Top managers of Beeline (Vimpelcom) will buy out the Russian operator from the parent holding Veon, said the Russian company. The transaction is expected to be completed by early June 2023.
“A group of top managers of the company, headed by CEO Alexander Torbakhov, has entered into an agreement to buy the company from the Veon holding,” Beeline said in a statement. The buyers included Beeline executive vice presidents Svetlana Kirsanova (retail business), Maxim Zaikov (corporate business development) and Valery Shorzhin (network technological development), as well as Renat, vice president for corporate development, mergers and acquisitions Nasretdinov, specified in the statement.
“In accordance with the terms of the agreement on the transaction, Veon will receive 130 billion rubles from the sale of the asset. The transaction is expected to close no later than June 1, 2023, with the parties entitled to extend this period if the necessary licenses and regulatory approvals are not obtained,” the release notes.
The deal will be registered with OJSC Copernicus-Invest 3. SPARK-Interfax states that the legal entity was registered on November 14, and Torbakhov was named CEO.
The Russian company was valued at about 370 billion rubles, Veon said in a release. In this way, "VimpelCom"will assume and repay certain debt of Veon Holdings BV, which will lead to a significant reduction in the share of borrowed funds on the balance sheet of Veon," the holding said. What part of the debt will be discussed, the statement did not indicate. Refused to answer this question and the representative of the Russian division of the company.
Veon shares, which before the announcement of the sale of VimpelCom to management grew by almost 9% compared to the values of the close of trading on November 23, after the news accelerated growth to 15% on the Moscow Exchange. By 16:00 Moscow time they were sold for 30 rubles. for paper.
Vedomosti sent a request to the FAS.
Prior to that, in November, Veon announced the search for a Russian buyer for its Russian division. This sale should reduce the sanctions risks for the holding, analysts told Vedomosti at the time. But in this case, Veon loses an asset that generated almost half of EBITDA and a significant part of the cash flow, Artem Mikhaylin, an analyst at Veles Capital, noted.
The total assets of Veon are estimated at $16 billion, the debt is $10.6 billion, part of this debt will remain with Veon, and part will become Beeline's debt, Leonid Delitsyn, an analyst at FG Finam, draws attention. He suggests that Beeline may account for the bulk of Veon's total debt. “This is a stable business in a fairly developed market with a large subscriber base, usually they try to hang the main part of the debt on it, so it has something to pay,” the analyst explains. “But what part of it will go to Beeline is still unknown.”
If not for the debt, the amount of the transaction could be in the range of $ 5-8 billion (300-480 billion rubles at the exchange rate of the Central Bank on November 24 - approx. Vedomosti), Delitsyn suggests. He believes that the purchase of the company by top management can be carried out on credit. According to Delitsyn, Beeline's management takes on big risks, since "there is no shortage of mobile operators on the Russian market and growth prospects are very limited." “The standard growth driver in other markets is the introduction of the 5G standard, but there is no such prospect in Russia, since it is not clear whether 5G will be introduced at all,” the analyst says.
In recent years, VimpelCom has shown a noticeable reduction in revenue both in general and in revenue from mobile communications, said Alexei Boyko, an analyst at MForum. This is happening against the backdrop of a significant reduction in the subscriber base. “Partly this is the result of the company’s strategy to improve the quality of the subscriber base — focusing on loyal and solvent customers, and partly the reduction in the base is due to a decrease in the number of migrants arriving in Russia, on whom the company has been making a serious bet for many years,” says the analyst.
VimpelCom (operating under the Beeline brand) lost 4 million subscribers over the year compared to the end of the third quarter of 2021, Veon indicated in its financial statements for the third quarter of 2022. The subscriber base of Vimpelcom decreased by 9%, from 50 .6 million to 46 million users. The revenue of the Russian "Beeline" in the III quarter decreased year-on-year by 6.1% to 70.7 billion rubles.
In recent years, VimpelCom has been actively rebuilt under the new leadership, the network has been actively modernized in key regions (Moscow, the Moscow Region and St. Petersburg), although the operator lagged behind its colleagues in the Big Four telecom companies, says IKS Consulting analyst Maxim Savvatin. The company was trying to make up for lost positions due to underfunding in infrastructure, he said.
According to Savvatin, the sale of the asset to Russian top management is an expected event that may allow the operator to strengthen its position in the B2G segment and develop new services in the field of education, medicine, transport and others.