Vimpelcom is exiting Vietnam following a write down of assets

International operator VimpelCom is to exit the Vietnamese mobile market, selling its 49 per cent share of fifth placed mobile operator Gtel Mobile for $45m. VimpelCom, which is headquartered in The Netherlands, said the stake would be bought by GTEL Transmit and Infrastructure, “a related party” of Vimpelcom’s local partner, Gtel.

The Vietnamese operation will be able to use the Beeline brand, which Vimpelcom has rolled out to a number of its operations, for six months before being required to rebrand.

A year ago VimpelCom increased its holding in Gtel Mobile from 40 per cent to 49 per cent at a cost of $196m, and assumed management control of the company. At the time it said a wider financing plan could lead to total investments of £500m in the Vietnamese operation by the end of 2013.

But earlier this year Vimpelcom booked an impairment charge on its Vietnamese investment, signalling a rethink of its commitment to the market.

Jo Lunder, CEO of VimpelCom, commented: “We have previously outlined our Value Agenda, within which all of our operations are reviewed to assess their future value to the Group. The decision to dispose of our interest in GTEL Mobile is a result of this process, which focuses on allocating capital to those markets where we see the best opportunities to generate shareholder value.”

Vietnamese mobile subscriptions by operator, Q4 2011

Source: Informa’s WCIS Plus www.wcisplus.com

Telenor faces a legal battle over its purchase of VimpelCom shares

The legal drama involving Nordic operator Telenor continued in Russia this week with authorities disputing the VimpelCom shares it purchased earlier this year.

In February, Telenor purchased 234 million VimpelCom preferred shares from Weather Investments for $374.4m, thereby increasing Telenor’s voting share in VimpelCom to 36.36 per cent. Now, Russian antitrust authority the Federal Antimonopoly Service of the Russian Federation (FAS) has filed a claim alleging that the share purchase and option transactions that it entered into with Weather Investments were illegal and violated Russian Strategic Investment Law.

The claim requests that the Moscow Arbitrazh Court, the principal commercial court in Moscow, invalidates the transactions, and Telenor return those VimpelCom shares to Weather Investments. The FAS names VimpelCom and holding company Altimo as “interested third parties” in the claim.

Telenor said that it has not yet been formally notified of the claim by the FAS or the court, but understands that the antitrust authority wants Telenor to strike a similar shareholders’ agreement to the one terminated by its venture partner Alfa Group last year, and until then, aims to prohibit Telenor from changing VimpelCom’s governing bodies.

Telenor spokesman Dag Melgaard said that that the operator believes it has fully complied with the Strategic Investment Law as it has been interpreted and applied to date.

“In addition, we have provided the FAS with all of the information it has requested.  There has not been any change of control in VimpelCom, nor is there any agreement between Telenor and Weather Investments concerning control of VimpelCom,” he said.

“We are open to a dialogue with the FAS, but we will defend Telenor’s position using all available remedies under applicable law and treaties.”

He added that, furthermore, Telenor is within the ownership range it has been before, and the transaction with Weather Investments reestablished the balance of shareholder interest which existed before Telenor’s ownership was diluted as a result of the Wind Telecom transaction.

The claim is the latest chapter in a long-running saga dispute with Altimo, which it had believed to have put to rest with the share purchase in February.

At the time of that purchase, the operator said in a statement that, because of the transaction, it had withdrawn all its existing legal claims against Altimo Holdings and VimpelCom and would work to expand the VimpelCom Board to eleven members.

Telenor is currently in legal disputes in India and Pakistan

Nordic operator group Telenor has been busy handling legal disputes this week, demanding compensation from Indian partner Unitech following the cancellation of its 2G spectrum licences and filing separate lawsuits against Nokia Siemens Networks and Huawei in Pakistan. The firm also announced that it is withdrawing all its longstanding legal wranglings against Altimo Holdings & Investments.

Following the recent decision by the Supreme Court of India to cancel all 122 licences issued in the country’s 2008 2G spectrum sale, Telenor has said that it holds Unitech liable for the breach of warranties related to the cancellation of the licenses.

It is seeking compensation for all investment, guarantees and damages caused by the Supreme Court Order and is also making an indemnity claim against Unitech for the failure to obtain spectrum in the strategically critical Delhi circle.

“This is directly related to warranties that Unitech gave to Telenor as part of creating a joint venture, about having valid licences for operation – and that was included in the shareholders agreement,” Tor Odland, group VP of communications at Telenor told Telecoms.com.

“We have initiated the processes by notifying them that a claim will arrive and we shall see what the financial solution to this is.”

Unitech appeared to be taken aback in its initial response to the news. The company told Indian website myiris.com:

“We are surprised to receive the indemnity claim from Telenor Group taking a plea of the order passed by the Honourable Supreme Court and simultaneous release of press statement to the media by Telenor Group which is not only a clear violation of the confidentially covenants agreed in the shareholders` agreement but also an action to malign the reputation of Unitech.”

“At best, Telenor Group can invoke the provisions between the Governments for protection of their investment in India, but they shall have no valid claim on Unitech and any demand from Unitech shall be contested,” the company added.

However, Telenor wants to continue operating in the country, and said it will consider every option available to secure the continued successful development of its mobile services in India.

Meanwhile, across the border, in Pakistan, the Nordic group has said that it filed separate lawsuits against Nokia Siemens Networks and Huawei Pakistan. It’s not clear what the dispute is about, but we know Huawei was supposed to offer managed network services to Telenor Pakistan for three years, starting April 2011.

While Telenor confirmed this, it would not be drawn into commenting expansively on the matter. Aamer Izhar Ul Haq, vice president corporate affairs & security at Telenor Pakistan, said in a statement: “As the matter is sub-judice, we are unable to comment any further on the subject.”

Finally, the operator is also putting its dispute with Altimo to rest, having purchased 234 million preferred shares in Russian operator VimpelCom from Weather Investments for $374.4m. This increases Telenor’s voting share in VimpelCom to 36.36 per cent.

“In connection with the transaction, Telenor has withdrawn all its claims against Altimo Holdings & Investments Ltd., Altimo Cooperatief U.A. and VimpelCom Ltd. in the pending arbitration proceeding, and will work to expand the VimpelCom Board to eleven members. Telenor’s withdrawal of its claims will result in the termination of the VimpelCom shareholders agreement,” Telenor said in a statement.

Djezzy is a strong performer

Russian carrier VimpelCom said Monday it has agreed to sell a majority stake in its lucrative Algerian unit, Djezzy, to the Algerian state for an undisclosed sum.

The move would end an ongoing dispute over ownership of the asset, involving companies from three countries. VimpelCom bought Djezzy in 2011 as part of a $6bn acquisition of Egyptian carrier, Orascom Telecom’s holdings, but the deal was hampered by calls from the Algerian government to nationalise the telco.

VimpelCom owns 51.7 per cent of Orascom, which in turn owns 96.81 per cent of Orascom Telecom Algeria, the holding company behind Djezzy.

Should a suitable price be agreed upon, it is expected the Algerian state will take 51 per cent of Djezzy, leaving VimpelCom with an interest in the business and still able to consolidate Djezzy into its financial results.

The funds, which may be in the region of $3bn to $4bn, would help VimpelCom pay down its massive debt pile.

Alexander Izosimov

The chief executive of second-placed Russian carrier VimpelCom, Alexander Izosimov, is to step down at the end of June. Izosimov will be leaving on a high, having engineered the somewhat controversial merger with Orascom Telecom parent Weather, which created the world’s fifth largest mobile carrier.

A statement points out that Izosimov’s tenure as CEO started in 2003 but neglects to mention the 13 months or so when ex-Telekom Austria chief Boris Nemsic took the helm between April 2009 and June 2010. Nemsic evacuated his post rather abruptly, amid suggestions he hadn’t been planning his resignation, as the firm reorganised itself into four new business units; Russia, Ukraine, CIS and International and Izosimov took up captaincy once again.

In this instance, current chairman, Jo Lunder, has been elected as the new CEO of VimpelCom, taking over from Izosimov at the end of June.

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Russia's answer to Carphone Warehouse is set to float on the LSE

Russian mobile phone retailer, Euroset, which claims to sell three out of every ten phones in Russia, is to launch on the London Stock Exchange. The fundraising target is said to be in excess of £620m, putting a value of between £1.8bn and £3.1bn on the company, which operates over 4,300 shops in Russia.

The flotation is reported to be planned for April, with most of the shares on offer said to be those belonging to former Yeltsin advisor-turned-oligarch Alexander Mamut, who holds a 50.1 per cent stake in the retailer. According to Reuters, “sources close to the deal” believe that Mamut is prepared to sell his entire stake if the price is right.

Russia’s third-placed mobile operator, Vimpelcom (which recently merged with Wind Telecom under controversial circumstances) holds the remaining 49.9 per cent stake. The operator has said that “intends to continue to be a shareholder” in Euroset, which doesn’t disclose handset sales but posted a profit of RUB5.6bn (£121m) in 2010.

Telenor was unable to prevent the VimpelCom-Wind deal from going ahead

Shareholders in Russian operator VimpelCom have voted in favour of a $6bn merger with Wind Telecom.  Despite strong  opposition from major shareholder Telenor, more than 53 per cent of voters supported a deal that will see the creation of the world’s fifth largest mobile company by subscriber base.

Under the deal, the telecom assets of Egyptian billionaire Naguib Sawiris have been acquired, bringing with them a series of challenges, not least in Algeria, where the possiblity of nationalising Sawiris’ assets (including Orascom) will almost certainly bring about lengthy negotiations. Other speedbumps include the integration of holdings in 15 emerging markets as well as Canada and Italy, an ongoing legal battle with Telenor and a need to reduce debts.

The merger decision comes on the back of months of legal wrangling with Norway’s Telenor which, despite its 36 per cent stake in VimpelCom, was unable to exert influence over the minority shareholders, the majority of whom supported 44.6 per cent stakeholder Alfa Group’s (Altimo)  favouring of the deal. According to VimpelCom, the transaction will be completed by the first half of this year. Despite losing the battle, Telenor spokesman Dag Melgaard said on Thursday that it remained committed to its investment in VimpelCom, “even though we believe [it] would have been better off without this deal.”  Previously, Telenor had stated its belief that neither the original merger proposal nor a revised one made financial or strategic sense and that the terms were overly generous to the owners of Wind.

Through the deal, VimpelCom will own, through Wind Telecom, 51.7 per cent of Orascom Telecom and 100 per cent of Wind Italy. The enlarged company will operate in 19 countries with more than 173 million mobile subscribers.

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Telenor said that it will try to stop the transaction from being completed

Telenor and VimpelCom are still slugging it out over the Russian player’s proposed acquisition of Wind Telecom, part of Egyptian billionaire Naguib Sawiris’ Weather Investments vehicle and owner of Orascom.

On Monday, as VimpelCom’s supervisory board gave its final approval for a merger with Wind, Telenor said that it will try to stop the transaction from being completed.

Should the deal go ahead, VimpelCom will own, through Wind Telecom, 51.7 per cent of Orascom Telecom and 100 per cent of Wind Italy, creating the world’s sixth largest mobile carrier by subscribers. The enlarged company would operate in 19 countries with over 173 million mobile subscribers.

VimpelCom has called a shareholder meeting for March 17 to consider the approval of the deal, which would give the owners of Wind Telecom a 30.6 per cent voting stake in VimpelCom.

But Telenor’s three nominees on the VimpelCom board have voted against the approval of the acquisition because they do not believe it makes strategic or financial sense for VimpelCom and will harm VimpelCom’s shareholders. Telenor holds a 36 per cent voting and 39.6 per cent economic interest in VimpelCom.

“We did not support the original proposal because it did not make strategic or financial sense.  The revised proposal makes even less sense as the consideration now being offered is even more generous to the owners of Wind Telecom. Existing VimpelCom shareholders face considerable additional dilution if this acquisition is completed on the terms approved by the board,” said Telenor spokesman Dag Melgaard.

“As a result of this transaction, VimpelCom minority shareholders’ existing 18.6 per cent voting stake will be diluted to 12.9 per cent, despite their having an economic stake of 16.3 per cent.  In our view, the disconnect between economic and voting stakes negatively affects the attractiveness of VimpelCom as an investment case for public investors,” Melgaard said.

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Telenor’s voting stake in VimpelCom is 36 per cent so, if it is the lone voice in opposition to the move, it will be unable to block the deal. VimpelCom’s supervisory board is scheduled to meet for two days in the near future to vote on final approval for the deal, the Russian firm said.

The deal was first announced in October and, if successful, will create the world’s fifth largest mobile telecommunications carrier by subscriber numbers. The merged entity would boast 174 million mobile subscribers spread over 20 countries in Europe, Asia, Africa and North America, with pro forma net operating revenues of $21.5bn.

Under the proposed deal, VimpelCom will pay out $1.8bn in cash to shareholders in Weather, in exchange for ownership of 51.7 per cent of Orascom and 100 per cent of Italian player Wind Telecomunicazioni. VimpelCom shares will also be issued to Weather shareholders representing a 20 per cent economic interest and an 18.5 per cent voting interest in the enlarged VimpelCom group.

When the deal was announced, Alexander Izosimov, CEO of VimpelCom, said:  “It offers our shareholders exposure to attractive growth markets in both Asia and Africa and the opportunity to diversify further our revenue base in terms of geography, currency and market characteristics. It also positions VimpelCom to take full advantage of the significant opportunities that we see in the fast-growing mobile data services market and to leverage the experience that already exists in this area within Wind Italy and other parts of the Weather group.”