* Sells 51 pct stake in Djezzy to Algerian sovereign fund
* Retains 49 pct stake and keeps operational control
* To get $1.9 bln in dividends from Djezzy to pay down debt
* Vimpelcom ADRs gain 8.6 pct in New York
(Adds further details of the deal, CEO quotes, analyst comment,
By Maria Kiselyova
MOSCOW, April 18 Russia's Vimpelcom has
resolved a long-running dispute with the Algerian government by
selling it a majority stake in the country's biggest telecoms
operator for $2.6 billion, while it will keep control and slash
Orascom Telecom Algeria, also known as Djezzy, is a prized
asset, which Vimpelcom bought in 2010 from Egyptian tycoon
Naguib Sawiris as part of a more than $6 billion deal as it
aimed to diversify outside of Russia.
Algeria that year made moves to nationalise Djezzy, hitting
the business with back tax claims and restrictions on imports
and foreign exchange transactions, creating uncertainty that has
weighed on Vimpelcom's shares.
On Friday, Russia's third-largest mobile operator said that
Global Telecom Holding (GTH), its 51.9 percent-owned
subsidiary, had signed an agreement to sell a 51 percent stake
in Djezzy to the Algerian National Investment Fund (FNI) for
The deal will help Vimpelcom reduce its $27.5 billion of
gross debt, built up in an acquisition spree, by $4 billion.
"It's a great day for the company. It has been a three-year
journey, and now it has come to an end," Vimpelcom Chief
Executive Officer Jo Lunder told Reuters.
"It is possible for us to take advantage of the very
attractive telecom market in Algeria and continue to develop
Djezzy, which has been difficult for us all these years," he
GTH will keep a 45.6 percent stake and buy the remaining 3.4
percent of Djezzy shares from minority shareholder Cevital for
$178 million, Vimpelcom said.
POSITIVE FOR VIMPELCOM
Despite ending up with less than 51 percent, GTH will
continue to exercise operational control over Djezzy, based on a
shareholder agreement between GTH and the fund.
Djezzy will pay Algeria a $1.3 billion fine, however, to
lift foreign exchange and import restrictions. It will also
write off tax receivables worth $700 million, implying a total
write-off by Vimpelcom of $2 billion in its 2013 financial
Vimpelcom ADRs were up 8.6 percent by 1345 GMT at $9 on
Friday in New York.
Alexander Vengranovich, an analyst at Otkritie Capital in
Moscow, said the terms of the settlement were favourable for
Vimpelcom as he upgraded his target price to $11.30 from $11.
"In our view, the deal is very positive for Vimpelcom
as it signals the long-awaited resolution of the dispute with
the Algerian government on very favourable terms," he said.
Vimpelcom also has an option to sell its stake in Djezzy to
FNI on the seventh anniversary of the closing of the deal.
GTH will receive $1.86 billion in dividends from Djezzy
prior to the closing of the transaction and will pass on these
funds and the proceeds from the Djezzy stake sale to Vimpelcom
by repaying it an outstanding loan.
Otkritie's Vengranovich said that using the proceeds to
deleverage meant that Vimpelcom would be able to resume dividend
payments that would be closer to normal after it slashed payouts
in January to preserve cash for debt repayments.
Last month, Vimpelcom also announced a refinancing plan for
its Italian subsidiary, Wind.
Vimpelcom's biggest shareholders are Russian billionaire
Mikhail Fridman's Alfa Group and Norwegian telecoms group
(Editing by Megan Davies and Jane Baird)