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Vimpelcom withdraws bid for Ukrainian operator

Last month the Russian mobile operator looked likely to finally acquire Kyivstar after Norwegian telecoms carrier Telenor ASA agreed to VimpelCom’s takeover offer for its Urkaine mobile unit.

VimpelCom had initially made a $5bn-plus-debt bid for Kyivstar in February. The move came amid a backdrop of a bitter dispute between Telenor and VimpelCom’s largest shareholder, Altimo (formerly Alfa Telecom, the telecoms arm of the Alfa Group) over VimpelCom’s expansion in Ukraine.

The bid soon ran into trouble when Telenor rejected VimpelCom’s initial offer to purchase Kyivstar for $5bn of its own shares, a structure that Telenor rejected. It instead proposed an all-cash takeover.

VimpelCom is in effect controlled by the Alfa Group, as Altimo has a 32.9% stake in the operator. Telenor on the other hand is a minority shareholder in the operator, with a 26.6% stake and a minority position on the board.

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The history behind the dispute stems from VimpelCom’s $231m acquisition of the WellCom Ukrainian mobile operator last November. Ukrainian Radio Systems operates under the WellCom brand, but Telenor was worried the acquisition would have an impact on its Ukrainian mobile phone operator, Kyivstar. Telenor enjoys a majority stake in Kyivstar (56.5%) compared to Alfa’s minority stake (43.5%).

Telenor disputed Alfa’s decision to steamroller VimpelCom’s acquisition of WellCom and viewed it as a challenge to Kyivstar GSM. Telenor had argued that the deal had no business merit and would destroy shareholder value.

However, in mid-May the two companies seemed to make peace over Kyivstar after Telenor said it was willing to accept both cash and equity for its stake in Ukraine’s largest mobile operator. Yet there was sting in the tail as Telenor said it was prepared to sell its stake in Kyivstar to VimpelCom and display flexibility in payment terms, if agreement was reached with Altimo on the mechanism of partnership termination, and permission from the Russian antimonopoly watchdog was obtained. Telenor was insisting on a scheme that would allow whichever of the two shareholders that offered the highest price for Vimpelcom stock to buy out the other’s shares.

Altimo said this term, advanced as a condition to close the deal, did not comply with Russian legislation and was deliberately unrealistic. We regrettably had to withdraw today our offer to buy Kyivstar, said chief executive Alexander Izosimov. Although the parties agreed on the timeframe for the deal, the acquisition of Kyivstar required that partnership end between Telenor and Altimo, and we have seen little progress on the issue in the last three months. Izosimov said that the company was still open to further talks and proposals. In the meantime, we’ll focus on our declared strategy to expand onto the Ukrainian market through Ukrainian Radio Systems, he added.

In the first quarter ending March 31, VimpelCom’s net income rose 37% to $150m from $109.6m in the year-ago quarter. Sales increased 46% to $936.2m, compared to $640.6m a year ago. Average revenue per user fell by 9.6% year-on-year, to $6.60, in line with expectations.
This article is from the CBROnline archive: some formatting and images may not be present.

CBR Staff Writer

CBR Online legacy content.