Vimpelcom may sell Russian broadband unit - sources

Wed Jan 30, 2013 4:44am EST

* Considering sale amid increased focus on mobile business

* Business reported to be worth $1 billion

MOSCOW Jan 30 (Reuters) - Telecoms operator Vimpelcom may sell its fixed-line retail broadband business in Russia, two sources said on Wednesday, to focus on higher-margin mobile business.

A sale of the assets - with an estimated value of $1 billion according to Russian daily Vedomosti - would leave Vimpelcom's Russian unit with a mobile business and, potentially, fixed-line corporate clients.

Vimpelcom was focused on Russia and former Soviet republics until 2011 when it acquired Egyptian group Orascom Telecom and Italian firm Wind.

It said in a recent strategy update it wanted to be a mobile-focused company with a selective presence in fixed-line, aiming at improving operating cash flows.

One source close to Vimpelcom said the New York-listed company was considering a sale of the assets and had held talks with possible buyers. A source with a rival operator said Vimpelcom was seeking buyers for the operation.

Vimpelcom declined to comment.

Vedomosti reported Vimpelcom values its Russian residential fixed-line broadband business at $1 billion, adding the company wanted to keep corporate fixed-line broadband clients.

"As a strategic move, this could be linked to the company's intention to focus more on profitable mobile business," one of the sources told Reuters.

Vimpelcom generated $23.5 billion in 2011 revenue with $9 billion coming from Russia, the bulk of which was mobile.

Otkritie analyst Alexander Vengranovich said Vimpelcom's Russian fixed retail broadband business generated $260 million revenue last year and $80 million earnings before interest, taxation, depreciation and amortisation.

"Vimpelcom's intent to sell its residential fixed-line broadband business indicates its focus on streamlining its Russian operations and developing its mobile-broadband business," Uralsib analysts wrote in a note.

A sale would help Vimpelcom cut debt and hit revenue growth slightly.

Vimpelcom is Russia's third-biggest mobile phone operator behind MTS and MegaFon. Last year, the three firms and state-controlled Rostelecom were awarded licences for high-speed mobile broadband, widely seen as a pillar of future growth for telecoms worldwide.

Vedomosti said privately-owned ER-Telecom and TTK, which is majority owned by state-run Russian Railways, as potential buyers, adding that a group of investors close to businessmen Arkady and Boris Rotenberg were also interested.

ER-Telecom and TTK declined to comment. The Rotenberg brothers were not available to comment.

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