Italy's Wind invites bids for phone masts as Hutchison talks stall - sources

Thu Sep 4, 2014 1:32pm EDT

* Towers deal could help Wind trim its 9.6 bln euros debt

* Advisers invite Spain's Abertis, infrastructure funds -sources

* Potential Wind-3 Italia merger deal slips to 2015 - sources

By Pamela Barbaglia and Sophie Sassard

LONDON, Sept 4 (Reuters) - Wind, the Italian subsidiary of Russian telecoms group Vimpelcom, is moving ahead with the sale and leaseback of 11,000 mobile phone masts in a long-expected deal that could be worth at least 500 million euros ($650 million), several sources familiar with the situation said.

The decision to move ahead with the masts deal comes after a plan to merge Wind, Italy's third-biggest mobile network operator, with rival Hutchison Whampoa's 3 Italia stalled for several reasons, including governance issues and the international political dispute between Russia and western nations over Ukraine, said the sources.

However, a successful sale of the masts would help Vimpelcom cut Wind's debt, which stood at 9.6 billion euros ($14 billion) in June and has so far proved one of the hurdles to a proposed merger with 3 Italia, the smallest of the country's four network operators behind Telecom Italia, Vodafone and Wind, the sources said.

Vimpelcom's advisers on the masts sale, Banca IMI and HSBC, last month sent invitations called "teasers" to more than 30 possible bidders including Spain's toll road operator Abertis and other infrastructure specialists like Italy's EI Towers, Australia's Macquarie, France's Antin and American Tower and Crown Castle , the sources said.

They will provide more detailed financial information towards the end of September with a view to shortlisting up to seven parties to submit bids, the sources added.

The sale would leave Wind owning less than 50 percent of its masts.

Meanwhile both Vimpelcom and Hutchison are still working with their advisers on a potential merger of their Italian businesses, with HSBC and Morgan Stanley retained by Vimpelcom and Goldman Sachs acting on behalf of Hutchison, several sources said.

In June Reuters reported that Hutchison Whampoa had resumed talks with Vimpelcom, encouraged by European regulatory approvals for merger deals in other national markets which similarly would reduce the number of network operators from four to three.

The parties, which have held on-off talks since last year, are struggling to reach an agreement as neither wants to be the seller, sources familiar with the matter said.

"The merger between Wind and 3 Italia is still months away," said one.

Separately, an industry consultant who has worked with Vimpelcom said he believed that an agreement could be reached in the first quarter of 2015.

BALANCING ACT

Wind provides valuable international diversification to Vimpelcom and its controlling shareholder, Russian tycoon Mikhail Fridman's Altimo, has become even more reluctant to sell since the escalation of the Russian dispute over Ukraine, the sources said.

Fridman, as a key shareholder in Russia's Alfa Group conglomerate, is sitting on nearly $10 billion of cash and is struggling to find investment opportunities at home, according to one banker familiar with Vimpelcom.

Vimpelcom also needs a plan to offset growing instability in its core markets of Russia and Ukraine and is in no rush to exit Italy, its only European market interest, having earlier this year pumped in 500 million euros of extra cash in Wind as part of a refinancing.

As a result board representation and voting rights have been one of the main sticking points as negotiations for a Wind and 3 Italia merger repeatedly stalled over control.

"The problem here is to strike a fair balance of power," said one of the sources.

Meanwhile a price war is weakening Italy's mobile phone market and all the players are now constantly talking to each other in an effort to predict their rivals' next move.

"Everyone is talking to everyone, but the only possible deal is between Wind and 3 Italia," said a source close to the Hutchison's camp.

Officials at Vimpelcom, HSBC and Banca IMI declined to comment. A spokesman at Hutchison in Hong Kong could not be reached for comment. (1 US dollar = 0.7710 euros) (Editing by Greg Mahlich)