Shares of Dutch telecom provider VimpelCom Ltd VIP, one of the world's largest integrated telecommunications services operators, jumped 15.79% to $5.94 on Jul 29, following rumors that the company is looking to combine its Italian wireless operations with Hong Kong-based CK Hutchison Holdings, which is controlled by billionaire Li Ka-shing.
The Italian subsidiary of Hutchison is 3 Italia. On the other hand, Wind Telecomunicazioni S.p.A. is the Italian unit of VimpelCom, with Russian billionaire Mikhail Fridman as one of its largest stakeholders.
According to a report appearing in the Bloomberg, the companies are very close to cutting a deal and the possibility of a merger announcement as early as next week cannot be ruled out. The two companies have been in talks over the last couple of months, pertaining to a merger of their mobile phone units in Italy, according to a Bloomberg report. The companies are reportedly mulling a possible “equal joint venture.”
In the event of the merger materializing, the number of national wireless networks in Italy would be reduced to three from the existing four. The Bloomberg report further states, assets like Wind’s fixed-line network (Infostrada), in addition to some wireless towers, may be up for sale in the event of the deal getting through. Moreover, the merged entity would cater to the needs of more than 30 million customers across the nation. We expect investor focus to remain on further updates on the rumored deal.
The said deal can be viewed as a major positive for VimpelCom, which has been undergoing troubled times lately courtesy its exposure to the turbulent market in Russia. The merger would strengthen its position in Italy. According to the Bloomberg report, the Italian telecommunications market hasn’t witnessed merger-oriented consolidation even as competition among operators weighs on call and data prices.
We note that VimpelCom, apart from operating in Canada and Italy, offers a wide range of wireless, fixed, and broadband services in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia and various countries in Asia and Africa. The company offers services under the Beeline, Kyivstar, djuice, Wind, Infostrada Mobilink, Leo, Banglalink, Telecel and Djezzy brands.
Zacks Rank
VimpelCom carries a Zacks Rank #3 (Hold). Better-ranked stocks are Cincinnati Bell Inc. CBB, Nippon Telegraph and Telephone Corp. NTT and Juniper Networks Inc. JNPR. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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