Veon exits Western Europe with debt-reducing Wind Tre sale

AMSTERDAM/HONG KONG (Reuters) - Veon VON.AS will sell out of Italian mobile network Wind Tre for 2.45 billion euros (2.16 billion pounds)in an exit from Western Europe the Amsterdam-based firm says will help it cut debt and focus on emerging markets.

FILE PHOTO: Ursula Burns, chairwoman of the supervisory board of Veon, gestures during the World Economic Forum annual meeting in Davos, Switzerland on January 25, 2018. REUTERS/Denis Balibouse/File Photo

The loss-making telecoms group, which was formerly known as VimpelCom and has operations in Russia and emerging markets, said on Tuesday it had agreed to sell its stake in Wind Tre to partner CK Hutchison 0001.HK.

Shares in Veon, which has been cutting jobs and struggling with more than 10 billion euros of long-term debt, rose 17 percent to 2.56 euros at 1250 GMT, although they remain down by around 19 percent so far this year.

Veon, whose biggest shareholder is Mikhail Fridman's investment vehicle LetterOne, also said it offered around $400 million in cash to Egyptian-based Global Telecom Holding (GTH) GTHE.CA to buy out its businesses in Pakistan and Bangladesh, valuing them at $2.55 billion including debt.

JPMorgan upgraded Veon’s American depository receipts to overweight with a price target of $4 after the announcements.

Veon acquired Italian operator Wind in 2011 and merged it to form the Wind Tre joint venture with Hutchison in 2016, hoping this would save on costs and compete with Italy’s biggest mobile providers, Telecom Italia Mobile and Vodafone.

However, Italy's telecoms market has faced bruising competition among established players and the entry in May of a fourth, cut-price player, France's Iliad ILD.PA.

Veon has been run by chairwoman Ursula Burns since Jean-Yves Charlier stepped down as chief executive in March. In April, Veon said its business in Russia, the largest of its 11 markets, was slowing.


Veon’s priorities included simplifying its structure, focusing on emerging markets and strengthening its balance sheet, Burns said in a statement.

GTH said in a statement it was considering the offer for the assets of GTH, in which Veon already has 57.7 percent and whose brands include “Jazz” in Pakistan and “Bangalink” in Bangladesh.

Veon said it will continue to hold its stake in GTH, which also owns Algerian mobile provider Djezzy. In April, Veon withdrew an offer to buy 42.3 percent of GTH.

If both transactions are approved, Veon will have debt of a little more than 6 billion euros, compared with annual underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of around 3.6 billion euros.

For Hutchison, the Wind Tre purchase consolidates its ownership of one of Italy’s top three mobile providers.

Frank Sixt, group finance director of CK Hutchison, said the deal was important in “a million small ways”, notably the profitability it will bring.

“With next-generation services – it will all have to be based on compatible systems and when you have only 50 percent of a venture, that may not work,” he said.

In February, Veon said Wind Tre’s revenue had slumped 11 percent to 1.6 billion euros in the fourth quarter, driven by an 8.1 percent decline in mobile service revenue, as competition saw its customer base fall almost 6 percent.

Completion is expected in the third or fourth quarter of 2018, the companies said.($1 = 0.8599 euros)

Reporting by Bart Meijer and Toby Sterling in Amsterdam; Anne Marie Roantree and Donnny Kwok in Hong Kong and Jennifer Hughes in Sydney; Editing by Christopher Cushing/Sunil Nair/Kirsten Donovan/Alexander Smith