- Life Style
Moscow--A deal for one of the world's largest mobile phone carriers moved a step closer Monday when Russia's Vimpelcom overrode its Norwegian shareholders to set up a merger with Egyptian tycoon Naguib Sawiris.
The revised US$6.5 billion agreement was denounced as grossly unfair by Telenor and set up a bitter board battle that promises to rage while the deal clears its final hurdles in the coming six months.
The agreement--which must still be approved by Russian regulators and Vimpelcom shareholders--would set up the world's sixth-largest mobile phone provider by number of subscribers.
It would also mark the Russian telecom industry's global emergence and create a company that has roots in some of the world's best-growing mobile phone markets.
Vimpelcom's six to three supervisory board vote allowed the number two Russian mobile carrier to acquire 51.7 percent of Egypt's Orascom Telecom and 100 percent of Italy's Wind.
But the acquisition would also require Vimpelcom to issue new stock and assume Egyptian debt obligations that the Norwegian carriers argue are harmful to both minority shareholders and the company's image abroad.
The deal envisions Vimpelcom issuing 325.6 million new common shares and 305.0 million convertible shares and also paying Sawiris US$1.495 billion in cash.
The Egyptian tycoon has also been angling for a seat on the new board but no such deal was announced under the terms disclosed Monday.
The cash payment is smaller than the US$1.8 billion package initially approved by the board last month.
Yet it would still significantly dilute the Norwegian firm's stake in Vimpelcom--a reality that Telenor argues will scare future investors in the predominantly Russian firm.
"Existing Vimpelcom shareholders face considerable additional dilution if this acquisition is completed on the terms approved by the board," Telenor spokesman Dag Melgaard said in a statement.
"As a result of this transaction, Vimpelcom's minority shareholders' existing 18.6 percent will be diluted to 12.9 percent," the Norwegian firm's spokesman said.
Melgaard added that this "disconnect" negatively impacted Vimpelcom's potential attractiveness to investors and urged other minority shareholders to vote against the agreement during a general meeting scheduled for 17 March.
Vimpelcom conceded that it was likely to face more boardroom drama as the deal approaches a shareholders' vote.
But it argued that Telenor was focused on the smaller picture while ignoring that the deal would help the company assert itself on the global market.
"This combination will create a top-tier global telecoms company and should drive significant value for all our shareholders," supervisory board chairman Jo Lunder said in the statement.
"While we acknowledge Telenor’s divergent view, we believe that the majority of our shareholders recognize the strategic and financial merits of this transaction.
"In the end, as it should be with a public company, it will be the special general meeting of shareholders that will make the final determination," said Lunder.