Telenor's VimpelCom Exit Gives Fridman Chance to Boost Control

  • Sale to end company's 16-year investment in wireless provider
  • Norwegian carrier to divest stake valued at $2.4 billion

Telenor ASA decided to give up on its Russian investment after 16 years, handing billionaire Mikhail Fridman a chance to consolidate his control of wireless carrier VimpelCom Ltd.

Other major investors would be less likely to take a risk with Russia’s third-biggest mobile-phone company as the country struggles with a recession, said analysts at Fondsfinans and Otkritie Capital. Russian tycoon Fridman’s investment firm is already the main owner of VimpelCom and has battled with Telenor for influence over the carrier.

The scarcity of potential buyers may limit the proceeds the Nordic region’s biggest phone company can expect to receive for its 33 percent stake, which is valued at about 20 billion kroner ($2.4 billion). Yet Telenor investors welcomed the news as the company is divesting an asset that it couldn’t fully control while reducing its exposure to Russia and Ukraine as well as a bribery probe VimpelCom is facing over its Uzbekistan operations.

“Everybody wants them to sell the stake so that’s neutral -- the problem is that there is technically only one buyer,” said Daniel Johansson, an analyst at Fondsfinans in Oslo. “There’s zero chance that it will be someone else completely unknown, like a Western investor.”

Telenor is free to sell the stake to anyone as a stockholder agreement with Fridman’s investment firm is no longer valid, said Glenn Mandelid, a spokesman for the Norwegian company. Telenor said Monday it will explore all options to sell the holding. Stuart Bruseth, a spokesman for Fridman’s investment firm L1 Technology, declined to comment.

Shares of Telenor advanced 2.8 percent to 159.6 kroner at 10:50 a.m. in Oslo. Shares of VimpelCom have dropped about 70 percent since the start of last year amid Russia’s economic slump and a plunge by the ruble, and closed at $4.05 in New York on Oct. 2.

Telenor bought about a third of VimpelCom in 1999 to expand beyond the Nordic region. The company has invested 15 billion kroner in VimpelCom and received about 20 billion kroner in dividends. It expects a non-cash impairment expense of about 7.5 billion kroner in the third quarter as a result of the stake sale.

Russian Control

Fridman’s L1 Technology, previously known as Altimo, is the largest shareholder in VimpelCom with about an 48 percent voting stake. L1 Managing Partner Alexey Reznikovich is the chairman of VimpelCom’s board.

What may limit other investors’ interest is the rocky history that Telenor had with VimpelCom’s Russian co-owners, said Alexander Vengranovich, an analyst at Otkritie in Moscow. Fridman and Telenor fought for influence over the company, and Russia’s anti-monopoly regulator took legal action in 2012 to stop Telenor from gaining control of the carrier, which owns assets deemed “strategic” by the Russian government.

Fridman “seems the most obvious buyer for Telenor’s stake," Vengranovich said. Selling the shares in the market is less likely as it would raise less money than a sale to a strategic investor, he said.

Uzbek Probe

A sale would end Telenor’s involvement with a company being investigated as part of a probe into Gulnara Karimova, daughter of Uzbekistan’s president. In December, Telenor then-Chief Executive Officer Jon Fredrik Baksaas left the board of VimpelCom after Swedish authorities started a probe into whether the wireless carrier paid bribes in Uzbekistan. Baksaas was replaced by Sigve Brekke in August. Norway’s government owns about 54 percent of Telenor.

Telenor is joining fellow Nordic carrier TeliaSonera AB in curbing exposure to former Soviet countries. The Swedish carrier, which has also faced bribery investigations related to Uzbekistan, said last month it plans to exit Asia and ex-Soviet markets that account for almost a third of earnings to focus on Europe and the Nordic region.

Telenor plans to start contacting potential buyers as soon as possible, CEO Brekke said in an interview. Brekke said he was asked by the company’s board to review its holding in VimpelCom about two months ago.

“Our minority position in VimpelCom has been very demanding because we couldn’t control the company,” Brekke said. “We wish to focus our efforts to the 13 markets that are our core operations.”

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