Te­lenor won’t sup­port Vim­pelCom’s bid for as­sets of weather in­vest­ments

The Pak Banker - - Company& -

OSLO: Te­lenor ASA, which owns al­most 40 per­cent of Vim­pelCom Ltd., won't back the Rus­sian af­fil­i­ate's bid for Weather In­vest­ments SpA as­sets, say­ing the move won't help the busi­ness or in­vestors.

Vim­pelCom, Rus­sia's sec­ond largest mo­bile-phone op­er­a­tor, agreed in Oc­to­ber to buy Weather In­vest­ments' 51.7 per­cent stake in Egypt's Oras­com Tele­com Hold­ing SAE and all of Ital­ian mo­bile op­er­a­tor Wind Tele­co­mu­ni­cazioni SpA. Weather's share­hold­ers would get 20 per­cent of new Vim­pelCom shares, which at the time of the deal were worth $4.7 bil­lion, and $1.8 bil­lion in cash.

"We strongly sup­port Vim­pelCom's ex­pan­sion in ac­cor­dance with the prin­ci­ples agreed at the time the com­pany was cre­ated," Dag Mel­gaard, a spokesman at Fornebu, Nor­way-based Te­lenor, said in a state­ment. "How­ever, in our ca­pac­ity as a share­holder of Vim­pelCom Ltd., we do not be­lieve this trans­ac­tion makes strate­gic or fi­nan­cial sense for Vim­pelCom's share­hold­ers."

Te­lenor Chief Ex­ec­u­tive Of­fi­cer Jon Fredrik Bak­saas, who is on the board of Moscow-based Vim­pelCom, told an­a­lysts in Moscow in Oc­to­ber that he fa­vored the trans­ac­tion. The deal would cre­ate the world's fifth-largest mo­bile-phone com­pany with a com­bined sub­scriber base of more than 174 mil­lion cus­tomers and give Vim­pelCom, which has op­er­a­tions in many for­mer Soviet re­publics, ac­cess to mar­kets in Africa and the Mid­dle East.

More­over, Fi­nan­cial Times re­ported that Te­lenor has warned In­dia that its un­pre­dictable reg­u­la­tory en­vi­ron­ment risks de­ter­ring for­eign in­vest­ment af­ter the Nor­we­gian mo­bile op­er­a­tor was drawn into a scan­dal over tele­coms li­cences that has rocked the In­dian govern­ment.

Jon Fredrik Bak­saas, chief ex­ec­u­tive, urged In­dia to "clean up the mess" sur­round­ing tele­coms reg­u­la­tion and said op­er­a­tors would not make big de­ci­sions over fur­ther in­vest­ment with­out greater clar­ity.

"This is very neg­a­tive for the in­dus­try, it is neg­a­tive for for­eign di­rect in­vest­ment and it is neg­a­tive for cus­tomers be­cause to ex­pand mo­bile cov­er­age will take longer with this kind of un­cer­tainty," he told the Fi­nan­cial Times.

Te­lenor is one of sev­eral op­er­a­tors fac­ing pos­si­ble li­cence can­cel­la­tions in In­dia as part of an in­ves­ti­ga­tion into sus­pected ir­reg­u­lar­i­ties dur­ing the al­lo­ca­tion of sec­ond-gen­er­a­tion spec­trum two years ago.

The scan­dal caused the res­ig­na­tion of Andimuthu Raja as tele­coms min­is­ter amid claims the govern­ment lost $39bn by hand­ing out li­cences too cheaply.

Mr Bak­saas in­sisted Te­lenor had done noth­ing wrong. "We have ful­filled our side of the deal in terms of de­ploy­ing re­sources. We ex­pect the govern­ment to hon­our their com­mit­ments."

He said the dis­pute fit­ted a broader pat­tern of reg­u­la­tory un­cer­tainty in In­dia. "The weak­ness that we've seen re­cently in many sec­tors - not just tele­coms - is some­thing In­dia needs to sort out be­cause it hurts In­dia's rep­u­ta­tion in­ter­na­tion­ally."

Te­lenor is one of sev­eral for­eign op­er­a­tors ac­tive in In­dia's fiercely com­pet­i­tive mo­bile in­dus­try, along­side Voda­fone of the UK, Do­CoMo of Ja­pan and Singapore Telecom­mu­ni­ca­tions among oth­ers.

In­dia is the world's sec­ond­largest mo­bile in­dus­try by sub­scribers af­ter China, with more than 600m users and it is fore­cast to al­most dou­ble in size by 2015, ac­cord­ing to of­fi­cial es­ti­mates.

Te­lenor se­cured its In­dian li­cences as part of the ac­qui­si­tion of Unitech, a lo­cal tele­coms com­pany, in 2008. It had 13.5m In­dian sub­scribers at the end of Oc­to­ber.

The Oslo-based group is one of the world's biggest emerg­ing mar­ket mo­bile op­er­a­tors with a pres­ence in 11 mar­kets from Hun­gary to Malaysia.

In­vestors have shown lit­tle en­thu­si­asm for Te­lenor's In­dian busi­ness amid con­cern over the heavy cap­i­tal ex­pen­di­ture and low mar­gins as­so­ci­ated with the mar­ket. -Bloomberg

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