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. Last Updated: 07/27/2016

Vimpelcom Blames Frequency Feud for Stock Dip

The president of local cellular operator Vimpelcom said Wednesday that government plans to seize two-thirds of its GSM 900 frequencies was "100 percent" to blame for the company’s continuing stock debacle.

Vimpelcom’s New York-listed American Depositary Receipts have lost nearly half its value since mid September when the order became public.

The Communications Ministry has since said it annulled the seizure order, which called for Vimpelcom to vacate 30 of its 45 GSM 900 frequencies by Nov. 1.

But Vimpelcom president Jo Lunder said he has yet to receive official confirmation of the annulment or a promise that he wouldn’t lose the frequencies in the end.

Vimpelcom’s stock slid more than 5 percent to $15.75 per American Depositary Receipt by early afternoon Wednesday.

Lunder also conceded that a soft market for telecoms stocks was holding Vimpelcom down.

Vimpelcom competitor Mobile TeleSystems, which also listed on the New York Stock Exchange this summer, has recovered from the news and was trading at $26 Wednesday morning, only a few dollars off its early September price. But its main networks were not threatened by the threatened seizure — only trial networks in the city metro.

"I think the market gradually appreciated that the decision to withdraw frequencies from Vimpelcom is much more detrimental to Vimpelcom than to MTS," said Vladimir Postolovsky, a telecoms analyst at Schroeder Salomon Smith Barney in London, adding the issue of frequency seizure remained "unresolved" despite the annulment report.

Vimpelcom’s poor performance, combined with Lunder’s surprise promotion from chief operating officer to president of the Russian cellular operator, has led to speculation that strategic investor Telenor, the Norwegian state telecoms operator, has followed portfolio investors in expressing displeasure with company. Prime-Tass, citing an anonymous Vimpelcom source, even reported company founder Dmitry Zimin was about to be sacked.

But Lunder said Telenor had a "good relationship to Zimin" and denied the Norwegian company was out to shore up control at the company.

He outlined Vimpelcom’s ambitious plans to grow its clientele in Moscow and the regions and said his own recent promotion from chief operating officer to president was initiated by Zimin, who wanted to free his time to "focus on regions and external questions." He said no significant personnel or policy changes were in the works.

He further denied speculation that Telenor might be seeking to buy ADRs cheap and build a controlling stake in Vimpelcom. Telenor now has 25 percent voting interest, while about 40 percent belongs to company management and the rest are in market circulation, he said.

He reiterated Vimpelcom’s goal of profitability by 2001 and a more lucrative subscriber base. A year ago, the company rewrote the rules on the cellular market by launching a $49 phone-in-a-box cellular starter kit that included a handset, a prepaid card and a contract.

The phone-in-a-box offer netted Vimpelcom 290,000 new subscribers in a year, the company said. But it also plunged the company into chronic losses loss as the average mass market subscriber brought in far less money.