New twist in European phone consolidation
The big news this week in European telecom is the offer by Russia's Vimpel Communications to buy Ukraine's Kyivstar in an approximately $5.5 billion bid. Vimpel is Russia's #2 cell phone company, while Kyivstar is #1 in Ukraine. It's likely to be yet another case of rapid consolidation in the European market.
That move, given the current tensions between the two former Soviet countries, is a bit of a surprise. But the deal is not a simple cross-border deal. Norwegian telecom company Telenor owns substantial shares in both Vimpel and Kyivstar, as does Russia's Alfa Group. The deal will end up with Telenor and Alfa each owning 39% of the new company.
A Wall Street Journal article ("VimpelCom Confirms Offer To Buy Ukraine's Kyivstar", 2/13/06) points out that there is an even more complex back story to the deal.
VimpelCom's offer follows a bitter battle between Telenor on one side and VimpelCom management and Alfa on the other, over VimpelCom's entry into the Ukrainian market. Late last year, VimpelCom management went ahead with the acquisition of Ukraine's fourth-largest operator, URS, for $231 million, which Telenor has challenged in court.
Telenor and Alfa's big problem was a fear of new competition in the Ukrainian market. The new deal would actually lessen competition, if Kyivstar and URS are allowed to merge.
