Industry Updates

The deal signals the resolution of a long running tax dispute with the Algerian government. It also allows VimpelCom, through its emerging markets subsidiary Global Telecom Holding (GTH), to retain overall operating control of Djezzy, entering into a long term partnership with the Algerian government through FNI, and to reduce the debt mountain incurred while expanding its global networks.

Prior to completion of the transaction, Djezzy will pay a dividend of US$1.9 billion to GTH and a fine of $1.3 billion to Bank of Algeria. All tax disputes between the parties will be resolved, international arbitration on Djezzy will be suspended and settled at closure of the transaction.

VimpelCom will continue to have operating control in Djezzy with a 49% stake and Djezzy will remain fully consolidated within VimpelCom. The total dividends and proceeds due to GTH when the deal is closed at the end of 2014 are expected to amount to USD 4.0 billion, net of all taxes and after the settlement of all outstanding disputes between the parties and the payment of associated fines. All proceeds will be used to pay down the outstanding shareholder loans provided by VimpelCom to GTH.

VimpelCom CEO Jo Lunder commented: "This favorable long-term agreement and settlement represents a successful outcome for all stakeholders. For VimpelCom and GTH, this value accretive transaction releases USD 4.0 billion in cash proceeds to pay down gross debt.

For GTH and Djezzy, it resolves our dispute in Algeria and allows us to solidify our strong leadership position in Algeria by enabling us to further invest in a high speed 3G network to take full advantage of the potential for mobile data growth in the country. We look forward to working with our new partner, the Algerian National Investment Fund, to drive the business forward and to create significant long-term value for all of our stakeholders in line with our strategic Value Agenda."

As a condition of the agreement OTA will transfer it's Algerian opeartions into a new subsidiary Optimum Telecom Algerie S.p.A. to inject local funding into the operation to enable further expansion. No shareholding transfers will be permitted during the first 7 years from closure.

Djezzy claims a 53% market share in Algeria with 17.6 million subscribers. It provides prepaid and postpaid voice, data and multimedia services in Algeria with a revenue of USD 1.796 billion in 2013.

The deal is seen as being positive for VimpelCom as it signals the resolution of the dispute with the Algerian government on  favourable terms, reduces its debt and provides a future for its Algerian operation.