VimpelCom Ltd. (VIP:US) is facing criminal investigation over its Uzbek business a year after the carrier warned investors about its relationship with Takilant Ltd., a company that is the focus of a corruption probe at Swedish rival TeliaSonera AB. (TLSN) The stock fell to a 19-month low.
VimpelCom’s headquarters in Amsterdam were raided yesterday by Dutch prosecutors. The operator, controlled by billionaire Mikhail Fridman, said in a statement the U.S. Securities and Exchange Commission demanded documents as part of the probe into the Russian company’s business.
In a separate statement, TeliaSonera said authorities yesterday searched premises of two of its Dutch holding companies, which are subject to preliminary investigation concerning bribery and money laundering. The Dutch units include the Uzbekistan operations, Stockholm-based TeliaSonera said, adding that it's fully cooperating with the authorities.
Takilant, a company with ties to President Islam Karimov, held a minority interest in VimpelCom’s business in Uzbekistan from 2007 to 2009. VimpelCom “worked with Takilant in the past” to acquire frequency in Uzbekistan, the Russian carrier said in an SEC filing last year. In 2012, Takilant was targeted by Swedish prosecutors in a probe into whether TeliaSonera knew, or should have known, that its license money went to Karimov’s family.
“We welcome this investigation to clarify matters surrounding our operations in Uzbekistan and we will fully cooperate with the investigation,” Bobby Leach, a spokesman for VimpelCom, said by telephone. Norway’s Telenor ASA (TEL) owns 33 percent of VimpelCom.
VimpelCom shares fell as much as 6.3 percent to $8.29 in New York, the lowest intraday level since July 31, 2012. It traded 2.9 percent lower at $8.59 as of 12:15 p.m. local time, valuing the company at $15.1 billion. TeliaSonera traded 0.2 percent lower at 48.29 kronor on the Stockholm exchange.
VimpelCom entered Uzbekistan in 2006 by acquiring Buztel and Unitel, two local operators, for about $260 million. Last year, VimpelCom received $676 million in revenue from the country, or about 3 percent of its total sales, according to the company’s earnings report. It had 10.5 million wireless customers in the country at the end of 2013.
“A criminal investigation has been started and the public prosecutor’s office visited VimpelCom’s headquarters yesterday,” Dickey Gardenier, a spokeswoman for the Dutch prosecutors, said by telephone today. She declined to comment further on the raid.
VimpelCom told investors last year it couldn’t be sure the company wouldn’t “become subject to investigations, face liability or suffer reputational harm” due to it relationship with Takilant.
TeliaSonera Chief Executive Officer Lars Nyberg resigned last year after a law firm hired to investigate graft accusations said TeliaSonera should have been more careful when it bought its Uzbek phone license.
TeliaSonera bought Uzbek mobile operator Ucell, a small company with half a million subscribers, in 2007. At the time of purchase, it agreed to buy a third-generation operating license and frequencies from Takilant for $30 million, as well as the Gibraltar-based company’s 26 percent stake in Ucell, as a “prerequisite” for entering the market, according to TeliaSonera’s website.
VimpelCom last week reported a fourth-quarter net loss of $2.66 billion after writing down its Ukraine assets by $2.1 billion because of the country’s political turmoil. The operator is struggling to cut its $27.5 billion debt pile, the result of an acquisition of assets in Italy, Algeria and Asia.
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