Despite objections from many shareholders, Vimpelcom has pushed through the merger with Wind Telecom that will see the combined company becoming the world's fifth largest operator with 173 million customers.
However, the deal is not without its problems, as Vimpelcom will need to take on nearly $20 billion of debt and issue new shares valued at $4.5 billion to fund the takeover.
According to Marketwatch, the purchase does have strategic merit that will see Vimpelcom gain access to rapidly growing mobile operators in Africa, Asia and Italy. The deal, at 6.2 times Wind Telecom's EBITDA ,has been judged fair in comparisons to other recent telecoms mergers that have been made between 9 times to 10 times EBITDA.
The deal, which is expected to be finalised by mid-year, will see Vimpelcom own over 51 per cent of Egypt-based Orascom Telecom, which has cellular operations in Pakistan, Algeria, Tunisia, Bangladesh, Zimbabwe, Namibia, Burundi and Canada.
Commenting on the merger, as reported by Telegeography, Vimpelcom's CEO and president, Alexander Izosimov, said that the combined group would have a significantly diversified revenue base and a considerably larger scale of operations. "The potential synergies [are] estimated to be $2.5 billion on a net present value basis."
While Vimpelcom said it had received all necessary approvals from the regulators, it will need to resolve the potential nationalisation by the Algerian government of the operation owned by Orascom,a key asset in the country. Vimpelcom will also have to manage the integration of operations in 20 countries, negotiate an amicable outcome to the long-running legal battle with Telenor and also set about reducing its mountain of debt.
Telenor, which has long resisted this merger, was reported by Dow Jones Newswires as saying that it remained committed to its investment in 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, " spokesman Dag Melgaard said in a statement.
For more:
- see this Reuters article
- see this Marketwatch article
- see this Telegeography article
- see this Dow Jones Newswires article
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