Global Insight Perspective | |
Significance | Usmanov himself has given little indication of his long-term plans, but he is likely to favour an IPO, which would generate extra funds for the operator's domestic and overseas projects. |
Implications | The news of Usmanov's share purchase is likely to be well received by other shareholders Alfa and TeliaSonera, as it provides ownership transparency, which would clear the way for their next moves. |
Outlook | Alfa has previously intimated that it is mulling divestment of its MegaFon stake, while TeliaSonera is likely to retain its own shareholding in the short term. |
Reports indicate that Uzbek oligarch Alisher Usmanov has agreed to acquire, for undisclosed fees, an 8% direct stake in MegaFon from IPOC and a 59% stake in holding group Telcominvest, both of which stakes are currently held by Danish lawyer Jefferey Galmond (see Russia: 13 May 2008: MegaFon Eyes Iran, Usmanov to Raise Stake in MegaFon). It was claimed in 2006 by a Swiss court that Galmond holds these stakes on behalf of Leonid Reiman, who this week was dismissed from his post as Russia's IT and Telecoms Minister. Should the purchase of these stakes by Usmanov be completed, it would increase his overall stake in MegaFon to 31.1%. MegaFon's other shareholders are TeliaSonera, with 43.8%, and Russian holding group Alfa, with 25.1%. No official confirmation of these deals has yet been offered by either Usmanov or Galmond.
Outlook and Implications
- Usmanov's Plans Likely to Include Support for IPO: Although Usmanov's aim of increasing his stake in MegaFon had long been known, he has given little indication of his future plans for the stake. There is a strong chance that he will encourage an initial public offering (IPO) of MegaFon. Earlier this year MegaFon CEO Sergei Soldatenkov indicated that there was little chance of an IPO before 2009, as shareholders had yet to discuss such a move, but with the opaque ownership structure likely to made more transparent soon, the chances of an IPO have increased. Such a move would raise funds for MegaFon, which would be of benefit domestically as it rolls out 3G, and could also be of benefit if it opts to add overseas assets, with the Iranian telecoms market a known target (see Iran: 20 February 2008: Russia's MegaFon Eyes Iranian Mobile Market Entry). Another possible route for Usmanov to take might be to build up his own personal telecoms portfolio. Despite a high mobile penetration level, the Russian telecoms market remains lucrative, with the dawning of convergence adding to its appeal and enhancing the potential for mobile operators to eye up fixed-line assets. Although foreign investors have been wary of ploughing money into operators in the former Soviet Union, the issue is likely to be less of a barrier to the Uzbek billionaire. A spate of regional privatisations is on the cards, with Russian holding Svyazinvest and Ukrainian incumbent Ukrtelecom both eye-catching assets. There has also been some speculation that Usmanov may be representing the interests of other investors, as he has done previously with shares he has held in other areas.
- Usmanov Purchase of Shares Will Be Welcomed by Other Shareholders: The sale of IPOC's shares to Usmanov will be cautiously welcomed by MegaFon's other shareholders, TeliaSonera and Alfa. IPOC's interest in MegaFon had for several years been a cause of legal dispute, with a long-running court case between Alfa and IPOC over ownership of a 25.1% stake in MegaFon only resolved in December 2007, in Alfa's favour (see Russia: 3 December 2007: Court Settlement of Altimo-IPOC Row Paves Way for Usmanov to Increase MegaFon Stake). Global Insight had projected then that resolution of this deal would allow Usmanov to increase his own stake in MegaFon and this now appears imminent. With the ownership structure of MegaFon now approaching transparency, Alfa and TeliaSonera will finally be able to consider their next move. Earlier this year Alfa had suggested that it was considering the medium-to-long-term divestment of its stake in MegaFon, as part of a wider-scale strategy of realignment (see Russia: 28 March 2008: Alfa Eyeing Increased Stakes in VimpelCom, Turkcell—Reports). It revealed plans to evolve from portfolio investor to strategic investor, by increasing its stakes in Russia's VimpelCom and Turkey's Turkcell, through the sale of its MegaFon stake and also its Kyivstar stake. Although this indicates that an asset swap would be its preference, any divestment strategy could appeal to Usmanov.
- TeliaSonera Likely to Stick With Russian Assets in Short Term: Amidst weak performance in its domestic Scandinavian markets, TeliaSonera has enjoyed healthy revenue input from its stake in MegaFon. As such it may look to capitalise on an asset swap offered by Alfa, potentially making use of its 37.3% stake in Turkcell. An increased stake in MegaFon would be of particular benefit from a prospective IPO. However, in the longer term it is conceivable that TeliaSonera might be tempted to sell up, at the right price. The Russian telecoms market is not historically the easiest market for foreign investors to do business, lacking the safety net of European Union (EU) regulation. TeliaSonera's interests are increasingly turning towards emerging markets, such as those of Eurasia, so it is conceivable that a strong offer from Usmanov could turn its head.