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. Last Updated: 07/27/2016

Brokerages Upgrade Vimpelcom to 'Buy'

Vimpelcom reaped the benefits of a double dose of good news Wednesday night when Thursday morning two local brokerages upgraded their recommendations from "hold" to "buy."

United Financial Group and Renaissance Capital analysts turned positive after Vimpelcom reported an early return to profitability and announced a partnership with Alfa Group to fund regional expansion.

"Based on relative value and growth considerations" of Vimpelcom, UFG recommended that investors switch to the country's No. 2 operator from current leader Mobile TeleSystems.

In New York on Wednesday, Vimpelcom shares ran up 14.29 percent from $15 to $17.20. They were at $17.36 at 1 p.m. Thursday.

The glow continued at a news conference with the new three-way partnership — Alfa, Vimpelcom and Norwegian company Telenor, which will keep its 25-plus stake by buying existing shares and has the option with Vimpelcom to invest another $117 million in Vimpelcom-Regions.

Alfa Group chairman Mikhail Fridman was all smiles about his latest telecoms foray, citing Vimpelcom's low market capitalization (around $700 million at placement time) compared with MTS's (around $2.8 billion), though Vimpelcom claims 40 percent of the market.

With Alfa Bank's recently acquired stake in Golden Telecom, Fridman said the two telecoms companies could now offer clients joint services. Vimpelcom already rents lines from Golden, and it expects cooperation to step "up another notch," said Vimpelcom chairman Augie Fabela.

Between $400 million to $500 million will go toward regional expansion over the next three or four years, CEO and general director Jo Lunder said in an interview following his pow-wow with Norwegian journalists who flew in for the announcement.

Lunder has high ambitions: "I think we have a very good starting point for being the leading national GSM standard operator in Russia some years from now."

The company still lacks a GSM license for St. Petersburg, where MTS plans to start up this year. Vimpelcom applied a year ago for a license, which Lunder said his company will "fight for."

"We need to include the northwest in our national plans," he said.

He couldn't predict when Vimpelcom-R would break even, citing the 18 months it took Vimpelcom itself to make a profit after the commercial launch of a GSM network in Moscow.

"In regions, probably a bit longer. On the other hand, if you combine acquisitions and greenfield, we could easily reach it even sooner," Lunder said.

He is ready for Alfa to take the lead on regional expansion "because they have a track record, they have a banking network, they have political contacts in the regions." He said the plan "down the road" is to merge Vimpelcom and Vimpelcom-R.

Regarding Vimpelcom founder and president Dmitry Zimin, who was paid dozens of millions of dollars for a part of his shares in the deal but still owns 10.4 percent of the company, Lunder joked: "He's a big investor, so we should listen to him." Lunder replaced Zimin as general director.