Takeover may help Wind Mobile

The takeover of the biggest investor in Canadian startup Wind Mobile may boost the Toronto-based company’s hunt for money to support its goal of being the fourth national wireless carrier.

Egyptian-based Weather Investments, which owns Orascom Telecommunications S.A.E. and is in effect Wind Mobile’s banker, said Monday it has struck a deal to merge with telecom giant VimpelCom Ltd. The result will be the creation of the fifth largest wireless carrier in the world by subscribers, with 174 million users in 20 countries, and will operate under Amsterdam-based VimpelCom’s name.

The combined entity will have annual revenues of US$21.5 billion. Orascom has already advanced some $650 million to Wind Mobile for its network in Toronto, Ottawa, Calgary, Edmonton and Vancouver, and the startup will need tens of millions more to finance its plan to expand everywhere it has licences – which is almost all of the country except Quebec. At this point it isn’t known if Canada will be a financing priority for the new conglomerate as VimpelCom hasn’t said what countries it will focus on.

However, a VimpelCom slide for analysts announcing the deal listed Canada along with Asia and Africa as growth markets.
Wind Mobile chair Anthony Lacavera, who controls the startup, wouldn’t comment on the deal or its impact. However, in a statement the company noted there will be no change in its ownership or control. “A stronger and more diversified Orascom Telecom that has even more scale globally in fact has potential benefits for Wind,” it added.

The merged company’s biggest revenues will come from VimpelComn’s Russian operations (35 per cent) and Orascom’s Wind Italy (34 per cent). As with Orascom, Canada will be the only foothold for VimpleCom in the Western Hemisphere. However, it is a relatively mature market with 70 per cent penetration and dominated by three giants: BCE Inc.’s Bell Canada, Rogers Communications Inc. and Telus Corp.

In addition, three well-funded cable companies – Quebecor Inc.’s Videotron, Calgary-based Shaw Communications Inc. and the Eastlink division of Halifax-based Bragg Communications Inc. – are starting wireless operations. Any foreign investment Wind Mobile hopes to get will depend on the Harper government’s upcoming policy on telecommunications investment. The government has said it hopes to introduce legislation this fall but opposition parties may throw a wrench into the plans. VimpelCom has telecom operations in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikstan, Georgia, Armenia, Kyrgyzstan, Vietnam and Cambodia under the Beeline and Kyivstar brands.

Weather Investments S.p.A. offers mobile, fixed, Internet and international communication services in Algeria, Bangladesh, Egypt, Greece, Italy, Pakistan, Tunisia and North Korea. However, the deal doesn’t include Orascom’s Wind Hellas unit in Greece, its joint venture with France Telecom in Egyptian carrier ECMS-Mobinil or its North Korea operation. Weather is owned 72.6 per cent by Weather Investments II S.a.r.l., which is itself owned by the family of mogul Naguib Sawiris.

When the deal is final, VimpelCom Ltd will own, through Weather, 51.7 per cent Orascom Telecom and 100 per cent of Wind Telecomunicazioni S.p.A. (“Wind Italy”). In a statement Sawiris called the deal a “ landmark transaction” that reflects the value of Orascom and Wind Italy’s assets. He and another Weather nominee will join VimpelCom’s 11-member supervisory board.

The top five mobile operators in the world by subscriber are China Mobile (421 million), British-based Vodafone Group (which owns part of Verizon Wireless in the U.S. and has 301 million subs around the world), Spain’s Telefonica S.A. (226 million world-wide) and Mexico’s America Movil (210 million subscribers).
The new VimpelCom will have a combined gross debt of just over US$24 billion, SU$18 billion of which comes from Orascom and Wind Italy.

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