Wind and Three in talks over Italian mobile tie-up

VimpelCom has confirmed talks to merge its Italian mobile business with rival Hutchison Whampoa.

The deal has been discussed for more than two years, although those with knowledge of the situation said that talks had progressed more rapidly in recent months as long standing issues over valuation and structure have been resolved.

VimpelCom chief executive Jean-Yves Charlier said in a statement on Wednesday that talks were under way to merge Italy's third and fourth largest mobile groups.

But he added that "there can be no assurances that an agreement will be signed and any transaction would be subject to, among other things, achieving satisfactory debt levels and obtaining all required corporate and regulatory approvals".

The combination of VimpelCom's Wind and Hutchison Whampoa's Three would create a mobile operator with about a third of the mobile market, roughly the same sort of share as larger rivals Telecom Italia and Vodafone.

The merger would be welcomed by its rivals, however, given evidence in other countries that such a reduction of competition can lead to higher profits for the remaining groups.

Italy has been a difficult market for mobile telecoms groups given a price war that has slashed profitability and revenues in the past few years. Similar deals have reduced the number of telecoms groups in Germany, Ireland and Austria from four to three.

One of the sticking points has been arguments over the structure of the deal between VimpelCom's biggest shareholder, Russian billionaire Mikhail Fridman's Alfa Group, and Hutchison Whampoa, which is controlled by Hong Kong billionaire Li Ka-shing.

However, VimpelCom indicated that the combined company would be split equally between the two sides.

Hutchison Whampoa has been acquiring businesses in the European telecoms market over the past few years, which has culminated in its £10bn offer earlier this year for O2, Telefonica's UK business.

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