Russia’s largest operator VimpelCom and Egyptian operator Orascom have confirmed that they are holding talks to discuss the possibility of a US$25 billion merger.
Russian newspapers have reported that VimpelCom’s two key shareholders – the Russian Alfa Group and Norwegian telecoms firm Telenor – have stated that they support the merger ‘in principle’.
While VimpelCom therefore seems a likely candidate for an Orascom merger, the Egyptian firm’s chairman Naguib Sawiris has stated that while talks are underway with the Russian operator, they are not exclusive.
“We are not only talking to [VimpelCom], we are talking to anybody”, said Sawiris. He went on to note that his top priority was to resolve Orascom’s legal issues in Algeria – the country’s government has banned the firm from selling its Algerian network to a third party.
Sawiris stated that while this issue took priority, finding ‘a good partner for the group’ was also of key importance, and would become Orascom’s focus once the Algeria issue had been resolved.
VimpelCom is reportedly interested in purchasing WIND, Orascom’s Italian mobile company, as well as taking a 51% stake in the Egyptian operator itself. This would reduce Alfa Group and Telenor’s shareholdings in the VimpelCom group to 27% and 35% respectively, while Orascom’s owners would gain voting shares of around 22%.
If a deal is agreed, VimpelCom would be expected to fund its purchase with a combination of cash and shares; however, observers have noted that acquiring Orascom would saddle VimpelCom with a large chunk of extra debt.