A Netherlands-based telecommunication services specialist that operates in Russia VimpelCom has announced it has signed a joint venture agreement with CK Hutchinson Holdings, a parent company of Italian mobile operator 3.
Under the terms of the deal, the new business of 3 Italia and Wind Telecomunicazioni (WIND), owned by VimpelCom, will operate as the combined telco business in Italy with around 31 million mobile customer base.
Both companies hope that their new joint venture business will benefit from better cost structure and the effect of scale which will help compete more aggressively in the Italian market. Additionally, the new subsidiary will receive significant investment at the start. Also, the new business is expected to generate Capex and Opex benefits with a net present value, less integration costs, in excess of €5bn.
According to the agreement, each of CK Hutchinson and VimpelCom will indirectly hold 50 percent of the shares in the joint venture. Upon the completion of the transaction there will be no additional obligations to contribute funds by either parent company.
On top of that, the management team of the new subsidiary will be supported by a board of six with three members being nominated by each of the party and with the position of the chairman of the board to rotate every 18 months. At the beginning, the business will be headed by Maximo Ibarra, the current CEO of WIND.
The total deal value is €21.8bn.
“We are delighted with the partnership that VimpelCom and CK Hutchison have reached in Italy. We see this transaction as transformative for VimpelCom and its shareholders in terms of value creation. The transaction provides VimpelCom with a significantly stronger balance sheet. We are pleased that this transaction was approved by the VimpelCom Supervisory Board on a unanimous basis,” says Alexey Reznikovich, Chairman of the VimpelCom Supervisory Board.
“The deal represents a major milestone for our Italian business. The combination of 3 Italia and WIND will create a financially sound and efficient operator that is able to compete head-on in the market place. This joint venture will give the combined business the scale and strengthen to offer Italian consumers and businesses a state of the art network with greater 4G coverage and higher speeds. This transaction underlines CK Hutchison’s continuing confidence in the Italian economy, and its commitment to the development of nationwide digital infrastructure and services in Italy,” says Canning Fok, Co-Group Managing Director of CK Hutchinson.