Telenor disappointed by Vimpelcom Ltd., but not selling
MOSCOW. Feb 12 (Interfax) - Norway's Telenor still sees its stake in Vimpelcom Ltd. as a long-term investment, despite the telecom provider's disappointing results.
Telenor is not considering selling the stake, as it is a long-term player, Telenor senior vice president and head of Telenor Russia Ole Bjorn Sjulstad told reporters.
He said Telenor is disappointed with Vimpelcom's results. It is sad to see the company's current share price, Sjulstad said, adding that it was due not only to macroeconomic conditions such as the depreciation of the ruble, but also to Vimpelcom's operating results.
Telenor is continually trying to influence Vimpelcom's work through the supervisory board, Sjulstad said, adding that he is confident that the company will improve its position in future.
Telenor invested NOK14.7 billion ($1.9 billion) in Vimpelcom and has earned NOK19.3 billion ($2.5 billion) in dividends, so the company's business case in Russia remains profitable, he said.
Sjulstad, as usual, did not comment on Telenor's plans concerning the conversion of Vimpelcom preferred shares.
Since October 2013 Telenor has had the option to convert its preferred shares in Vimpelcom, which are not traded on the exchange but have a vote, into common shares by paying the market price of the latter. At Vimpelcom's current share price on Nasdaq, the conversion would cost Telenor $1.4 billion, while a year ago the Norwegian company would have had to pay $3 billion.
If the shares are converted, Telenor's voting stake would remain at the current level of 43%, but its economic interest would increase to 43% from 33%. But if Telenor does not convert the preferred shares by April 2016, they will be cancelled and the company's voting stake will shrink to 33%, while the stake of the other major shareholder, Russia's Altimo would increase to 56.2% from 47.9%.
Conversion would not increase Telenor's influence at Vimpelcom, but would give it a bigger share of dividends. However, since last year Vimpelcom has been paying only symbolic dividends and intends to continue doing so until its net debt/EBITDA ratio drops to 2; it is expected to be 2.4 as of the end of 2014.
Sjulstad is optimistic about the future of Russian telecom companies. Despite the economic crisis, people will continue to use mobile phones and smartphones. The revolution in mobile data is continuing, with access to 4G services growing very rapidly, he said.
There might be a slowdown, but development will continue, Sjulstad said, adding that in difficult times there is always the possibility of improving efficiency, which is what Vimpelcom and other operators are trying to do.
Vimpelcom Ltd.'s revenue, 40% of which is generated in Russia, fell 9% year-on-year to $5.1 billion in the third quarter of 2014. The organic drop in revenue (before exchange rate differences and impairment) was 3%. The group's earnings before interest, tax, depreciation and amortization (EBITDA) fell 11% to $2.2 billion, with an organic drop of 4%.
