Please give us a brief background to Visor Holding and its operations in Kazakhstan?
Visor Holding is a private equity firm based in Kazakhstan. While our headquarters are here, we invest mostly outside of Kazakhstan and heavily in the former Soviet Union, as these are areas that we understand well. We have some investments in Kazakhstan, but they are marginal compared to our other businesses. Visor Capital is one of our subsidiaries that focuses on Western practices like corporate finance; we work on an open market and provide investment banking services to clients both in Kazakhstan and abroad. With a subsidiary based in London, there are many international people working for Visor Capital who conduct major deals and transactions for the company. However, we are in the process of shutting down Visor Capital because we consider investment banking in Kazakhstan to show little potential. We are minimizing the staff and the business step by step, as Kazakhstan's economy is not big enough to support these kinds of operations.
What sectors are showing the most potential?
The main principle that we adhere to is that we never go into an unknown country with an unknown business. You can go to an unknown country with a business you know or to a known country with a business that you do not know. We are not particular in terms of the sectors we are interested in. Our focus of late has been telecoms. We have created the largest telecoms firm operating from greenfield. About four years ago we sold the majority stake in this business to a company in Sweden, but we are still minority shareholders. It is a big business and it has a lot of clients. We also own one of the largest telecoms operations in the Kyrgyz Republic as well, called O. We have been the first to introduce LTE services in the country. We have a good team there and it is a good business. The Kyrgyz Republic just joined the customs union and there are a lot of Kyrgyz people living in customs union countries, so we are optimistic about this business. We will be in business for the medium-term as long as nothing major happens.
What opportunities do you see in this region?
The problem of Kazakhstan is the so-called Dutch disease. All the assets here are expensive. From the point of view of an investor, it is not exciting. Our business model has been to use local funding, money from the Kazakhstani banks, buying assets in a country with cheaper assets but high risks and high opportunity. Kazakhstan has made huge progress and it has a good investment climate, but the other part of the story is that the assets are expensive. Investing in countries like Uzbekistan can be a challenge for the staff. For example, the Uzbek government confiscated one of our cement plants about four years ago. It has made tax allegations and makes it unreasonably expensive, which is why we had to exit this business. We launched a complaint two years ago and it will take another two years, but we are confident that we are going to win. We are one of the largest investors in Kyrgyzstan and there have been two revolutions there. One of our businesses there is a retail business. Every time there is a revolution there are some looters and the first place they go are the supermarkets, so we lose all the working capital we have.
Are you seeing these challenges as opportunities?
We plan to sell some assets in Nepal, sit on the cash for the next two years, and look for fresh opportunities. Solid buying opportunities will come, because the current situation lacks stability, as the banking system is deteriorating, the Central Bank is making poor decisions, and oil prices are low. Conversely, Kazakhstan has another positive booster that can help. In a year or two, Kashagan is coming. Even though it has experienced significant delays, once it happens it will bring additional revenues and increase confidence.
What are your expectations for the company moving forward?
We will continue watching Kazakhstan carefully. Kazakhstan is on the eve of an unprecedented political transformation, and this obviously makes people and the business community nervous. Neighboring countries are experiencing hard times both politically and economically, which is why people want to sell. At some point, Kazakhstan will experience this, and it will be a great time to buy. We want to watch Kazakhstan and watch what happens with the Kazakhstani banks and international companies doing business here. When a large international company leaves Kazakhstan, it presents a huge opportunity for a local one. We are optimistic about Kyrgyzstan, as it held its first democratic elections in late September and successfully held elections with six different parties holding seats in parliament. We expect something to happen in Uzbekistan, as it has the same problem with the transit of power. It's a huge country with a population of 30 million people, which is almost twice as big as Kazakhstan. It has a large population growth rate, and many natural resources such as gas, gold, cotton, and uranium, and has managed to develop many businesses inside the country. The real problem of Uzbekistan is economic mismanagement, as its currency exchange regime if volatile. Uzbekistan will change at some point and will become a leader in the region. Some people in Kazakhstan consider Uzbekistan a competitor, but if it is an open country with an open economy, it is going to be a boost for Kazakhstan as well. It will be healthy competition.