Vimpelcom, Weather Investments merger under threat of failure

PanARMENIAN.Net - Vimpelcom is warning it could sue the Algiers government if it seeks to nationalise Algeria’s leading mobile phone operator. Alexander Izosimov, Vimpelcom chief executive, told the Financial Times he could resort to legal action should Algiers offer an unfavourable price for Djezzy, the country’s largest mobile operator.

Vimpelcom, Russia’s second-largest mobile operator, announced plans to secure a controlling stake in Orascom Telecom, the Cairo-listed telecoms group whose most valuable asset is Djezzy. But the Algerian government immediately responded by saying it wanted to own Djezzy.

Dmitry Medvedev, Russia’s president, held talks with Abdelaziz Bouteflika, his Algerian counterpart, to try to smooth the way for Vimpelcom to own and run Djezzy. Mr Izosimov, who accompanied Mr Medvedev on the Algiers trip, said the Algerian government – “as the position looks now” – seemed more interested in buying Djezzy.

While Mr Izosimov said Vimpelcom’s preference was to own Djezzy, he added the Russian group was “happy” to sell it so long as there was a “fair price tag” of $7.8bn. Some analysts predicted the government could pay much less than $7.8bn, or even expropriate Djezzy.

In such situations, Mr Izosimov said Vimpelcom would not hesitate to take legal action: “If the government makes moves or extracts the asset – nationalises and so on – we will try and defend our rights.” However, he added legal action was a worst-case scenario, and expressed optimism that either the Algerian government would pay a fair price for Djezzy or allow Vimpelcom to own and run the mobile operator.

Vimpelcom announced plans to combine with Weather Investments, the private investment company of Naguib Sawiris, the Egyptian entrepreneur, in a $6.6bn deal that is due to close early next year. Weather owns Wind, Italy’s third largest mobile operator, and also has a 51.7 per cent stake in Orascom. Djezzy would contribute 10 per cent of the enlarged Vimpelcom group’s earnings before interest, tax, depreciation and amortisation.

But Mr Izosimov said that if the Algerian government insisted on buying Djezzy, it would not kill the proposed deal between Vimpelcom and Weather. “There are many attractive assets we are acquiring,” he said. “Algeria is just one of them.” Mr Izosimov also stressed the benefits for Algeria of letting Vimpelcom develop the country’s telecoms infrastructure by investing in Djezzy.