Telenor says Vimpelcom needs to focus on regaining Russian position, not Sawiris deal
MOSCOW. Feb 9 (Interfax) - Vimpelcom Ltd ought to concentrate on regaining its positions in the Russian market rather than on the deal to buy the telecom assets of Egyptian billionaire Naguib Sawiris, says Norway's Telenor, one of Vimpelcom's two core shareholders.
The deal to buy Wind Telecom from Sawiris is "destroying the value" of Vimpelcom, Telenor's Russia chief, Ole Bjorn Sjulstad, told a press conference on February 9.
Sjulstad said Wind Telecom had an awkward asset composition as around 80% of the company's business falls to Italy's Wind, which operates on a saturated market and occupies the penultimate third place there, lagging far behind the market leader.
If Algerian operator Djezzy, which Wind Telecom controls via Orascom Telecom, is nationalized, then Wind's shares ill be over 90%. But the Italian operator has an enormous debt [$11.2 billion net debt at end H1 2010] and it would not be right to ease that debt with cash flow from Russia and Ukraine, Sjulstad said.
He said synergy by integrating Vimpelcom, Wind and Orascom would be "very hard to achieve." Vimpelcom's management earlier estimated the synergetic effect would be $2.5 billion. Telenor is more concerned with achieving a synergy between its Russian and Ukrainian operations, which were brought under the Vimpelcom Ltd umbrella almost a year ago.
Sjulstad also said the deal threatened Vimpelcom's corporate governance as it would dilute the stake held by minority shareholders and their ability to influence the situation in the company, he said.
Telenor is urging Vimpelcom's minority shareholders to vote against the deal at a March 17 EGM but will not block it in court. Telenor's court action in London is intended to uphold its preemptive rights to buy Vimpelcom shares, Sjulstad said.
Although Telenor is against the Sawiris deal, it is a long-term Vimpelcom investor and does not want to reduce its stake in the company, Sjulstad said. "We support Vimpelcom in Russia, Ukraine and the markets of other countries where operations create value for the company," he said.
The Russia business is key for Vimpelcom and Telenor is "deeply concerned about the loss of the company's market positions," Sjulstad said.
In order to reinstate its second place by revenue and subscribers in Russia itself, which Vimpelcom has lost to MegaFon this year, Vimpelcom needs to take measures like increasing its operating efficiency, modernizing network infrastructure and concentrating more on services distribution, he said.
The company needs a sustainable leadership strategy, and the corresponding management to achieve better results, Sjulstad said.
The results in Russia cannot be improved overnight, and this will take "half a year, a year, two," he said.