UCOM to ‘pledge’ 100% of Orange Armenia with local banks

8 Oct 2015

Armenian alternative broadband and fixed line services provider UCOM is looking to ‘pledge’ 100% of the shares of its recently acquired Orange Armenia subsidiary with local banks, and to that end is waiting for a decision from the Public Services Regulatory Commission (PSRC) concerning its request. According to PSRC, the altnet UCOM has outlined plans to pledge a 51% stake in its new cellco with Ardshinbank, 29% with Ameriabank and 20% with Araratbank. Although no reason has been given for the move, the former Orange Group’s financial statements confirm that in 2014 it reported losses totalling AMD4.00 billion (USD8.5 million), on top of a net loss of AMD3.85 billion in 2013.

Generally speaking, the pledging of shares (i.e. when banks and financial institutions consider shares as security to raise loans) is seen as the last option for owners seeking to raise funds, as typically it means that no one else is prepared to offer a loan on a company considered a bad risk, operating under too stringent financial constraints or saddled with too much debt.

As previously reported by CommsUpdate, in August this year Orange Group signed an agreement with UCOM to sell 100% of its mobile subsidiary Orange Armenia. No financial details of the deal were disclosed, although Orange is known to have spent upwards of USD350 million in the venture – including its mobile licence. Orange Armenia launched on 5 November 2009 and today provides a range of 3G/3.5G voice and data services over a network which covers more than 97% of the Armenian population. It had 639,000 customers at the end of June 2015 and employs approximately 500 people. The French giant is on record as saying that whilst Orange Armenia had performed well in terms of subscriber growth and profitability, it lacked ‘the necessary scale to carry out by itself the massive investments required to enable it to offer its customers convergent services’. A sale to UCOM, which was established in 2009 and has built up a fibre-to-the-home (FTTH) network with more than 75,000 residential customers, has effectively created a new converged player which is able to offer a range of fixed and mobile services.