The Russian mobile operator VimpelCom (operating under the Beeline brand) sold its parent company, the Dutch telecommunications holding Veon, a business in Kazakhstan for 54 billion rubles. Interfax reported about it with reference to the reporting of Vimpelcom according to IFRS published on April 28, 2023.
On December 6, 2022, Veon Eurasia Sarl, a subsidiary of Vimpelcom, transferred 75% of the shares of VIP Kazakhstan Holding AG (it is a subsidiary of the Russian operator, which owned Kar-tel LLP and indirectly owned in operating organizations in Kazakhstan LLP ” Kazeuromobil”) Veon Holdings BV (subsidiary of Veon Ltd.) in exchange for a reward of 54 billion rubles, Vimpelcom reports. At the same time, the funds were set off as repayment of debt on loans from the parent company to the operator.
A representative of Vimpelcom refrained from commenting.
Consolidated revenue of Vimpelcom for 2022 under IFRS decreased by 1.4% to 286.7 billion rubles, EBITDA increased by 9% to 118.4 billion rubles, the company reported earlier.
The sale of VIP Kazakhstan Holding AG to Veon structures is not the first step in the restructuring of the operator’s assets. In September 2021, VimpelCom carried out a reorganization, as a result of which the Uzbek business was separated into a separate legal entity – Veon Uzb LLC, whose capital shares were distributed among the shareholders of PJSC VimpelCom. After the completion of the reorganization, the assets in Uzbekistan, previously owned by the VimpelCom group, were transferred to Veon Ltd.
In March 2022, VimpelCom also announced the sale of an asset in Kyrgyzstan for RUB 1.4 billion. Veon Eurasia Sarl transferred to Veon Holdings BV a 50.1% stake in Kyrgyzstan Holding AG, which owns 100% of the shares in Menacrest AG (owns Sky Mobile LLC and Balance KG LLC operating organizations in Kyrgyzstan).
In November 2022, Veon announced the sale of VimpelCom to the top management of the company, headed by the CEO of the Russian operator Alexander Torbakhov. Because of this, the total debt of Veon as of December 31, 2022 decreased to $7.5 billion from $11.4 billion, the holding said in its statements. On February 7, 2023, a subcommittee of the government commission for control over foreign investment in the Russian Federation (approves transactions with companies from unfriendly countries) agreed on the sale of VimpelCom to the company’s top management. Permission for the transaction was issued by Copernicus Invest 3 JSC, which was registered by Torbakhov in November 2022.
Veon shareholders would like to distance themselves from Russia, which is the reason for their sale of assets such as VimpelCom, says Alexander Volchkov, founder of Eastway Capital. At the same time, the telecommunications business brings them substantial income and is generally interesting, especially in growing emerging markets, so they would like to keep companies located in Kazakhstan and Central Asia, he says.
The holding structure was built in such a way that all assets in Kazakhstan and Central Asia were Vimpelcom’s subsidiaries, Volchkov points out. Most likely, one of the terms of the deal for the sale of the Russian business to top management was the sale of these assets to Veon as the parent structure, which is now being implemented, the expert admitted. Therefore, these assets partially repay VimpelCom’s debt to Veon, Ilya Zharsky, managing partner of the Veta expert group, agrees. The holding has already received the company’s assets in Kyrgyzstan and Uzbekistan, and the sale of the Kazakh business can be called a logical development of the situation, he noted.
The transfer of VimpelCom to management is only an intermediate stage, after which the Russian business can be sold to a major player interested only in the Russian part of the business, Alexander Zhuravlev, managing partner of the EBR law firm, believes. Thus, Vimpelcom’s exit from non-Russian parts of the business may be (in fact) an exit from non-core assets, the lawyer believes.
Most likely, a deal of 54 billion rubles. has already been taken into account in the upcoming sale of the operator to top management, since work is underway to restructure the internal corporate debt of the holding Veon before the sale of the key business, Zhuravlev draws attention. The proceeds from the sale of Kazakhstani assets are used to pay off Veon’s previously formed debt to VimpelCom, Zharsky agrees.
According to Volchkov, with an annual revenue of a Kazakh company of 36 billion rubles. price of 54 billion rubles. looks close to fair. When a transaction is made in a hurry, under sanctions or other pressure from external circumstances, and also if the transaction is a transfer “for debts”, as in the case of VimpelCom, this often affects the deviation of the price from the market, argues an economist, a member of the Russian Chamber of Commerce and Industry Committee on entrepreneurship in the field of media communications Pavel Katkov. But in this case, there is a risk of additional taxes being charged between related parties based on the average market price. Therefore, when concluding transactions, the parties most likely adhered to the corridor up to 20% of the average market price, being ready to justify the price of the transaction, Katkov believes.