Emerging markets telecoms group Vimpelcom wants to delist Cairo-based subsidiary Orascom Telecom Holding (OTH) from the Egyptian and London stock exchanges so it can manage it directly, two sources said on Friday.
The move will also allow Vimpelcom to cut costs associated with running the Egyptian office and avoid regulatory and political risks, a source familiar with Vimpelcom’s plans and a source close to Vimpelcom said.
Vimpelcom acquired a controlling stake in OTH in 2011 along with 100 percent in Italy’s Wind from Egyptian tycoon Naguib Sawiris in a $6 billion-plus deal, expanding outside its Russian home market.
Together with subsidiaries, Vimpelcom owns 51.92 percent of OTH, which has mobile businesses in Canada, Algeria and other emerging markets such as Bangladesh.
The purchase of Wind and Orascom, which was overshadowed by a bitter shareholder dispute at Vimpelcom, saddled the company with heavy debts and prompted it to launch a strategic review of the assets.
The company has already sold businesses in Vietnam and Cambodia and sources say it may exit more emerging markets. It is also struggling to end uncertainty over the fate of its lucrative Algerian business Djezzy that the Algerian government wants to nationalise. “This is part of the strategy. There is a task to run the assets directly, which will help to improve the quality of management of the businesses such as (Djezzy) in Algeria,” a source close to Vimpelcom said.
“Vimpelcom spends around $50 million a year on its Cairo HQ, and taxes in Egypt are very high,” said another source familiar with Vimpelcom’s plans. The source said material regulatory risks, such as extra tax claims, and political risks due to broader instability, added to the reasons for the move. Removing this extra layer will make it possible to save at least $100 million, one of the sources said, adding the decision has been taken “at shareholder level”.
Vimpelcom’s biggest shareholder, Russian billionaire Mikhail Fridman’s Altimo, made a $1.8 billion offer March to buy out OTH minority shareholders. OTH management advised shareholders to reject the offer, saying it was too low.
Vimpelcom would need the approval of around 75 percent of all shareholders present at the shareholder meeting to go ahead with the delisting, one source said. The source said the company may try to secure the backing of 5-10 percent of OTH shareholders by offering them its own shares, which have risen around 50 percent since the middle of last year, adding the shares tendered in the Altimo offer could also vote for the delisting. Vimpelcom and Orascom Telecom declined to comment.