Regulators have not started to agree on the sale of “Beeline”

The Federal Antimonopoly Service (FAS) agreed on a deal for the sale by a Dutch holding Veon Russian operator “VimpelCom“(works under the brand”Beeline”) to local top management headed by VimpelCom President Alexander Torbakhov. This was reported to Vedomosti by a representative of the FAS, specifying that permission for the deal was issued to Copernicus Invest 3. This company was registered by Torbakhov in November, Vedomosti reported.

“The service has established that the deal will not lead to restriction of competition,” the FAS representative added, noting that it requires the approval of a subcommittee of the government commission for monitoring foreign investment in the Russian Federation.

This subcommittee, which approves transactions with foreign companies from unfriendly countries, was created in early March 2022 on the basis of the government commission on foreign investment. It was headed by the Minister of Finance of the Russian Federation Anton Siluanov.

But the subcommittee has not yet begun to consider the issue. Deal negotiation question Veon was scheduled for discussion at a meeting of the subcommittee on Thursday, January 26, 2023. On the evening of the same day, Kommersant reported on the results of the meeting of the subcommittee, citing three sources. One of the interlocutors of the publication claimed that the issue was allegedly considered, but “the Central Bank, the Ministry of Finance and the Ministry of Economy opposed the transaction in the current configuration.” Based on this report, the newspaper assured that “the government did not agree on a deal to sell the operator.”

This information is refuted by Vedomosti sources: according to three interlocutors of the newspaper who are familiar with the meeting, the issue of selling VimpelCom was not even considered at it. Its discussion was postponed, according to a Vedomosti source in one of the ministries. This information was confirmed by a source in VimpelCom and an employee of a large Russian IT company, who knew this from the meeting participants. At the same time, a federal official familiar with the outcome of the meeting told Vedomosti that the deal was “sent for revision.”

Vedomosti sent inquiries to the government, the Ministry of Economic Development, the Ministry of Finance, the Ministry of Digital Development and the Central Bank, as well as representatives of Veon and VimpelCom.

Approval of a deal to sell VimpelCom was complicated by a lawsuit between Veon Eurobond holders and the holding’s Russian subdivision. The corresponding claim is now being considered by the Moscow Arbitration Court. This lawsuit against VimpelCom was filed in September 2022 by Leader Management Company, demanding the repayment of payments on Veon Eurobonds.

“We appealed to the government commission so that the deal for the sale of VimpelCom could be approved only if settlements with the holders of Veon Eurobonds were completed in full. In a response letter, we were confirmed that our appeal would be taken into account, ”Oleg Aleshin, deputy general director of Leader, told Vedomosti.

Discussions on the sale of VimpelCom have been ongoing since autumn 2022. In November Veon announced an agreement to sellVimpelCom» Russian top managers of the company. In addition to Torbakhov, the buyers were Vimpelcom’s executive vice presidents Svetlana Kirsanova (retail business), Maxim Zaikov (corporate business development) and Valery Shorzhin (network technological development), as well as the company’s vice president for corporate development, mergers and acquisitions by Renat Nasretdinov.

It was reported that the deal was planned to close before June 2023. VimpelCom was then valued at 370 billion rubles. ($5.35 billion at the exchange rate of the Central Bank on January 26, 2023), but the amount of the transaction was called less – 130 billion rubles. ($1.88 billion at the exchange rate of the Central Bank on January 26, 2023). The remaining 240 billion rubles. ($ 3.47 billion at the Central Bank rate as of January 26, 2023) is the net debt of Vimpelcom as part of the total debt of the global holding Veon Holdings BV, which the company will assume and repay, reported in November 2022 to Vedomosti representative of VimpelCom. The total debt of Veon is estimated at $10.6 billion with the total assets of Veon at $16 billion, Leonid Delitsyn, an analyst at FG Finam, noted in November.

For the past two years, Beeline’s subscriber base has been declining, says Denis Kuskov, general director of the Telecom Daily analytical agency, although the operator is working on the activity and loyalty of subscribers, he added. The expert notes that at least since 2010, investments in the development of this operator have been significantly less than those of competitors. However, over the past few years,Beeline» significantly improved the state of its infrastructure, Kuskov noted.

Leonid Delitsyn, an analyst at FG Finam, also agrees with the fact that Veon was not actively developing Beeline. According to him, in many respects this asset, on the contrary, was actively exploited for the development of other operators, also included in the Veon perimeter.

Further “VimpelCom» may become part of Veon, admits Kuskov. This can happen through buyback mechanisms, which can be provided for by the agreements reached with the Torbakhov team. Does not exclude the option of intermediate ownership of the operator now and Delitsyn. According to him, when the deal is approved by the Russian authorities, Torbakhov’s team will stay as its owners for at least a year. Any major investor, when buying such a large asset, will analyze the state of the company for at least 6 months, Delitsyn noted.

According to Delitsyn, the total debt that VimpelCom will take on under this deal will most likely be initially paid to the global holding, which, in turn, will subsequently service it to external creditors. But one way or another, the repayment of a debt of 240 billion rubles. will take place over at least 3-5 years, Delitsyn noted.

As Vedomosti sources noted in November 2022, the deal to buy VimpelCom was supposed to be carried out with borrowed funds. Sberbank was named as one of the likely creditors, to which the operator already owes 100 billion rubles, as well as VTB and Gazprombank.

The sale of the Russian operator should reduce sanctions risks for the Dutch holding, analysts told Vedomosti in November. But in this case, Veon loses an asset that generated almost half of EBITDA and a significant part of the cash flow, said Artem Mikhaylin, an analyst at Veles Capital.