Sawiris, VimpelCom discuss $25-billion merger

Egyptian billionaire Naguib Sawiris was in talks to merge the bulk of his telecommunications assets with Russian mobile-phone company VimpelCom in a transaction that could create a company worth more than $25 billion, two people familiar with the matter said yesterday.

Sawiris would become a significant minority investor in the new company, which would include his Weather Investments SpA’s 51 per cent stake in Egypt’s Orascom Telecom Holding SAE and Italian mobile operator Wind Telecomunicazioni SpA, said the people. They declined to be identified because the talks are private.

While negotiations are progressing, the structure of a deal hadn’t been decided and an agreement might not be reached, these people said. The transaction would create an entity with a combined total mobile subscriber base of more than 200 million customers and give VimpelCom, Russia’s second-largest mobile-phone operator, access to markets in Africa and the Middle East. It is Sawiris’s second attempt this year to sell Orascom assets, after talks with South Africa’s MTN Group collapsed in June.

VimpelCom, with headquarters in Amsterdam and listed in New York, was formed by Russian billionaire Mikhail Fridman’s Alfa Group and Norway’s Telenor ASA to consolidate holdings in Russian and Ukrainian mobile-phone operators. VimpelCom is 39.6 per cent-owned by Telenor, while Alfa’s Altimo unit controls 39.2 per cent and minority shareholders own 21.2 per cent, according to VimpelCom’s website.

Structure discussions
Telenor spokesman Dag Melgaard and VimpelCom’s spokeswoman Elena Prokhorova yesterday declined to comment. A spokeswoman for Wind said the division wasn’t in talks. Sawiris and spokespeople for Weather and Orascom Telecom couldn’t immediately be reached for comment outside of business hours.

VimpelCom and Weather were discussing issues including the structure of a combined entity and corporate governance and there remained a chance that no deal will be reached, said one of the people. VimpelCom has a market value of about $19 billion. Pierre Merveille, a senior credit analyst at Spread Research, said the value of Weather’s combined holdings is close to $6 billion, consisting of $2.4 billion for Orascom and $3.6 billion for Wind, excluding debt.

“One of the attractions of the deal would be the ability to reduce financing costs ofSawiris’s assets by using VimpelCom’s balance sheet and ‘creditability,’” Dalibor Vavruska, an analyst at ING Groep NV, wrote in a note this week.

‘Open for mergers’
Sawiris is restructuring debt and selling assets. VimpelCom posted a $412 million profit in the first quarter. VimpelCom CEO Alexander Izosimov said on February 18 the company had a structure that was “very adaptable and open for mergers” and might “actually create quite a sizeable player.”

MTN, Africa’s largest mobile-phone operator, ended talks to buy some of Orascom’s assets in June after the Algerian government objected to the sale of Cairo-based Orascom’s unit in that country. The government ordered the division to pay $596 million in back taxes last year. Orascom, the biggest mobile- phone operator in the Middle East, said in April it paid the disputed amount, pending an appeal.