VimpelCom proposes deal to end probes into alleged Uzbekistan corruption

VimpelCom announced it is preparing to acknowledge certain violations of U.S. and Dutch laws as part of proposals to settle investigations into allegations of corruption relating to its operations in Uzbekistan.

The Netherlands-headquartered operator said it has discussed prospective settlements with the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DoJ), along with the Openbaar Ministerie (OM -- the Dutch public prosecution service) to end long-running probes into its dealings in Uzbekistan.

While VimpelCom emphasised the proposals are yet to be finalised, it stated that the deal on the table would see it and its subsidiaries "acknowledge certain violations of the U.S. Foreign Corrupt Practices Act and relevant Dutch laws". If the plan is accepted, VimpelCom would also "pay fines and disgorgements" to the SEC, DoJ and OM.

Those fines would be paid from a $900 million (€809 million) provision VimpelCom made in its third quarter earnings to cover the cost of settling the investigations, the company stated.

Telenor, which holds a 33 per cent stake in VimpelCom, reacted to the announcement by stating that it "takes it very seriously that VimpelCom now seems to acknowledge certain violations" of the U.S. and Dutch laws.

The Norway-headquartered operator is seeking to divest its stake in VimpelCom, and has conducted extensive internal investigations to determine the level of knowledge its executive team had of the alleged corruption.

VimpelCom announced the proposed settlement as it revealed a drop in earnings through 2015.

In the fourth quarter, total reported revenue declined 23 per cent year-on-year to $2.3 billion, as mobile and fixed service revenue fell 25 per cent to $2.1 billion and mobile data revenue declined 10 per cent year-on-year to $313 million. Fourth-quarter 2015 EBITDA of $793 million was 26 per cent down on the same period of 2014.

Despite those declines, VimpelCom cut its net loss from continued operations from $967 million in the fourth quarter of 2014 to $190 million in the recent quarter.

For the full year, total reported revenue fell 29 per cent year-on-year to $9.6 billion, with EBITDA declining 49 per cent year-on-year to $2.8 billion. However, net loss from continued operations increased from $223 million in 2014 to $851 million in 2015.

VimpelCom CEO Jean-Yves Charlier said the company had "delivered on its 2015 targets despite a difficult backdrop of currency devaluations and economic challenges in most emerging markets across the world."

In 2016 the operator will aim to build on "the good momentum of 2015, which will see the company targeting flat to low single-digit organic growth in service revenue, underlying EBITDA margins and operating cash flow," Charlier added.

For more:
- see VimpelCom's earnings statement (PDF)
- view this Telenor statement

Related articles:
Telenor Group CFO falls victim to VimpelCom probe
Telenor CEO hands VimpelCom probe over to external lawyers
Telenor chairman Aaser quits following government pressure
Telenor plans to sell 33% VimpelCom stake worth $2.3B
VimpelCom faces criminal investigation over Uzbekistan operations