VimpelCom, Weather merge to create new telco giant

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.”