VimpelCom and Weather Investments – the owner of Orascom Telecom – have confirmed a merger between the two firms. The resulting entity will be the world’s fifth-largest mobile operator group.
VimpelCom will acquire Weather Investments (WI), which owns 51.7% of Orascom as well as having complete ownership of WIND Italy. WI will take a 20% economic interest (and an 18.5% voting interest) in the enlarged VimpelCom group. VimpelCom’s key shareholders – Telenor and Alfa Group’s Altimo – will see their stakes in the firm reduced to 31.7% and 31.4% respectively.
VimpelCom will also pay WI US$1.8 billion in cash; the operator has stated that it will finance this sum through existing cash balances and new debt facilities.
Various assets are not included in the acquisition, with Orascom’s investments in Egypt and North Korea to be transferred to WI’s current shareholders. While the bankrupt Greek operator WIND Hellas is not included in the deal, Orascom’s Algerian branch Djezzy is – despite ownership disputes with the Algerian government.
The new company formed from the acquisition will have operations in 20 countries, with roughly 174 million subscribers. VimpelCom has stated that the group’s provisional net operating revenues for the year ending December 2009 are around US$21.5 billion, while outlined EBITDA is US$9.5 billion.
Based on this information, VimpelCom’s Russian operations are likely to represent 35% of the new company, with Wind Italy representing 34%. The group has stated that it is aiming to make savings of US$2.5 billion “primarily derived from procurement opex and capex.”
“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,” said Weather and Orascom Chairman Naguib Sawiris.
Alexander Izosimov, CEO of VimpelCom, added: “Today’s announcement marks a transformational transaction for VimpelCom. 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.”
The transaction will be voted on before the end of the year by VimpelCom’s new board, and if approved is expected to close in the first quarter of 2011.