IHS Global Insight Perspective | |
Significance | The deal was initially agreed in April 2010 but faced objections from rival operator Astelit and later from the regulator. |
Implications | Kyivstar was already the leading mobile operator in Ukraine, and the merger adds another 2 million subscribers to its base. |
Outlook | The move is relatively minor for VimpelCom, given its recent attempt to acquire Orascom. Nevertheless, it bolsters its Commonwealth of Independent States presence and creates fresh synergies. |
The merger of VimpelCom and Ukrainian mobile operator Kyivstar into a single entity, VimpelCom Ltd, has been approved by Ukraine's Antimonopoly Committee. The deal had originally been suggested as part of the truce between VimpelCom shareholders Telenor and Altimo in October 2009. Although the Antimonopoly Committee initially agreed to the move, it was postponed because of objections from rival Ukrainian mobile operator Astelit. Ironically, Astelit then withdrew its objection, only for the Antimonopoly Committee also to change its mind and halt the merger process (see Ukraine: 16 July 2010: Astelit Withdraws Objection to VimpelCom-Kyivstar Merger, Regulator Maintains Stance). Finally, however, the bizarre episode seems to have concluded, almost as it began, with the Ukrainian regulator granting its blessing to the merger.
Outlook and Implications
Increasing Kyivstar's Ukrainian Dominance: The regulatory systems of some of the Commonwealth of Independent States (CIS) telecoms markets can at times seem a little opaque, so it is difficult to know exactly what prompted the behaviour of the Antimonopoly Committee in first approving, then rejecting, and finally sanctioning the merger. At the end of 2010 Kyivstar led the Ukrainian mobile market with 22.0 million subscribers, a figure to which a further 2.0 million can be added by the merger with VimpelCom's unit Ukrainian RadioSystems (URS). The merger is therefore unlikely to be well received by MTS Ukraine, the second largest Ukrainian operator, with around 17.7 million subscribers at end-2009. MTS Ukraine is the Ukrainian unit of leading CIS operator Mobile TeleSystems (MTS), the principal rival of VimpelCom in the region. However, the objections to the deal have emanated from Turkcell's Astelit and the Ukrainian regulator; MTS for its part has not voiced any concern about the merger.
Consolidation Continues for VimpelCom: The regulatory green light for the Ukrainian merger adds to a busy period of consolidation for VimpelCom. Already fighting for supremacy in the CIS region, having begun to add fixed broadband to its traditional mobile operations, the group earlier this month announced a US$6.6-billion deal to take over the operations of Egypt's Orascom, thereby granting it exposure to the emerging markets of the Middle East, Asia, and Africa. Although not yet finalised, such a deal would catapult it into the upper echelons of the leading global operators. Within this context the Ukrainian deal becomes slightly less important, but it nevertheless represents a further move of strength, in bolstering VimpelCom's presence in its domestic CIS markets and creating fresh synergies for roaming and international calls.