VimpelCom Ltd., a wireless carrier controlled by Russian billionaire Mikhail Fridman with partners, agreed to merge assets in Pakistan with a local competitor as Chief Executive Officer Jean-Yves Charlier makes progress with his overhaul of the company.
VimpelCom’s Pakistani unit Mobilink will buy Warid Telecom in exchange for Warid’s owner Dhabi Group getting a 15% stake in Mobilink, according to a statement from VimpelCom Thursday.
The combined company will have 45 million users and US$1,4 billion in sales. No value for the transaction was disclosed.
Charlier, who started as CEO this year, is revamping the carrier to boost cash flow and focus on its most promising markets.
Earlier this year, VimpelCom combined its Italian assets with those of Hong Kong billionaire Li Ka-Shing’s CK Hutchison Holdings Ltd. VimpelCom also agreed to sell its operations in Zimbabwe.
Last month, the Nasdaq-listed global telecoms giant, agreed to sell its majority shareholding in Zimbabwe’s third largest mobile network operator, Telecel Zimbabwe to the tune of US$40 million as government tightens its control on the country’s telecoms sector.
As first reported by the Zimbabwe Independent, the Amsterdam-based telecoms firm announced that it had entered into an agreement with government to sell its 60% stake to a chaotic quasi-government entity, Zarnet.
“This is yet another important step in our journey to continue delivering on our strategy to transform VimpelCom,” Charlier said in today’s statement.
VimpelCom predicts about US$500 million of synergies in capital spending and operating expenses from the deal. The company expects to complete the transaction within six months.
Mobilink is the largest player in the Pakistani wireless market, while United Arab Emirates-backed Warid is the No. 5, according to VimpelCom. Pakistan’s other carriers include Norway’s Telenor ASA, China Mobile Ltd.’s Zong unit and Ufone of Pakistan Telecommunication Co.
“Pakistan has five wireless carriers — it has put pressure on margins, so market consolidation was clearly needed,” Muhammad Tahir Saeed, deputy research head at Karachi-based Topline Securities, said by phone.
“Warid was losing customers and had debt issues. It’s good that its shareholders will swap their holdings into the larger player.”
VimpelCom is reportedly in talks to pay about US$775 million — a near record — to settle U.S. allegations it paid bribes in Uzbekistan to win business, according to three people familiar with the matter.
Last week Bloomberg reported that the Amsterdam-based company’s resolution with the Justice Department and the Securities and Exchange Commission could be announced in January.-Bloomberg/Staff Writer