Vimpelcom Heading West

An interview a couple of days ago in the Wall Street Journal saw Vimpelcom’s Chief Executive Officer Alexander Izosimov express confidence about the company’s foreign acquisition plans which have eroded the company’s share of the domestic market, and caused a spat with shareholder TelenorReuters picks up the thread here, with a look at an arguably risky strategy:

Izosimov, speaking at the annual Mobile World Congress in Barcelona, was unapologetic about the strategy.

“We will actually create a different platform to ride the wave of data growth starting from the west to the emerging markets,” Izosimov said.

The Italian market with its high smartphone penetration and marginsclose to 50 percent is perfectly positioned for data growth, he said,and added that he made up his mind to pursue the deal with Sawiris atlast year’s mobile fair.

Emerging markets buyers have fueled telecom mergers and acquisitions in the last few years as their own markets have become more competitive and growth has slowed to the high single digits.

Not many chief executives from developing economies are expected to follow Izosimov into western Europe, where growth is much lower still, however.

“Vimpelcom is brave going west, but western Europe is a managing margins story … on a good day you have 2-3 percent growth,” said Mark Newman, chief research officer at Informa Telecoms & Media.

While other chief executives share the belief in the potential of mobile broadband — AT&T CEO Randall Stephenson described it as the biggest transformation in his 28 years in the industry — most companies are still deciding on the business model to tackle it.