixth-largest wireless operator by subscribers, and more than 70 percent of its subscribers are outside of Russia.
Fourth-quarter pro-forma sales rose 4 percent to $5.88 billion.
VimpelCom aims to reduce its ratio of net debt to earnings before interest, taxes, depreciation and amortization to less than 2 by the end of 2014 through a combination of cost cutting and higher-margin services, Lunder said.
The company isn’t considering the refinancing of debt at the moment, though it may refinance some “ring-fenced debt” in Italy later, he said.
VimpelCom expects Russia to award spectrum for LTE fourth- generation wireless technology in the first half, Lunder said.
“We have a good chance to win one of the four blocks,” he said. “We don’t expect a large supply of LTE phones until 2013 and for that reason a launch in 2012 is largely PR and image- driven.”
Earnings before interest, tax, depreciation and amortization are forecast for “mid-single-digit” growth through 2014. Vietnam and Cambodia have proved to be less profitable than originally thought because of the number of operators and the lateness of VimpelCom’s entry, Lunder said.
“Those are two markets where we don’t have a strong position and for that reason we’ve done a thorough analysis of how realistic the future of those markets is for VimpelCom,” Lunder said.
VimpelCom still wants to be a long-term investor in Algeria, Lunder said, without giving a timetable for discussions on the future of its Djezzy unit.
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