Vimpel Makes Move in Ukraine
The country's No. 2 mobile phone firm, VimpelCom,
entered Ukraine's fast-growing market Friday by buying a mobile
operator for $231.3 million, despite opposition from Norway's
Telenor, one of VimpelCom's key shareholders.
The acquisition of Ukrainian RadioSystems marks
a victory for Alfa Telecom, VimpelCom's largest shareholder,
over Telenor, VimpelCom's second-biggest investor.
Alfa Telecom, which owns 32.9 percent of the
company, has pushed for VimpelCom to expand into Ukraine, where
subscriber growth rates are faster than in the company's home
market.
Although a shareholder meeting approved the
purchase of Ukrainian RadioSystems, or URS, Telenor had opposed
the deal, which has been under discussion since August 2004,
at board meetings, saying the price was too high.
Telenor owns 26.6 percent in VimpelCom, which
operates under the Bee Line brand in Russia and Kazakhstan.
Under the terms of the deal, VimpelCom also assumed debt of
$23.5 million, it said.
"As CEO, I could not have failed to fulfill
a shareholders meeting's decision," Alexander Izosimov
told a news conference. "There are no other such markets
in Europe like Ukraine. "With a population of 47 million,
Ukraine's mobile services penetration is 50 percent, compared
with 80 percent in Russia.
There are two major mobile services firms in
Ukraine. Mobile TeleSystems -- VimpelCom's key rival in Russia
-- has been operating in Ukraine for several years and has the
biggest market share of any company. The second-largest company
is Telenor-controlled Kyivstar, where Alfa is a minority shareholder.
VimpelCom's board has never approved the deal
with the required majority because Telenor's representatives
have voted against it.
Telenor said the purchase of URS, a company
that controls less than 1 percent of the market, would require
major investments and put VimpelCom's own future at risk.
Telenor promised to consider taking legal action
against the acquisition, but added it would not sell its stake
in Vimpelcom as it had once said it might.
Telenor will "consider carefully what
steps we need to take to defend VimpelCom's future value,"
spokesman Dag Melgaard said in the company's statement. "This
might include legal steps."
On the sale of its stake, Melgaard said: "We
do not want to be intimidated out of such a good company."
Telenor's stated long-term strategy for its mobile units abroad
is to win control or pull out.
In terms of its plans for URS, Izosimov said
VimpelCom wanted to have at least 15 percent of the Ukrainian
market within 18 months to two years.
He promised that the company would spend no
more than $100 to $110 per subscriber in Ukraine, the same amount
it spends in Russia.
But Morgan Stanley said it was less optimistic
about the amount of spending needed to expand in Ukraine and
the amount of time required to win a 15 percent market share.
"We believe the execution on the Ukrainian
expansion will be challenging for VimpelCom, given an already
high penetration level and well-established competition,"
it said in a note.
