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Mobilink, Warid to merge in Pakistan

Dubai - As per merger agreement, Dhabi Group gets a 15% stake in new entity.

VimpleCom Ltd, Russia's third-biggest wireless carrier, said on Thursday it along with its associates agreed to merge their Pakistan Mobile Communications Ltd (Mobilink) and Warid Telecom (Pvt) Ltd to boost their network and expand mobile financial services.
The Amsterdam-based telecoms company, controlled by Russian billionaire Mikhail Fridman with partners, said as per the merger deal, Warid's owner Dhabi Group gets a 15 per cent stake in Mobilink.
According to the statement, Mobilink will first acquire 100 per cent of Warid's shares in consideration for the Dhabi Group shareholders acquiring approximately 15 per cent of Mobilink's shares.
Mobilink chief executive Jeffrey Hedberg will become the CEO of the combined business, which will serve 45 million customers in Pakistan, giving it a substantial lead in terms of market share.
The board of the new company will consist of seven directors, of whom six will be nominated by VimpelCom and Global Telecom Holding (GTH) and one nominated by the Dhabi Group shareholder
The merger is expected to create capital and operating expenditure synergies of about $500 million, the companies said in a statement on Thursday. The combined revenue of both companies for the 12 months to September 2015 was $1.4 billion.
The transaction is the first merger in the mobile telecommunications sector in Pakistan. Mobilink is the largest player in the Pakistani wireless market, while Warid is the No. 5, according to VimpelCom. Pakistan's other carriers include Norway's Telenor ASA, China Mobile Ltd's Zong unit and Ufone of Pakistan Telecommunication Co.
Chairman of Dhabi Group, Shaikh Nahyan bin Mubarak Al Nahyan, said creating the largest operator in Pakistan is not only a significant milestone for Mobilink and Warid but also for Pakistan as a whole.
"Warid's partnership with Mobilink will create value for all stakeholders and pave the way for exceptional and cost-efficient telecommunication services for customers. Both parties bring their unique strengths to this merger. Warid, with its strong post-paid base and high quality 4G/LTE network will complement Mobilink's position in the market. We are very pleased to continue to contribute to the strengthening of the competitive landscape for the broader telecom sector and the overall economy of Pakistan. The transaction reaffirms my own and my fellow investors' long-standing and continuing commitment to Pakistan."
VimpelCom's Pakistani unit Mobilink will buy Warid Telecom in exchange for Warid's owner Dhabi Group getting a 15 per cent stake in Mobilink, according to a statement from VimpelCom Thursday. The combined company will have 45 million users and $1.4 billion in sales. No value for the transaction was disclosed.
Jean-Yves Charlier, who started as CEO this year, is revamping the carrier to boost cash flow and focus on its most promising markets. Earlier this year, VimpelCom combined its Italian assets with those of Hong Kong billionaire Li Ka-Shing's CK Hutchison Holdings Ltd. VimpelCom also agreed to sell its operations in Zimbabwe.
"This is yet another important step in our journey to continue delivering on our strategy to transform VimpelCom," Charlier said in today's statement. VimpelCom predicts about $500 million of synergies in capital spending and operating expenses from the deal. The company expects to complete the transaction within six months.
The merger deal comes as VimpelCom Ltd has made headway in talks to pay about $775 million to settle US allegations it paid bribes in Uzbekistan to win business, according to three people familiar with the matter.
The Amsterdam-based company's resolution with the Justice Department and the Securities and Exchange Commission could be announced in January, said the people, who asked not to be identified because details of the proposed settlement aren't public.
VimpelCom set aside $900 million earlier this month for potential liabilities stemming from Dutch and US investigations. Negotiations with US authorities are ongoing and the amount as well as the timing of the settlement could change, one of the people said.
- issacjohn@khaleejtimes.com