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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VimpelCom is 33.2% negative

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The deal will create the world’s fifth largest mobile carrier by subscribers

Russia’s second biggest operator, VimpelCom, has merged with Egypt-based Orascom Telecom and investment vehicle Weather Investments, creating the world’s fifth largest mobile telecommunications carrier by subscribers.

The new entity will 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 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.

Certain assets, primarily Orascom’s units in Egypt and North Korea, will be transferred to the current Weather shareholders and Greek operator Wind Hellas Telecommunications is entirely excluded from the transaction.

The ownership structure of VimpelCom is complicated and upon issuance of new VimpelCom shares, Telenor and Altimo Holdings & Investments will hold 31.7 per cent and 31.4 per cent of the economic rights and 29.3 per cent and 36.4 per cent of the voting rights, respectively, of VimpelCom. Minority shareholders in VimpelCom will represent 17 per cent of the economic rights and 15.7 per cent of the voting rights.

Weather will designate two members to an enlarged VimpelCom board of eleven members, while Telenor and Altimo will each continue to designate three board members. Synergies between VimpelCom and Weather’s operations are estimated to deliver savings of $2.5bn derived from procurement opex and capex.

The Orascom Telecom assets intended to be demerged include the 34.7 per cent stake in the Egyptian Company for Mobile Services (ECMS) held 20 per cent directly and 14.7 per cent indirectly via MobiNil Telecommunications; the 75 per cent stake in Koryolink in North Korea and certain sub-sea cable and internet portal operations. The Wind Italy assets to be demerged include the Libero internet portal, Wind International Services wholesale carrier subsidiary and the operation of a sub-sea cable between Italy and Greece.

Naguib Sawiris, chairman of Weather, said: “We share a common vision with our new partners at VimpelCom of the exciting prospects of our new, enlarged and diversified telecoms platform. Moreover, I am confident that our minority shareholders in Orascom Telecom will benefit from the synergies created by the combination of the two entities, especially in the area of procurement, and by the overall strengthening and de-risking of the Orascom Telecom balance sheet.“

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.”

Wind taps Samsung for Caribbean WiMAX

Dominican broadband internet and pay TV provider Wind Telecom said Tuesday it has tapped Samsung to deliver a mobile WiMAX network in the Caribbean country. The Dominican Republic shares the small Caribbean island of Hispaniola with Haiti.

Wind plans to provide Mobile WiMAX services in the Dominican Republic from the third quarter of 2010, focusing on the island nation’s two major cities, Santo Domingo and Santiago. The initial installation will begin in the second quarter and Wind plans to roll out WiMAX to other cities in the future.

Samsung is providing an end to end solution including Mobile WiMAX infrastructure, terminals, training, and engineering. Wind said it will use WiMAX to complement its existing broadband and TV offering to develop a triple play service.

The Dominican Republic has a history of WiMAX innovation, Onemax, a privately held local ISP, launched the world’s first commercial Mobile WiMAX (802.16e) network in the 3.5GHz frequency band in October 2007.

Khaled Bichara will become CEO of Orascom

Egyptian carrier Orascom Telecom announced a shake up of its leadership team, promoting chief operating officer Khaled Bichara to the position of group chief executive officer.

Bichara will report directly to Naguib Sawiris, who will now take the position of executive chairman and will continue to direct the group’s growth and expansion strategy.

“The telecommunication business is continuing to grow and evolve at a rapid pace, and we’re reshaping OTH to be a leader in this transformation. I will also remain involved in the businesses with more focus on steering the Group’s strategic growth while guiding and supporting the activities of the senior management team. I believe that the telecom market will see massive consolidation during the coming years, and with the new structure I will be able to devote more time and effort in this direction,” Sawiris said.

Orascom said that net income for the third quarter 2009 reached $365m, growing 6 per cent over the same period in the previous year. For the nine months to the end of September, Orascom reported revenues of $3.8bn, down 1.9 per cent over 2008.

The company’s total subscribers hit 89 million at the end of September, an increase of 12.1 per cent over September 2008.

Meanwhile, Sawiris is still upset at Canada’s objections to Orascom opening up shop in North America. Orascom has an investment in AWS spectrum licensee Wind Mobile Canada, previously known as Globalive Wireless, which the Canadian regulator has said is not eligible to operate in Canada.

The CRTC objects to launch of Wind, saying that it is in breach of foreign ownership rules, a move which may put the kybosh on Wind’s proposed launch of early December.

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