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VimpelCom to Spin Off Korea, Mobinil at Book Value

VimpelCom Ltd., which is seeking a $6.5 billion merger with Naguib Sawiris’s Orascom Telecom Holding SAE and Weather Investments SpA, will spin off Egyptian and North Korean assets at book value following the deal.

“Orascom would split off its share in Mobinil and in Korea and there will be a spin-off at book value in principle, in line with Egyptian regulation,” Chief Financial Officer Henk van Dalen said in a phone interview today.

Sawiris said in October that VimpelCom, which has its headquarters in Amsterdam, will spin off the assets into a separate company on completion of the merger. The company said today it aims to close the deal in the first half of 2011 as it seeks approval from shareholders. VimpelCom initially said in October it planned to complete the merger by February.

“Given the size and complexity of the deal, we are satisfied with the progress made thus far,” Chief Executive Officer Alexander Izosimov said. “We remain committed and continue to move forward.”

Orascom owns 34.6 percent of Mobinil, Egypt’s second-biggest mobile operator. The company owns 75 percent of its North Korean unit, which provides services to the capital Pyongyang.

The two companies have yet to sign a final agreement to create the world’s fifth largest mobile-phone company as Orascom tries to resolve a dispute with the Algerian government over its local unit, Djezzy.

Back Taxes

The Algerian government, which wants to buy Djezzy, has ordered it to pay more than $800 million in back taxes and banned it from transferring money abroad, penalties that Orascom has contested. The Egyptian company has said it could be in international arbitration by the second quarter of next year unless it can resolve the dispute.

VimpelCom is not in talks with the Algerian government over Djezzy, while it waits for the government to appoint advisers, CFO van Dalen said today.

“There are contacts with them from time to time,” van Dalen said. “At the moment, there’s no reason to step into discussions, it is better to leave as is.”

Orascom has been seeking to cut debt ahead of the merger with the Russian company. In November, it agreed to sell its 50 percent holding in Tunisiana for $1.2 billion, in a deal that was supported by VimpelCom, which said it couldn’t gain full control of the asset.

Sawiris may consider selling assets individually rather than as a group to VimpelCom, analysts, including Dalibor Vavruska, an analyst at ING Groep, have said.

Orascom is selling the Tunisian holding at a multiple of 6.7 times 2009 earnings before interest, taxes, depreciation and amortisation, higher than the 6.2 multiple for VimpelCom deal.

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