VimpelCom is mulling a potential sale or merger of its Italian mobile business, according to the UK’s Financial Times newspaper.
The operator – whose biggest market is Russia – is reportedly in discussions with Hutchison Whampoa about the future of Wind (Rome, Italy), its second-biggest subsidiary and Italy’s third-biggest mobile operator.
Acquired in 2010, the unit has about $14 billion in debt on its books but could interest Hutchison Whampoa (Hong Kong), which operates Three, Italy’s fourth-biggest mobile operator, and has previously had discussions with incumbent Telecom Italia about a possible merger.
Hutchison has already played a part in recent European consolidation, having negotiated the takeover of Orange’s (Paris, France) business in Austria and Telefónica’s (Madrid, Spain) Irish subsidiary.
Citing analysts at Bernstein, the Financial Times puts Wind’s net debt at about 4.7 times its earnings before interest, taxation, depreciation and amortisation, with most large European operators aiming to maintain ratios of between two and 2.5.
VimpelCom (Amsterdam, Netherlands) needs to find ways of refinancing Wind’s debts because of the high interest payments and with some loans due to mature in four years’ time.
One option, reports the Financial Times, would be to issue new group debt and lend the proceeds to Wind.
The operator has already sold smaller interests in Africa and Asia in an effort to improve its financial position and as it looks to concentrate on core markets.
Any merger talks between Wind and Three in Italy would obviously attract regulatory scrutiny because of the implications for the market’s competitiveness.
European Union authorities are already examining a proposed merger between Telefonica and E-Plus (Dusseldorf) in Germany that would turn the region’s largest mobile market into a three-player one.
The outcome of that investigation could influence developments in Italy, as well as other countries where consolidation has been mooted.