Vimpelcom (NASDAQ:VIP) and Hutchison Whampoa have finally inked a deal to create a significant competitor to Telecom Italia and Vodafone’s local subsidiary. The combined company will have a value of €21.8bn, and some 31 million mobile…
Vimpelcom (NASDAQ:VIP) and Hutchison Whampoa have finally inked a deal to create a significant competitor to Telecom Italia and Vodafone’s local subsidiary. The combined company will have a value of €21.8bn, and some 31 million mobile customers.
Announcing the 50/50 JV during Vimpelcom Q2 results presentation today, CEO Jean-Yves Charlier said the combined Wind Telecommunicazioni and 3 Italia would have “clear corporate governance” and an independent management headed up by Wind CEO Maximo Ibarra, with 3 Italia’s Stefano Invernizzi as CFO. The six-person board would comprise three members nominated by each company, with a rotating chairmanship every 18 months.
Vincenzo Novari, the current CEO of 3 Italia, will be appointed as senior adviser for Italy to Hutch parent CK Hutchison and will serve as a CK Hutchison nominee on the JV holdco board. 3 Italia COO Dina Ravera will lead the merger integration process and hold a senior operating role.
The chairman will cast the deciding vote on “certain fundamental business matters,” a spokesperson explained. Both shareholders have the option to sell after three years from completion, said Charlier.
The tie-up includes all of the ring-fenced Wind group and all of its debt, plus all of 3 Italia, €200m in cash and no debt.
“It is only conditional on both parties being satisfied with regulatory approvals and any resulting remedies,” added Vimpelcom group CFO Andrew Davies.
The deal will not include any involvement by a third party such as private equity, noted Charlier, dismissing the idea as press speculation.
Together, Wind/3 will have a 36% share of the market, and 33% of total Italian mobile revenue, on a par with Vodafone and a point behind Telecom Italia, said Charlier.
The two shareholders intend the new telco to be a converged operator, accelerate investment, achieve 90% coverage within a few years and compete more effectively in Italy, continued the CEO. Furthermore, the companies promise to create €700m in run-rate synergies, with 90% of these occurring within the first three years.
Assuming the deal receives regulatory approval, Vimpelcom and Hutch will “consider” tower sales to independent towercos such as Cellnex, Charlier said, in answer to an analyst question during the conference call, adding: “Fundamentally, we want to be more digital and asset light.”
The companies had started tie-up talks, at first around combining their tower operations, in 2008.
Together, the companies also have 2.8 million fixed line customers (2.2 million of which are fixed broadband), with a net present value (minus integration costs) of over €5bn. The joint revenue of both companies in FY14 was €6.4bn. Wind is worth €13.9bn and 3 Italia €7.9bn, the companies said.
Goldman Sachs and Freshfields advised Hutchison, while Morgan Stanley, HSBC and Allan & Overy advised Vimpelcom.
