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Telenor set to sell out of VimpelCom, refocus on Europe

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Norwegian operator Telenor has announced plans to fully divest its 33% share in VimpelCom in order to refocus on its core operations.

While based in Holland, many of VimpelCom’s main interests are in Russia and Ukraine. Telenor’s decision to effectively withdraw from those markets echoes TeliaSonera’s recent decision to retreat from the Eurasian region, also in order to refocus on its core operations.

This is probably not a coincidence, coming as it has so soon after Telenor and TeliaSonera announced the failure of their proposed joint venture in Denmark. That meant the two companies were back to competing with each other in that country and seems to have led to a general refocusing on Europe for both of them.

Telenor Group has invested NOK 15 billion in VimpelCom. The company has received NOK 20 billion in dividends and the current market value of the ownership stake is approximately NOK 20 billion. The divestment will apparently result in a non-cash impairment of approximately NOK 7.5 billion in the third quarter.

“The VimpelCom asset, where Telenor holds a minority position without the possibility to fully control the company, has been challenging,” said Telenor chairman Svein Aaser. “Based on a strategic review by the Board and the CEO, and after due considerations, Telenor Group has decided to divest its shares in VimpelCom Ltd. The disposal of our shares is in the best interest of our shareholders, and in accordance with Telenor Group’s long-term strategic focus.”

“We have maintained growth through solid performance from our controlled operations and will continue to focus on value creation in our core operations,” said Telenor CEO Sigve Brekke. “Our ambition is to drive profitable growth in the telecom business, where Telenor will continue to monetize on the exponential data usage taking place across our footprint.”

European competition commissioner Margrethe Vestager has been strongly hinting that she’s against telecoms consolidation and will resist moves to reduce the number of mobile operators in a country. In a recent speech she stressed she does not have an arbitrary minimum number of operators in mind, but her actions imply the contrary and place that number at four. This is probably contributing to strategic rethinks from European operators and their apparent desire to refocus on core operations.

Probably not unrelated to this is the UK Competition and Market Authority’s request to have the casting vote on the O2/Three merger, on the perfectly reasonable grounds that it is a UK matter. However it looks like the CMA isn’t too keen on this merger and is worried Europe might wave it through in spite of the consequent reduction in UK operators.

“The CMA’s initial view, following consultation and preliminary analysis, is that the transaction threatens to affect significantly competition in the UK retail mobile and wholesale mobile markets,” said the CMA statement, adding that it might as well take over as it’s already looking into BT/EE and it considers itself to be pretty good at this sort of thing. The clear inference there is that the CMA has little faith in the European Commission’s skills in this area, a tactlessness it may come to regret if its request is rejected.


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