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Kremlin trip to Algiers may trigger Vimpelcom deal

Moscow, October 2, 2010

Russian mobile operator Vimpelcom and Egyptian businessman Naguib Sawiris may be poised to unveil a deal combining their telecoms assets ahead of President Dmitry Medvedev's visit to Algeria next week.

One source familiar with the matter said an announcement relating to Vimpelcom and Sawiris could come as early as Monday, without specifying what the statement would address.

Vimpelcom, the acquisitive telecoms operator that is part owned by Russia's Alfa Group and part by Norway's Telenor, is in talks to buy Sawiris's Italian unit Wind and his 51-per cent stake in Egypt's Orascom Telecom, in a deal potentially worth $6.5 billion.

But the talks have been complicated by Algiers, which says it has the right of first refusal over Djezzy, the Algerian unit that is Orascom's single biggest revenue source.

But this person and several others said no definitive agreement had yet been reached and suggested talks could still break down.

These people cited potential difficulties such as Telenor's attitude towards a deal, as well as the complexity and refinancing needs of Sawiris's companies, and finding the appropriate role for Sawiris in a combined group.

Algiers vetoed the sale of Djezzy to South Africa's MTN  last year and some Vimpelcom investors fear it could intervene again.

Vimpelcom may hope to have a preliminary deal in hand so Medvedev can negotiate with Algerian government. If the deal goes through, the combined group would become the world's fifth-largest mobile operator, roughly doubling current revenues.

Shareholders might also be satisfied with a cash buyout by the Algerian government at what they deemed a fair price.

But it is unclear that Alfa Group and its Norwegian partners, each with about 40 per cent of Vimpelcom, have agreed amongst themselves on Orascom.

They have "philosophical" differences over the risks they would face in the frontier markets where Orascom operates, a source close to Vimpelcom said.

Telenor faces a tough market in its latest major foray abroad in India, and said earlier this month it would back plans by Vimpelcom to expand in new regions but was concerned about its ability to maintain its dividend policy.

Vimpelcom revived dividends last year with an interim payout of $324 million. The shareholders made peace after a 5-year war for control of Vimpelcom and it relocated to neutral ground in Amsterdam.

It had been founded in Moscow after the fall of the Soviet Union by a Russian radio engineer and a family of US investors.

Vimpelcom, Alfa Group's telecoms arm Altimo and Telenor declined to comment on the talks.-Reuters




Tags: Russia | Vimpelcom | Algieria |

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