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20 Aug, 2010 13:56

Vimpelcom deal reports point to new global telecoms player

Press reports that VimpelCom will take a controlling stake in two telecoms controlled by Egyptian billionaire Naguib Sawiris, have analysts pointing to the Russian company becoming a serious global player.

A new giant may emerge on the world mobile market with agencies reporting that Vimpelcom and Egyptian billionaire Naguib Sawiris are about to sign an MoU which will see Vimpelcom will fully take over Italy’s Wind and acquire Sawiris’s 51% stake in Orascom Telecom in exchange for a 20% stake in Vimpelcom and more than a billion dollars.

Konstantin Chernyshev head of the research at Uralsib Analysts believes that Vimpelcom is interested in the deal because it is looking for new ways to develop on Asian markets.

“Russia and Ukraine, lacking growth drivers, at least both Kievstar and Vimpelcom, Russia, can’t deliver such growth rates as they delivered several years ago. In that case it’ll be reasonable to grow through M&A activities. Such markets as Asian ones are still underpenetrated.”

If the deal goes through, the number of Vimpelcom subscribers will grow from 90 million to 200 million. This will make the Russian company one of the largest players on the world mobile market.

Economic observer, Abdu Rahman Shalbi, believes that the deal will provide Naguib Sawiris, with cash he needs to take care of the Italian company’s debts.

“Wind has long been debt-ridden. Currently, its debts stand at 8 billion euros. This was one of the main problems Naguib Sawiris was trying to resolve by drawing new loans. He had difficulties financing his activities. I believe his main objective with this deal is to resolve the problem of Wind’s debts.”

In addition, some believe the deal will help Naguib Sawiris with his company Djezzy, which is facing problems in Algeria. Despite all the positive aspects of the deal, it seems that investors are not too enthusiastic about Vimpelcom’s plans. As soon as the news about contacts between the two parties leaked to the media, Vimpelcom stock significantly dropped. Specialists think this is because Sawiris’ two companies, estimated as worth $17 billion, are deeply in debt and because return on these assets is much lower than that of Vimpelcom.