Russia's VimpelCom Jumps After Settling U.S. Corruption Probe

  • Carrier expects to pay less than $900 million it set aside
  • Uzbek settlements reached with SEC, DOJ, Dutch prosecutors

VimpelCom Ltd., the wireless carrier under investigation for bribery in Uzbekistan, will acknowledge it broke laws in settlements reached with U.S. and Dutch authorities and expects to pay less than the $900 million set aside for fines as part of the agreements.

The company, controlled by Russian billionaire Mikhail Fridman and partners through a 48 percent voting stake, has come under pressure over alleged corruption in the ex-Soviet republic. The stock rose 6.8 percent to $3.60 at 10:03 a.m. in New York, giving VimpelCom a market value of $6.3 billion.

VimpelCom has reached deals with the U.S. Securities and Exchange Commission and Department of Justice as well as the Dutch Public Prosecution Service. While they’re still subject to the approval of the authorities, VimpelCom will acknowledge "certain violations" of U.S. and Dutch laws under the settlements. Financial penalties won’t exceed the provisionit made last year, the company said in a statement Wednesday.

Fourth-quarter sales rose 1 percent in local currencies to the equivalent of $2.3 billion. In dollar terms, sales fell 29 percent, VimpelCom said. Earnings before interest, taxes, depreciation and amortization rose 3 percent in local currencies to $793 million.

The company forecast unchanged or a "low single digit" increase in service revenue in 2016, and said it’s targeting as much as a 1 percentage point increase in its organic Ebitda margin.

Norway’s Telenor ASAhas said it will divest its 33 percent stake in the company, while VimpelCom Chief Executive Officer Jean-Yves Charlier has begun a strategic revamp at the wireless carrier. Telenor takes "very seriously" VimpelCom’s apparent acknowledgment of violations of U.S. and Dutch corruption laws, the Norwegian company said in a statement Tuesday.

Charlier in August agreed to merged VimpelCom’s Wind Italy unit with CK Hutchison Holdings Ltd.’s 3 Italia allowing the carrier to de-consolidate Italian operations from its balance sheet, offloading more than $12 billion in debt. The company also bought a rival in Pakistan and plans to sell wireless towers in emerging markets to cut debt.

VimpelCom is showing operational improvements under Charlier, said Alexander Vengranovich, an analyst at Otkritie Capital in Moscow. The exact size of the settlement over the alleged Uzbek bribes and the timing of the completion of the merger in Italy still contribute to uncertainty around the company, he said.

VimpelCom said Wednesday it plans to complete the Italian merger by the end of this year compared with an earlier prediction of August. The company plans to expand to local commerce and online payment services, according to a presentation.

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