20 August 2010
Mergermarket publishes Evgeny Bolshakov’s commentary on Vimpelcom's acquisition of Wind Telecomunicazioni

Vimpelcom acquisitions may face obstacles - analysis

• Antitrust approval unlikely to be a serious issue despite OTH's wide geographic presence
• Unresolved issues in Ukraine and Algeria hinder valuations of Vimpelcom, OTH
• No significant benefits of the merger seen for Vimpelcom except subscriber numbers

Vimpelcom's acquisition of Orascom Telecom Holdings (OTH) and Wind Telecomunicazioni would require specific regulatory approvals in certain countries, lawyers told this news service.

Taking the potential deal in its publicly discussed structure, it will most likely require approval from the Italian and Egyptian antitrust regulators, said Maria Kirienko from Debevoise and Plimpton.

Wind is a significant player on the Italian telecoms market, she added. The acquisition of Wind will require regulatory approval in Italy unless it falls within an exception, which could be the case under certain conditions if the deal is conducted outside Italy, added Evgeny Bolshakov, a lawyer with EPAM. The standard approval term is 30 days, but the Italian regulator may take a further 45 days for the decision, he said.

The nature of approvals may significantly differ from country to country, the second lawyer said. For instance, as of 2008, Algerian law required approval of such deals, which may take up to three months, he added. On the other hand, the Egyptian law as of 2008 only required a notification of the regulator after the deal, the second lawyer said.

Antitrust legislation is generally not very well developed in the countries where OTH is present; therefore, regulatory approval is unlikely to play a key role, the first lawyer said. There is generally no requirement for deal approvals in Bangladesh, for example, she added.

In general, the fact that Vimpelcom is not active in countries where OTH and Wind have a presence makes the approval side of the process much easier, the lawyers agreed. Regulatory requirements may cause delays in completion of the deal; however, these delays would be unlikely to exceed the usual terms, the second lawyer stressed. In any case, Vimpelcom will need to hire law firms with local expertise for the deal, he noted.

The presence of Telenor, one of the largest shareholders in Vimpelcom, in Bangladesh and Pakistan is unlikely to lead to the need for additional regulatory approval, because Telenor does not have control over Vimpelcom, the first lawyer said.

However, the future actions of Vimpelcom in these countries will come under scrutiny from local governments if suspicions of market monopolisation arise, the first lawyer noted.

The acquisition of 23% in Vimpelcom Ltd. by N. Sawiris is unlikely to require antitrust approval in Russia, the first lawyer confirmed.

However, recently Russian antitrust authorities are drawing more attention to shareholder agreements when assessing mergers and acquisitions. Should Russian regulatory body the FAS treat the shareholder agreement of Vimpelcom Ltd. as setting joint control over the company, the deal may need its approval, Krienko said.

The potential delay of an approval of the merger between Vimpelcom OJSC and Kyivstar by the Ukrainian Antitrust Committee does not seem to represent legal obstacles to the acquisition of a 23% stake in Vimpelcom Ltd by N. Sawiris, both lawyers agreed. According to media reports, it is planned that Naguib Sawiris would receive 23% in the Netherlands-registered Vimpelcom Ltd., plus a USD 1.74bn cash payment as a result of the deal with Vimpelcom Ltd.

However, the issue may influence the valuation of the Vimpelcom Ltd stake that is to be transferred to N. Sawiris as part of the deal or cause a delay, the first lawyer suggested.

There is very little clarity as to valuation of both Vimpelcom and Orascom, a Moscow-based analyst said. Not only is the merger between Vimpelcom OJSC and Kyivstar still pending, there is also an issue with Orascom's subsidiary in Algeria.

According to media reports, OTH and the government of Algeria are in talks on the sale of OTH subsidiary Djezzy. There are too many risks and too many issues to be solved before proceeding with the deal, the analyst noted.

The acquisition of Orascom and Wind has no benefits for Vimpelcom except the increase of its subscriber base and gaining presence on markets, of which some, but not all, are attractive, the analyst said. There are no specific synergies arising between the companies, the analyst added. The actions of Altimo and Telenor, the current shareholders of Vimpelcom Ltd., as regards to the deal will demonstrate whether there is real unity between them and whether the conflict is indeed over, the analyst said.

by Alexander Čajčyc