Mobilink, Warid Telecom announce merger

VimpelCom Ltd and its 51.9 percent-owned Global Telecom Holding unit are merging their Mobilink operations in Pakistan with those of Warid Telecom (Pvt) Ltd, creating a company with 45 million customers. The deal is expected to create capital and operating expenditure synergies of about $500 million, the companies said in a statement on Thursday.
Mobilink Chief Executive Jeffrey Hedberg will become CEO of the combined business, whose board will consist of six directors from the VimpelCom and Global Telecom side and one from Warid''s parent Dhabi Group. As part of the deal, Mobilink, which operates Pakistan''s largest voice and data network with over 8,500 cellphone sites, will first acquire all of Warid''s shares, while Dhabi shareholders will acquire approximately 15 percent of Mobilink shares, the statement said.
No other financial details were disclosed. The transaction is expected to be completed within six months, subject to regulatory approval. Warid will then be merged into Mobilink. VimpelCom is in the process of negotiating a settlement with US, Dutch and Norwegian authorities relating to alleged bribery in Uzbekistan. The company took a $900 million provision earlier this month in relation to the investigation.
VimpelCom is owned by Norway''s Telenor, which holds 33 percent, and Russian billionaire Mikhail Fridman, whose LetterOne fund holds 56 percent. Telenor put its stake up for sale in October. -Reuters PRESS RELEASE: VimpelCom Ltd ("VimpelCom") and Global Telecom Holding S.A.E. ("GTH"), together with Warid Telecom Pakistan LLC and Bank Alfalah Limited ("Dhabi Group shareholders"), have yesterday reached an agreement to merge their Pakistan telecom businesses.
The merger of Pakistan Mobile Communications Limited ("Mobilink") and Warid Telecom (Private) Limited ("Warid") will see the combined entity serving 45 million customers. The transaction is the first merger in the mobile telecommunications sector in Pakistan.
Together with continued investments, the new entity will allow Mobilink and Warid to accelerate the availability of high-speed mobile telecommunications and provide consumers and businesses with a best-in-class mobile network, more competitively priced services and wider access to enablement facilities such as mobile financial services. Commenting on the agreement, Jean-Yves Charlier, Chief Executive Officer of VimpelCom, said: "We are delighted to announce the agreement with theDhabi Group shareholders today to combine our businesses in Pakistan. With the addition of Warid to our already strong customer base at Mobilink, we will serve more than 45 million customers and offer a best-in-class mobile and high-speed data network - a key factor in the digital enablement of Pakistan''s economy. This transaction follows a number of strategic milestones for the company, including our recent joint venture announcement with WIND and 3 Italia in Italy and the agreement to sell our operations in Zimbabwe. This is yet another important step in our journey to continue delivering on our strategy to transform VimpelCom and improve our competitive position in our operating markets."
The transaction is expected to create Capex and Opex synergies with a net present value of approximately USD 500 million. The combined revenue of both companies for the 12 months to September 2015 was USD 1.4 billion. Chairman of Dhabi Group, Sheikh Nahyan Mubarak Al Nahyan said "Creating the largest operator in Pakistan is a significant milestone for Mobilink and Warid but also for Pakistan as a whole. Warid''s partnership with Mobilink will create a value for all stakeholders and pave the way for exceptional and cost-efficient telecommunication services for customers. Both parties bring their unique strengths to this merger. Warid, with its strong post-paid base and high quality 4G/LTE network will complement Mobilink''s position in the market. We are very pleased to continue to contribute to the strengthening of the competitive landscape for the broader telecom sector and the overall economy of Pakistan. The transaction reaffirms my own and my fellow investors'' long-standing and continuing commitment to Pakistan."
VimpelCom and the Dhabi Group shareholders have agreed a clear corporate governance structure. The board will consist of seven directors, of whom six will be nominated by VimpelCom and GTH and one nominated by the Dhabi Group shareholders. Upon successful completion of the transaction, Mobilink''s CEO Jeffrey Hedberg will become the CEO of the combined business and Mobilink''s CFO Andrew Kemp will become the CFO of the combined function.
As part of the Transaction, Mobilink will first acquire 100% of Warid''s shares in consideration for the Dhabi Group shareholders acquiring approximately 15% of the shares of Mobilink (the "Transaction"). Following completion of the Transaction, the parties intend to merge Warid into Mobilink in due course (the "Merger").
The Transaction is expected to close within six months, subject to obtaining approvals from the relevant authorities in Pakistan and the satisfaction of customary closing conditions. The Merger is expected to close within 6 months from closing of the Transaction, subject to the satisfaction of customary closing conditions. After a four year lock-in period following the date of closing of the Acquisition Transaction, the Dhabi Group shareholders will have the option to put their shares of the merged company to VimpelCom/GTH, and VimpelCom/GTH will have the option to call the shares of the merged company held by the Dhabi Group shareholders, each at fair market value.