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Company reported a 19% decline in EBITDA in Q1 2016.
Vimpelcom appeared unphased by CK Hutchison’s failure to win EU approval of its plan to buy O2 UK, indicating that it remained confident a similar plan in Italy would still go ahead.
The European Commission said on Wednesday that it had decided to block the Hong Kong-based company’s proposal to buy O2 UK and merge it with 3 UK.
Although the Amsterdam-based company did not mention the UK deal in its Q1 results presentation, it said it expects the proposed transaction to merge CK Hutchison-owned 3 Italia with Vimpelcom’s Wind “will complete around the end of 2016, subject to regulatory approvals.”
Vimpelcom’s confidence is not shared by everyone: the deal in Italy now looks increasingly in doubt because of the EC’s clear resistance to transactions that reduce the number of mobile network operators within a market from four to three. A merger of 3 and Wind in Italy would leave just three mobile network operators on the Italian market: the new combined entity, Vodafone Italy and TIM.
Vimpelcom did acknowledge the fact that the EC has opened an in-depth investigation into the proposed joint venture in Italy:
“This decision was widely expected in the context of the commission’s approach to in-country telecoms mergers. It does not in any way pre-judge or prejudice the final outcome of the commission’s consideration of the transaction,” the company said.
It was also reported in late April that the EC would publish a statement of objections to the proposed Italian merger. The commission has until 18th August to reach a final decision.
Meanwhile Vimpelcom reported a 19% year-on-year decline in EBITDA to $758 million for the first quarter of 2016. The company blamed currency “headwinds” and adverse economic conditions in some of its markets, although it said “there are signs of an easing in pressures, with the exception of Russia.”
Bloomberg reported that earnings missed analyst estimates, noting that eight analysts surveyed by Interfax had predicted $815 million on average.
Vimpelcom also said it generated positive free cash flow in the quarter “excluding the payments in relation to the agreements regarding the Uzbekistan investigations”. Revenue fell by 12% on a reported basis to $2.02 billion, although the company said in organic terms revenue was 4% higher.
It added that it is on track to achieve its financial targets for the year.
“Our strategy to profoundly transform Vimpelcom is firmly on course, particularly in the areas of cost base transformation, streamlining our portfolio, and greater globalization of our internal operations,” the company said.
