Russian wireless carrier VimpelCom (VIP) reported its plans to proceed with the acquisition of a majority stake in Millicom Lao Co. Ltd., a wireless operator with operations in Laos. This clears the ongoing uncertainty surrounding the completion of the deal, which was originally scheduled for completion by the end of 2009.
VimpelCom signed a pact in September 2009 to acquire a 78% stake in Millicom Lao Co Ltd from Netherlands-based Millicom Holding B.V., a subsidiary of telecom operator Millicom International Cellular (MICC) for approximately $66 million. The remaining 22% stake will continue to be held by the Government of Laos.
The transaction has been delayed pending clearance by the Government of Laos. However, VimpelCom expects to receive the necessary regulatory approvals soon to close the deal. VimpelCom’s statement follows Millicom’s recent comments, which indicated that the Russian carrier has failed to complete the acquisition.
VimpelCom remains the second largest wireless operator in Russia with over 25% market share. Nevertheless, the company has a higher projected growth rate than its nearest competitor Mobile Telesystems (MBT) as it continues to demonstrate the ability to succeed in emerging markets driven by sustained subscriber growth.
Besides maintaining its strong market position in the rapidly maturing Moscow metropolitan area, VimpelCom has instituted expansion in regions outside of Russia. As a part of this strategy, the company is currently exploring business opportunities in relatively under-penetrated incipient markets in Southeast Asia.
VimpelCom launched cellular operations in Cambodia in May 2009 under its Beeline brand and covered more than 70% of Cambodia’s population by the end of 2009. The company also launched commercial mobile operations in Vietnam in July 2009.
Being one of the fast growing economies in Southeast Asia, Laos represents a significant prospect for VimpelCom with just 23% wireless penetration in a country with a population of roughly 6.5 million. By acquiring a controlling stake in Millicom Lao, the carrier will get 274,000 mobile subscribers representing a market share of 22%.
If the deal is eventually consummated, Laos will be VimpelCom’s third venture in Southeast Asia after its successful entry into Vietnam and Cambodia. We expect acquisitions and expansion opportunities in emerging markets to boost opportunities in wireless and foster much of the company’s growth moving forward.
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