Daily analyst comments
Telenor and Alpha Group may merge VimpelCom and Kievstar: a bright, but unlikely idea
29.06.09 10:06
Although a merger of some of Alpha Group and Telenor’s communication assets would help solve a lot of outstanding problems, such an outcome of events does not seem likely, given the ongoing tensions between the two companies.
On June 26, business newspaper Vedomosti reported that Telenor and Alpha Group might revert to an option of a merger between VimpelCom and Kievstar. This move could ease tensions between the two companies: during the last few years, Alpha and Telenor have been involved into a conflict over equity stakes in the two mobile operators. At the moment, Vedomosti reported, Alpha Group and Telenor are considering the idea of merging their equity stakes. Telenor has demanded that the transaction be carried out under United States jurisdiction.
The idea of uniting VimpelCom and Kievstar dates back to 2006: indeed, a merger between Russian-based VimpelCom, where Alpha and Telenor control a total of 74% shares, and Ukrainian-based Kievstar, where the two companies act as sole investors, would be quite logical.
However, although the idea of establishing a JV in the United States to merge equity stakes looks fresh, it is quite utopian: a US jurisdiction may not suit Alpha Group; in addition, Telenor wants to consolidate the merged company’s operating indicators into its own financial report. Moreover, there are a number of crucial issues that prevent the parties from reaching an accord: for example, Telenor announced that it would not start negotiations with Alpha Group until Farimex withdrew its lawsuit against the Norwegian company.
We do not expect the conflict between Alpha Group and Telenor to be resolved in the near future. We do not have an official recommendation for VimpelCom; however, tensions between Alpha and Telenor could have a negative impact on the mobile operator’s investment appeal.