VimpelCom Weighs Use of $1.4 billion to Reduce Debt

VimpelCom Ltd. is considering the use of $1.4 billion received from billionaire Mikhail Fridman’s Altimo to cut debt or pay dividends, Jo Lunder, Chief Executive Officer of the Amsterdam-based mobile operator, said today.

“The decision is to be made by the supervisory board,” Lunder said on a London conference call with reporters. Altimo agreed to pay the sum to VimpelCom for converting 128 million preferred shares into common stock by April 16, the operator said Dec. 24.

VimpelCom, controlled by Altimo and part-owned by Norway’s Telenor ASA, is struggling to reduce debt that stood at $26.6 billion at the end of September following acquisitions, including telecommunications assets from Egyptian billionaire Naguib Sawiris in Italy, Algeria and Asia.

The operator plans to improve cash flows by as much as $900 million a year through 2015 as it reduces and “optimizes” debt, limits capital spending to about 15 percent of revenue and cuts costs, VimpelCom said in a presentation today.

The company’s shares rose 2.6 percent to $11.28 at 10:55 a.m. in New York.

VimpelCom will probably use the proceeds from Altimo’s shares conversion to pay down the expensive debt of its Wind Italy unit, which stands at about $5 billion, according VTB Capital. Lunder declined to comment on this.

Dividend Policy

VimpelCom reiterated its policy to pay a dividend of at least 80 cents per share and said this would continue to 2015. It plans to cut the ratio of net debt to earnings before interest, taxes, depreciation and amortization to less than 2 by 2015 from 2.4 as of Sept. 30.

The conversion of preferred shares will increase Altimo’s economic stake in VimpelCom to 56.2 percent, while its voting stake will stay at 47.9 percent. Telenor will become eligible to convert its preferred shares into common from October, according to Sberbank Investment Research.

Separately, Lunder also said today that VimpelCom is “optimistic” on a potential resolution of its dispute with the Algerian government regarding ownership of the local unit.

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