Veon ex­its Western Europe with debt -re­duc­ing Wind Tre sale

Enterprise - - International news -

Veon will sell out of Ital­ian mo­bile net­work Wind Tre for 2.45 bil­lion eu­ros ($2.85 bil­lion) in an exit from Western Europe the Am­s­ter­dam-based firm says will help it cut debt and fo­cus on emerg­ing mar­kets.

The loss-mak­ing tele­coms group, which was for­merly known as Vim­pelCom and has op­er­a­tions in Rus­sia and emerg­ing mar­kets, said it had agreed to sell its stake in Wind Tre to part­ner CK Hutchi­son.

Shares in Veon, which has been cut­ting jobs and strug­gling with more than 10 bil­lion eu­ros of long-term debt, rose 17 per­cent to 2.56 eu­ros at 1250 GMT, al­though they re­main down by around 19 per­cent so far this year.

Veon, whose big­gest share­holder is Mikhail Frid­man´s in­vest­ment ve­hi­cle Let­terOne, also said it of­fered around $400 mil­lion in cash to Egyp­tian-based Global Tele­com Hold­ing (GTH) to buy out its busi­nesses in Pak­istan and Bangladesh, valu­ing them at $2.55 bil­lion in­clud­ing debt. JPMor­gan up­graded Veon´s Amer­i­can de­pos­i­tory re­ceipts to over­weight with a price tar­get of $4 af­ter the an­nounce­ments.

Veon ac­quired Ital­ian op­er­a­tor Wind in 2011 and merged it to form the Wind Tre joint ven­ture with Hutchi­son in 2016, hop­ing this would save on costs and com­pete with Italy´s big­gest mo­bile providers, Tele­com Italia Mo­bile and Voda­fone.

How­ever, Italy´s tele­coms mar­ket has faced bruis­ing com­pe­ti­tion among es­tab­lished play­ers and the en­try in May of a fourth, cut-price player, France´s Iliad.

Veon has been run by chair­woman Ur­sula Burns since Jean-Yves Char­lier stepped down as chief ex­ec­u­tive in March.

In April, Veon said its busi­ness in Rus­sia, the largest of its 11 mar­kets, was slow­ing.

Veon´s pri­or­i­ties in­cluded sim­pli­fy­ing its struc­ture, fo­cus­ing on emerg­ing mar­kets and strength­en­ing its bal­ance sheet, Burns said.

GTH said it was con­sid­er­ing the of­fer for the as­sets of GTH, in which Veon al­ready has 57.7 per­cent and whose brands in­clude “Jazz” in Pak­istan and “Ban­galink” in Bangladesh.

Veon said it will con­tinue to hold its stake in GTH, which also owns Al­ge­rian mo­bile provider Djezzy.

In April, Veon with­drew an of­fer to buy 42.3 per­cent of GTH.

If both trans­ac­tions are ap­proved, Veon will have debt of a lit­tle more than 6 bil­lion eu­ros, com­pared with an­nual un­der­ly­ing earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion (EBITDA) of around 3.6 bil­lion eu­ros.

For Hutchi­son, the Wind Tre pur­chase con­sol­i­dates its own­er­ship of one of Italy´s top three mo­bile providers.

Frank Sixt, group fi­nance di­rec­tor of CK Hutchi­son, said the deal was im­por­tant in “a mil­lion small ways”, no­tably the prof­itabil­ity it will bring.

“With next-gen­er­a­tion ser­vices, it will have to be based on com­pat­i­ble sys­tems and when you have only 50 per­cent of a ven­ture, that may not work,” he said.

In Fe­bru­ary, Veon said Wind Tre´s rev­enue had slumped 11 per­cent to 1.6 bil­lion eu­ros in the fourth quar­ter, driven by an 8.1 per­cent de­cline in mo­bile ser­vice rev­enue, as com­pe­ti­tion saw its cus­tomer base fall al­most 6 per­cent. Com­ple­tion is ex­pected in the third or fourth quar­ter of 2018.

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