VimpelCom-Orascom Merger Gets Approval

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VimpleCom-OTHRussia’s VimpelCom has announced that its shareholders today approved the previously announced merger of VimpelCom and Orascom Telecom of Wind Telecom, although Telenor is still opposing the merger.

In today’s scheduled Special General Meeting, 93.1% of the Company’s voting shareholders participated, out of which 53.3% of the voting shareholders approved the proposed merger.

“Following this favorable outcome, the management teams of VimpelCom and WIND TELECOM will proceed in satisfying the conditions precedent for the completion of the Transaction, which is expected to take place in the first half of 2011”, said a statement issued by the group.

If transaction, subject to regulatory approvals and recipient of funds, goes through – both Wind Telecom and VimpelCom will merge with VimpelCom owning 51.7 % of Orascom Telecom and 100 % of Wind Italy.

Naguib Sawiris, Executive Chairman of Wind Telecom, in return will get $1.495 billion in cash and 325.6 million new common shares and 305 million new convertible preferred shares.

Larger VimpelCom will have more than 173 million subscriber base with with pro forma net operating revenues of US$21.3 billion and pro forma EBITDA of US$9.4 billion for the year ended 31 December, 2009.

Alexander Izosimov, CEO and President of VimpelCom, commented:

“The approval of this transformative combination with Wind Telecom by our shareholders will lead to the creation a new global telecom player with over 173 million mobile subscribers covering a population of 838 million people.

The combined group will have a significantly diversified revenue base, substantially larger scale of operations, and potential synergies estimated to be US$2.5 billion on a net present value basis. This transaction and the shareholder vote underscore the Company’s dedication to delivering substantial value creation for shareholders and our commitment to corporate governance excellence.”

Telenor, which earlier opposed the deal said that its will remain commitment to the future prosperity of VimpelCom.

“Even though we believe VimpelCom would have been better off without this deal, we will now continue to work in the best interest of VimpelCom and its shareholders” said Dag Melgaard, spokesperson Telenor Group.

Naguib Sawiris, Executive Chairman of Wind Telecom, said:

“Following the industry trend of consolidation, we believe there will be only space for larger global operators in the market that will be able to benefit from economies of scale and scope. We look forward to continuing to play a significant role in the global telecom industry as part of one of the biggest telco players in the world.”

Pakistan Scenario:

Mobilink will become part merged VimpelCom. In a statement issued today, company welcomed the deal.

Commenting on the decision Rashid Khan, President and CEO, Mobilink said:

“The decision which is in favor of the merger is slated to change the global telecommunication scenario. As a key subsidiary of Orascom Telecom Holding, Mobilink welcomes this win and looks forward to becoming a part of one of the biggest telecom players in the world.”

CCP Approval in Pakistan:

Mobilink in Pakistan being part of Larger VimpelCom will be owned by Telenor Group (with minority stakes) that has its operations in Pakistan with fully owned Telenor Pakistan.

This translates into a proposition according to which Mobilink and Telenor Pakistan will be owned by same group (Telenor International) at a parent group level.

The outcome can possibly form a cartel in Pakistan which may not be favorable for competitors such as Ufone, Warid Telecom and CMPak.

For time being, Competition Commission of Pakistan has granted conditional approval for the Orascom-VimpelCom merger.

A press release issued by CCP said that it conditionally approved the deal after undertaking Phase-II review of the transaction to address the competition concerns.

VimpelCom may face a similar regulatory hurdle in Bangladesh.

Citing Chief Executive of VimpelCom, Alexander Izosimov, Reuters has reported that group will not need sell assets in Pakistan or Bangladesh, based on CCP concerns, he said: “There is no sell-off needed.”

Tech and telecom reporter for over 15 years

  • Seriously. What utter useless analysis at the end. Telenor has a minority stake. MINORITY means less. Yes, there would be a regulatory issue but not a cartel.

    As far as I can see, with the vote bank Telenor has. They might be only placing a single director on the VimpleCom board.

    Btw, correct me if I am wrong. The earlier plans were to keep Mobilink seperate. Right?

    • If two operators have one owner with same market and interests, are potentially a cartel.

      Meanings of Cartel in my dictionary are: A consortium of two organizations that has potential to limit competition by controlling the production and distribution of a product or service.

      • I don’t think this cartel is going to work, like if Ufone decreases rates then what this cartel is going to do?

        It can only happen in case of monopoly or oligopoly.

        • Han par yeh baat zrur hai du operator mil gay hain… ab kuch bhi kar saktay hain :D

          [Comment Edited]

      • Dude. Do not go to the dictionaries. Furthermore, involving yourself in a cartel is risky business. Somehow, we all forget that Competition Commission of Pakistan has very stringent rules and they have applied them over companies for years.

        It would be best that we should speculate on the basis of reality.

        This is a merger and a new set of Directors will be asked to board. As far as I have seen, Telenor has 16% (please correct me). With 16%, you cannot make decisions for a cartel.

        Then there is quite tough market conditions as well. A cartel of two companies would be a joke. The other three will recognize patterns sooner or later.

        • Shares = Interests = Returns

          Let’s not argue on scale of return, as return will remain a return – no matter, its smaller or higher. Moreover, I am not certain of cartel, i have used these words, “the possibility of a cartel”. I am sure CCP looks into all potential scenarios.

          And if Ufone, Zong or Warid are okay with merger, then obviously it would be a go call from CCP.

          • If you have said “possibilities”, are we not discussing those possibilities?

            There is a easy way out too you know. Telenor can sell their minority and use that money to finance the possible network upgrades in this region.

    • I agree with Saad.
      If Telenor has a minority stake, how can it own Mobilink in Pakistan? Was this a part of the deal?

  • Technically the, should’nt Ufone and PTCL be also considered as a cartel since both are telecom providers and since PTCL has a major share in fixed line, call rates to/from fixed line to Ufone mobile phones can be reduced to take the advantage. Ufone already has an advantange in International call rates and International SMS.

  • For those knowing MNCs’ affairs closely, there is nothing unusual here.

    For a considerable time Lipton and BrookBond were competing with each other though they used to report to same company internationally i.e. Unilever.

    All sorts of regulations were still there though with a differnt name (Monoply Control Authority stuff) when these two apparently separate companies, with profits going into the same pocket, were doing business in the country.

    Unilever bosses finally decided enough is enough and BrookBond was merged with (read: acquired by – since I know what actually happened) Lipton to avoid duplicate overhead costs. End of Story.

    So it doesn’t require much intelligence to guess what to expect next in Mobilink/Telenor story.

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