Wind blowing hot in customer growth terms, but Vimpelcom ready to storm out

15 May 2014

Canada’s Globalive Wireless (Wind Mobile) acquired over 100,000 net new mobile users in the twelve months to the end of March 2014, including 26,000 added in January-March, to end Q1 with a total of 702,000 customers, of which more than 55% were post-paid. The performance compares well with Canada’s three large national mobile operators, Rogers (which lost a net 71,000 wireless users in the first three months of 2014, while gaining 56,000 year-on-year), Bell (minus 16,000 quarter-on-quarter, up by 90,000 in a year) and Telus (up 11,000 in Q1, up 115,000 in twelve months), albeit Wind has significantly lower ARPU and post-paid subscriber percentage than all three incumbents. Meanwhile, TeleGeography estimates that similar-sized cellular operator Videotron added around 25,000 net mobile customers in the quarter and about 107,000 in a year for a total of approximately 528,000 at 31 March.

Despite Wind’s promising growth statistics, parent Vimpelcom – which owns its indirect majority equity stake via Egypt-based Global Telecom Holding (GTH) – is impatient to exit Canada, as the government has blocked the Russian-backed group from taking voting control of Wind for unspecified reasons, while on the other hand preventing any of the three nationwide operators from acquiring the cellco under federal spectrum trading policy. GTH has fully impaired its assets in Canada (by USD619 million), due to the ‘challenges’ the company is facing in the country, and ‘the lack of clarity’ on the best course of action regarding spectrum acquisitions needed to achieve long term growth (which caused it to abstain from the recent 700MHz 4G auction). Rumoured interest in Wind from US giant Verizon also came to nothing, and re-investment from original Egyptian financial backer Naguib Sawiris is unlikely after Ottawa blocked his takeover of nationwide business network operator Allstream for reasons related to ‘national security’ (following which the tycoon said he was ‘finished’ with Canada). Bloomberg quotes Vimpelcom’s CEO Jo Lunder as saying it is looking to either sell Wind or ‘swap it’ for a stake in a ‘larger operator’ in Canada; this statement could be a reference to a potential merger with quadruple-play cableco Videotron, which has acquired 700MHz licences covering three provinces allowing it to expand its mobile network outside home market Quebec, although the Quebecor subsidiary is yet to decide whether to press ahead with expansion or to stockpile the frequencies for future sale.

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