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VimpelCom Discount Shrinks After Euroset Deal: Russia Overnight

VimpelCom Ltd. rose last week to trade at the smallest discount versus its emerging-market peers in more than three weeks as the mobile provider moves beyond a shareholder dispute and bolsters its presence in Russia.

Shares of VimpelCom jumped 3.7 percent last week to a one-month high in New York, pushing the stock to 11.3 times estimated earnings, compared with an average multiple of 13.2 for the MSCI Emerging Markets Telecommunications Services Index. It was the narrowest gap since Nov. 14. The Bloomberg Russia-US Equity Index of Russian companies traded in the U.S. climbed 2.8 percent to 95.41 last week, while the Dec. 7 evening session of the futures on the RTS Index was canceled as the Moscow Exchange tested their new platform.

VimpelCom has climbed 2 percent since Nov. 23, when Russia agreed to withdraw its case against Norway’s Telenor ASA for boosting its stake in the phone company, a move that frees VimpelCom to distribute dividends. The company, Russia’s third-biggest mobile phone provider, said on Dec. 7 that it had raised its stake in Euroset Holding NV to 50 percent, splitting the Moscow-based retailer with OAO MegaFon, Russia’s second-biggest mobile operator.

“People are expecting dividends will resume very soon and are pleased,” Sergey Libin, an analyst at ZAO Raiffeisenbank, who rates VimpelCom hold said in a phone interview Dec. 7 from Moscow. “VimpelCom has successfully kept MegaFon from obtaining a controlling stake in Euroset. They see potential in the Russian market.”

Russia provided 42 percent of VimpelCom’s revenue last year as the nation’s economy grew 4.3 percent. Gross domestic product in Russia, the world’s largest energy exporter, will expand 3.5 percent in 2013 after rising 3.6 percent in 2012, according to the median estimate of 35 economists in a Bloomberg survey.

Dividend Yields

MegaFon, which raised $1.7 billion in its initial public offering last month, and its main shareholder billionaire Alisher Usmanov paid a combined $1.07 billion for 50 percent of Euroset. VimpelCom raised its stake in Euroset by 0.1 percent to 50 percent.

VimpelCom, controlled by Russian billionaire Mikhail Fridman and Telenor, will hold its annual shareholder meeting on Dec. 21.

A Moscow court had banned the Amsterdam-based company’s Russian unit from paying dividends earlier this year because the anti-monopoly service, knows as FAS, opposed Telenor’s moves to increase its stake. The dispute was settled when Fridman increased his voting stake in VimpelCom to 47.85 percent in October. Telenor owns 43 percent of VimpelCom’s voting shares.

The company’s dividend yield was 4.1 percent over the past 12 months, compared with the 3.5 percent average for Russia-US index companies.

Oil Drops

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, climbed 2.9 percent to $28.64 last week, the highest level since Oct. 22. The evening trading sessions of FORTS and the Standard market were canceled Dec. 7 as the Moscow Exchange tested its new SPECTRA platform, according to a statement on its website.

Oil, which together with natural gas accounted for half of Russia’s federal budget revenue last year, capped the first weekly decline since early November on Dec. 7.

Crude for January delivery dropped 0.4 percent to $85.93 a barrel on the New York Mercantile Exchange. Prices fell 3.4 percent last week and are down 13 percent this year. Brent oil for January settlement lost 3.8 percent to $107.01 a barrel on the London-based ICE Futures Europe exchange, while Urals crude, the country’s main export blend, rose 0.1 percent to $105.54 on Dec. 7, trimming its decline last week to 3.8 percent.

Norilsk Rallies

OAO GMK Norilsk Nickel, the world’s largest producer of the metal, surged 12 percent to $17.73, the biggest weekly gain in two years. The company advanced 9.8 percent to 5,298 rubles, or the equivalent of $171.85, in Russia’s Micex Exchange. One ADR equals a 10th of an ordinary share.

The billionaire shareholders in Moscow-based Norilsk may agree to distribute more than $10 billion in dividends as part of an agreement to end a four-year battle over control, according to three people with knowledge of the talks. The company would pay the money on profit earned between 2012 to 2014, the people said on Dec. 5, asking not to be identified because a final agreement hasn’t been signed.

Separately, Norilsk said on Dec. 7 that the first stage of a facility to reduce emissions will start in late 2016 as the company woos investors after Norway banned it from the country’s wealth fund.

American depositary receipts of OAO RusHydro traded in New York fell 1.8 percent last week to $2.23. Shares on Russia’s Micex Index rose 0.1 percent to 73.51 kopecks, or the equivalent of 2.38 U.S. cents. One ADR is equal to 100 shares.

United Co. Rusal, the world’s largest aluminum producer, rose 1.9 percent to HK$4.85 in Hong Kong trading as of 10:59 a.m. local time. The MSCI Asia Pacific Index gained 0.1 percent.

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