MOSCOW/LONDON: Russian telecoms group Vimpelcom has rebuffed Norwegian shareholder Telenor’s criticism of its planned $6 billion Wind Telecom acquisition, saying the deal was fairly priced to create value.
Both sides are battling to win over the minority investors that will seal the deal’s fate in a March 17 vote. Vimpelcom was responding to a letter from Telenor on March 2.
Vimpelcom also said in its letter to shareholders that the acquisition of Italian group Wind and control of Cairo-listed emerging markets operator Orascom Telecom would allow it to capture future growth in emerging markets.
Chief executive Alexander Izosimov said the deal would "strengthen our ability to capture additional growth following the paradigm shift from voice to data and ensure that we secure the full advantages from greater scale and scope as the industry consolidates further."
The deal for the telecoms assets of Egyptian tycoon Naguib Sawiris has the backing of Vimpelcom’s other key shareholder, Russian billionaire Mikhail Fridman’s Alfa Group, and of three independents directors on Vimpelcom’s Supervisory Board.
With 36 percent of Vimpelcom’s voting stock, Telenor has said the deal makes no strategic or financial sense and needs over 70 percent of minorities to vote with it at a March 17 investor meeting to block the transaction.
Counter arguments
Telenor’s March 2 letter said the deal would cut Vimpelcom’s revenue and EBITDA (core profit) growth profile, as well as its margins, in part because of Wind Italy’s sour outlook as an indebted, No. 3 operator in the mature Italian mobile market.
Vimpelcom said in its letter, filed on Monday with the US Securities and Exchange Commission, that it saw Italy as one of the most attractive and profitable markets in Europe.
"Italy is the most developed data market in Europe and can provide Vimpelcom with the know-how and experience to develop data products in our other markets," Izosimov said.
Vimpelcom also said the premium it was paying for Wind was less than 30 percent, adding Telenor’s claim of an 84 percent premium was based on incorrect assumptions.
Telenor’s claim the deal would hit Vimpelcom’s financial flexibility and compromise its ability to pay dividends was not true, Vimpelcom said.
Vimpelcom said its net debt-to-EBITDA ratio will rise from 0.9 to 2.3 after the deal, compared with 2.3 for Telefonica, 2.4 for Deutsche Telekom and 2.1 for France Telecom.
The ratio is expected to decline below 2 times within two years given the combined group’s cash flow generation of $1-3 billion a year, according to the letter.
