VimpelCom Sets Aside $900 Million Amid Bribery Investigation

  • Provision included in third-quarter financial statements
  • U.S., Dutch authorities are probing carrier's Uzbek business

VimpelCom Ltd., Russia’s third-biggest wireless carrier, set aside $900 million for potential liabilities as it waits for the outcome of Dutch and U.S. investigations into alleged bribes in Uzbekistan.

The provision will be included in third-quarter earnings, the carrier said Tuesday. VimpelCom said there is no certainty as to the final cost until discussions with authorities have been concluded.

VimpelCom, owned by billionaire Mikhail Fridman and Norway’s Telenor ASA, is being investigated as part of probes into the role of Gulnara Karimova, daughter of Uzbekistan’s president, in the awarding of telecommunications contracts in the country.

"Provisions of this kind normally mark the maximum damage the company may suffer," said Alexander Vengranovich, analyst at Otkritie Capital. "Still, $900 million is a lot, and it’s not quite clear what the basis for this figure was.”

VimpelCom shares have declined 12 percent this year in New York, giving the carrier a market value of about $6.4 billion.

Norway ousted Telenor Chairman Svein Aaser last week, citing a lack of confidence in his leadership after the Industry Ministry received more information about VimpelCom’s alleged bribes in Uzbekistan. Last month, Telenor said it intends to divest its VimpelCom stake.

VimpelCom’s announcement is a “serious development that significantly increases our concerns in relation to the potential outcome of the still-ongoing investigations,” Telenor said Tuesday. Shares of the Norwegian carrier fell 1.3 percent to 157.8 kroner at 10:56 a.m. in Oslo.

The U.S. Justice Department in July won a bid to seize $300 million alleged to be the proceeds from an Uzbek telecommunications scheme that involved companies including VimpelCom and Takilant Ltd., an investment firm linked to Karimova and her father.

Swedish carrier TeliaSonera AB is also under investigation for allegedly paying bribes in Uzbekistan. The Swedish government-controlled company overhauled its leadership after similar allegations surfaced in 2012. The carrier said it has yet to hear from authorities investigating whether it will be fined.

"We have not as of yet received any indications from U.S. authorities on a number of a fine or sanction or other consequence of this yet," TeliaSonera General Counsel Jonas Bengtsson said Tuesday in a phone interview. Its shares dropped 0.5 percent to 43.60 kronor in Stockholm.

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