Monday, telecommunications operator Vimpel-Communications (VIP) said it acquired 49.9% of Morefront Holdings Ltd, a company that owns 100% of the Euroset Group, for about US$226 million, with a view to bolster its competitive position in the retail segment.
Handset retailer Euroset is a dealer for major mobile network operators in Russia and is engaged in the retail sale of mobile handsets, digital cameras, CD, MP3 players and DECT-phones.
In addition, as part of the deal, open joint stock company VimpelCom said it has agreed on put and call arrangements, exercisable after three years, for an additional 25% of the shares of Morefront Holdings Ltd. owned by Rambert Management Ltd., a company controlled by A&NN Capital Management Fund.
Currently, VimpelCom, as a minority shareholder, does not expect to consolidate Euroset results and will not guarantee any of its obligations.
Presently, Euroset operates more than five thousands outlets in Russia, Ukraine, Belarus, Moldova, Kazakhstan, Kyrghyzstan, Uzbekistan and Armenia and reported revenues of $3.14 billion for 2007.
Alexander Izosimov, chief executive officer of VimpelCom, said, "Historical analysis across multiple markets shows that the level of importance of retail networks rises during challenging market conditions. Hence, it is in our best interest to forge solid relationships with the retail operators at this point in time. We believe that acquiring a stake in a leading retailer, like Euroset, will allow us to strengthen our competitive position and to stabilize the market."
VIP is currently down $0.49 or 6.63% and trades at $6.90.
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