VimpelCom has acquired a controlling stake in the fixed-line operator Buzton, which is part of the assets of its parent holding Veon in Uzbekistan. Veon needs restructuring to improve performance and the possible sale of assets, experts say: against the background of MegaFon’s entry into the region, competition in this market has intensified.
Kommersant discovered in the SPARK-Interfax database that VimpelCom (owned by the Dutch Veon) on March 31 received 55.37% of Buzton, a joint venture between Veon and the Uzbek state operator Uzbektelecom. And on May 27, at a meeting of the company’s shareholders, it was decided to create a subsidiary called Veon Uzbek, according to the same database.
A Kommersant source familiar with the situation claims that Veon needs restructuring of assets in Uzbekistan in order to sell this business together with the Russian VimpelCom in the future. The latter company declined to comment. Veon and Uzbektelecom did not respond to the request.
In 2004, Golden Telecom received 54% of Buzton’s shares (in 2007 it entered VimpelCom), having bought out the share of American NCI Projects, Inc. for $ 2.8 million. Another 43.52% of the company’s shares remained with the state operator Uzbektelecom and 2.48% with NCI Projects, Inc. In February 2006, Veon (then Vimpelcom) bought the second largest Uzbek mobile operator Unitel, and in 2008 Buzton began providing fixed Internet and telephony services under its brand.
In 2014, Vimpelcom faced difficulties in the Uzbek market. The US Securities and Exchange Commission and the US Department of Justice have launched investigations into Vimpelcom, MTS and Sweden’s Telia. The companies were suspected of corrupt payments for $ 380 million, and Vimpelcom – for $ 133.5 million. According to the US Department of Justice, such amounts were paid to companies associated with the family of the President of the country in 2004-2009. In February 2016, Vimpelcom agreed on the terms of an amicable agreement with the US authorities in the case, paying $ 795 million.
According to iKS-Consulting analyst Maksim Savvatin, the Uzbek asset Veon “lost its leadership over the past year, slipping to third place in the country.” The total outflow of subscribers from Unitel in 2020 exceeded 1.2 million people, the expert says: “There is very high competition in the telecommunications market of Uzbekistan, some of the major players are affiliated with state-owned companies.” The strengthening of Ucell’s positions, which at the beginning of the year bought MegaFon, took place even before the arrival of Russian capital, but now they will strengthen even more, Mr. Savvatin believes.
The transfer of the asset to the Russian jurisdiction may allow Veon to improve its performance, says Sergey Polovnikov, head of Content Review: “In addition, in the past few years, the company has been selling business in countries that it does not consider to be key. In particular, Veon has already sold its business in Pakistan, Armenia and Italy ”. After the restructuring and reduction of the headquarters management carried out in Veon, the functions of direct and partially strategic business management in different countries have shifted to the local level, adds MForum Analytics expert Alexey Boyko: him business management in Uzbekistan ”.