* Shares slide 13 pct after company says to slash dividend
* Annual payout cut to 3.5 cents per share, from guidance of
* Firm has spent heavily on acquisitions; share price drops
* Russian rivals MTS, Megafon still pay high dividends
By Megan Davies and Maria Kiselyova
MOSCOW, Jan 28 Vimpelcom, Russia's third
biggest mobile operator, said it would slash its dividend to pay
down debt piled up in an aggressive expansion drive, marking an
unexpected policy shift that spooked shareholders.
Vimpelcom's expansion into Africa, Asia and continental
Europe left the group with more than $20 billion in debt,
according to its latest quarterly results. [ID nL5N0IR0PC]
To bring down its debt ratio, it will cut its annual
dividend payout to 3.5 cents per share from 2014, it said in a
statement on Tuesday - a tiny fraction of the prior guidance for
at least 80 cents.
Vimpelcom's ADRs opened 13 percent lower at $10.14 in New
York, where it is listed on Nasdaq.
"The market had not expected that the company would cut
dividends and cut that significantly," said Anna Lepetukhina,
analyst at Sberbank.
"The reaction is understandable. It means that of the big
three (Russian) telecoms groups, Vimpelcom stops being a
However, Lepetukhina also said the move was understandable
given difficulties the firm faces with its operations in Italy
Competitor MegaFon launched a bout of dividend
hikes among Russia's Big Three operators - also including MTS
- when it floated in London in late 2012.
An equity salesman in Moscow earlier recommended his clients
sell Vimpelcom with a $10 target price.
"The Vimpelcom story was based on the dividend and now that
is off the table. This is a big blow to the company's
credibility," he said.
OWNER FLUSH WITH CASH
In a statement released as the firm spoke to investors in
London, CEO Jo Lunder said the firm continued to offer "an
attractive combination of mature, strong cash-generating
businesses and solid emerging market growth opportunities."
But its African and Asian businesses have been hurt by
regulatory pressures while its Italian unit has been hit by
reduced fees that its can charge rivals to use its network.
Vimpelcom has also been in drawn-out negotiations with
Algeria's government over selling its stake in its Djezzy unit.
Algeria wants to nationalise the business, which is the jewel in
the crown of assets Vimpelcom bought in 2010.
For 2013 Vimpelcom announced an interim dividend of 45 cents
per share. The company, in which billionaire Mikhail Fridman's
Alfa Group has a 56 percent economic share, said it would not
pay a final dividend for 2013.
Fridman and his partners are flush with cash from the sale
last March of their stake in oil firm TNK-BP, which was bought
by state oil major Rosneft for $55 billion. That means
he may be less focused on dividend streams than Vimpelcom
Vimpelcom said it would keep its new dividend policy in
place until it has a net debt to EBITDA ratio of under 2 times.
It aims to cut the ratio to about 2.3 by the end of 2014.
It also expects revenues and EBITDA in 2014 to be stable
year over year.