Hold up! Ukraine anti-trust regulator reconsiders Vimpelcom-Kyivstar merger

23 Apr 2010

The Anti-monopoly Committee of Ukraine (AMCU) has suspended its previous decision to approve the merger of Ukraine’s dominant mobile operator Kyivstar into Russian cellular group Vimpelcom, in order to review a complaint submitted by Ukrainian cellular rival Astelit, owned by Turkish mobile group Turkcell and domestic conglomerate System Capital Management, which is itself run by Ukraine’s richest man, Rinat Akhmetov. ‘We have started the revision of this decision based on Astelit’s petition and have suspended it for the period,’ the AMCU said in a statement, quoted by The Moscow Times. The newly created Vimpelcom Ltd’s offer to acquire Vimpelcom shares expired on 20 April 2010, having netted 97.87% of shares, including the stakes held by Russian conglomerate Alfa Group (44%) and Norwegian telco Telenor (29.9%), and the new company began trading on the New York Stock Exchange on 22 April. Alfa’s telecoms arm Atimo’s voting stake in the new company will be 44.7% (39.2% equity stake), while Telenor will have 36.0% voting rights (39.6% equity) and the free float will be 19.3% voting shares (21.2% equity). A merger plan agreed in October 2009 sees both Vimpelcom and Kyivstar becoming 100% subsidiaries of Vimpelcom Ltd. However, yesterday AMCU spokesman Bohdan Yakymiuk confirmed to Interfax-Ukraine that ‘additional circumstances have come to light and the decision will be re-examined.’

Astelit (which uses the life:) brand) is claiming that the March approval was based on ‘incorrect’ calculations of market shares and frequency bandwidths. TeleGeography’s GlobalComms Database notes that Vimpelcom already wholly owns two other Ukrainian operators, GSM-based nationwide cellco Beeline Ukraine (formerly Ukrainian Radio Systems), as well as fixed network operator Golden Telecom (Ukraine), which also owns GSM spectrum in several regions, with a limited mobile user base. Vimpelcom merged the management of URS and Golden (Ukraine) under the Beeline banner in August 2008. Kyivstar had a 44.1% share of mobile subscribers at end-December 2009, whilst Beeline Ukraine (including Golden) accounted for a 4% slice of the market at that date, according to GlobalComms. The addition of the country’s largest GSM player Kyivstar to the group would give Vimpelcom a significantly larger allocation of radio spectrum than its rivals, and speculation is mounting that Ukrainian regulators will order the newly formed company to relinquish a portion of frequency from Kyivstar/Beeline/Golden to allow the merger to go ahead. Analysts quoted by The Moscow Times said the takeover was very unlikely to be reversed. The same paper quoted AMCU head Alexei Kostusev as saying that that the review could take ‘between one and several months’, although Interfax quoted him as assuring that the timescale would not exceed one month. Regardless of timeframe, the official declared that in the meantime the parties should not take any steps toward the merger, but Telenor and Alfa are apparently ignoring the advice, and have announced they intend to proceed with the deal based on the AMCU’s earlier decision. ‘We do not see any legal consequences of the AMCU’s decision, as all the main necessary conditions for the deal to close had been fulfilled by the time the deal closed on 21 April. The deal is closed and Vimpelcom Ltd will act with no changes to its plans,’ Altimo said. Telenor spokeswoman Anna Ivanova-Galitsina agreed that the deal had been completed in line with the initial decision by the AMCU.

Meanwhile, Vimpelcom said its remaining minority shareholders, representing 2.13% of equity, which have not taken up the Vimpelcom Ltd share offer, will be squeezed out, and it will give details of this process on or before 26 May 2010.