VimpelCom May Resume Dividends as Profit Beats Estimates
VimpelCom Ltd (VIP), the mobile operator owned by Russian billionaire Mikhail Fridman and Norway’s Telenor ASA (TEL), reported third-quarter profit that beat analyst estimates and said it was close to a decision on dividends.
Net income rose to $538 million from $189 million a year earlier, when foreign-exchange losses hurt earnings, Amsterdam- based VimpelCom said in a statement today. Profit exceeded the average estimate of $509 million from 10 analysts surveyed by Bloomberg. Sales fell 6 percent to $5.7 billion.
The third-quarter results “are unlikely to have a major impact on the stock price as the market is currently more concerned” with the resolution of the conflict between Fridman’s telecoms group Altimo and Telenor and the possibility of VimpelCom resuming dividend payments, Evgeny Golosnoy, an analyst at IFC Metropol, said in a note on Nov. 9.
VimpelCom’s supervisory board may make a decision on dividend payments for 2011 and 2012 as early as this quarter, Chief Executive Officer Jo Lunder said in a telephone interview.
“I would recommend the board doing so once the FAS claim goes away,” Lunder said, referring to an unresolved court injunction by the Russian antitrust watchdog. VimpelCom has a policy to pay at least 80 cents per share, he said.
Given the low free float of shares, U.S.-traded VimpelCom has put on hold a plan to obtain a technical listing on a European bourse, Lunder said. Vimpelcom’s shares have gained 13 percent in the year to date, compared with an 11 percent drop for the Bloomberg Europe Telecommunication Services Index.
Fornebu, Norway-based Telenor and Altimo have been fighting for control over VimpelCom for several years. In April, Russia’s Federal Anti-Monopoly Service claimed Telenor had no right to increase its stake in VimpelCom, which it said owns strategic assets in Russia, to a level exceeding local shareholders’ ownership. The agency also won an injunction banning VimpelCom’s Russian unit from making payouts to the parent.
Altimo last month increased its stake in VimpelCom to 47.9 percent of voting shares, exceeding Telenor’s 43 percent. The Moscow court is set to hear the antitrust watchdog’s claim on Nov. 27, according to VimpelCom and the watchdog also known as FAS. VimpelCom convened a shareholder meeting for Dec. 21 to re- elect the board.
VimpelCom’s charter requires a shareholder whose ownership passes a threshold of 50 percent to make a mandatory offer to all other shareholders, Lunder said in the interview today. Telenor would be “pragmatic” over any offer from Altimo, the CEO of the Norwegian company Jon Fredrik Baksaas told the Financial Times on Nov. 1.
VimpelCom, which operates in Russia, Italy, Africa and Asia, increased subscribers by 7 percent from a year earlier to 212 million. The company gained about 2.2 million users in the third quarter in Uzbekistan, where competitor OAO Mobile TeleSystems (MBT) shut its services in July after a court order, AC&M Consulting said last week.
VimpelCom is seeking to increase profitability by expanding data services and cutting costs as it tries to reduce its $26.6 billion debt after acquiring telecommunication assets from Egyptian billionaire Naguib Sawiris last year. That deal more than doubled the company’s subscribers and made it the sixth- largest operator globally.
The margin of earnings before interest, taxes, depreciation and amortization to sales rose to 44 percent from 42.2 percent a year earlier, VimpelCom said today. The growth was led by Russia and former Soviet republics. Performance in Algeria, Bangladesh and Pakistan was undermined by local currencies depreciation versus the dollar.
VimpelCom, which operates in 18 countries, is weighing the sale of small or unprofitable units in Cambodia, Laos and Sub- Saharan Africa including Burundi, Central African Republic and Zimbabwe, the Financial Times reported last month, citing a person familiar with the matter.
The company is continuing to examine its assets portfolio, while it has no plans to quit any particular region, Lunder said. VimpelCom is weighing both divesting and market consolidation opportunities in different markets, the CEO said, declining to be more specific.
VimpelCom is seeking a “mutually beneficial” solution with the Algerian government over the future of local unit Djezzy, according to Lunder. Algeria wants operational control of the company, while VimpelCom wants the profitable operator to remain on its balance sheet.
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