Global Insight Perspective | |
Significance | North-West Telecom's sale of mobile assets is, in isolation, no surprise, but the price of the sale and identity of the buyer have attracted interest. |
Implications | Although not involved in the deal, the presence of TeliaSonera in the background is impossible to ignore. The Scandinavian group is keen on raising its stake in MegaFon, and the latest transaction will have affected its own stance. |
Outlook | Global Insight anticipates that a reaction from TeliaSonera, regarding its interest in MegaFon, will be imminent. |
Regional Russian operator North-West Telecom, a subsidiary of national fixed-line holding Svyazinvest, has sold its 15% stake in Telecominvest to little-known group AF Telecom Holding. The deal is reported to be worth around US$410 million. Telecominvest owns a 100% stake in internet provider Web Plus, a 51% stake in billing systems supplier Peterservice, and a 31.3% stake in Russia's third-largest mobile operator, MegaFon. As such, North-West Telecom has effectively sold a 4.7% stake in MegaFon.
AF Telecom Holding is controlled by Russian bank Renaissance Capital, according to Prime-Tass. It beat four other bidders to the stake, which SKRIN, citing Vedomosti, lists as Sistema, Altimo, First National Holding, and an unnamed Kyrgyz company. The deal will be completed within the next three months.
North-West Telecom's divestment of its Telecominvest stake, and with it the 4.7% of MegaFon, is, in isolation, understandable. North-West Telecom is essentially a fixed-line operator, has been increasing its focus on fixed-line and internet provision, and has rarely prioritised its mobile assets (see Russia: 22 May 2007: North-West Telecom Announces Completion of 139-km Fibre-Optic Line). On top of this, parent company Svyazinvest recently announced that all of its subsidiaries would divest their mobile assets within 18 months, citing the fact that the mobile market had peaked and that Svyazinvest's assets were not strong enough to make a serious impact (see Russia: 25 June 2007: Svyazinvest Considers Sale of All Mobile Assets). The fact that North-West Telecom has sold its stake is therefore uncontroversial—further mobile divestments from Svyazinvest subsidiaries are likely—but the identity of the buyer and the price of the stake have attracted interest.
Outlook and Implications
Rumour Mill Goes Into Overdrive: The only concrete fact is that a 4.7% stake in MegaFon is changing hands, yet speculation is already rife that more seismic changes are imminent. The US$410-million price tag is universally acknowledged as a low price for a stake that would normally have cost closer to US$750 million.
TeliaSonera's Interest in Both Telecominvest and MegaFon: As a company with a foot in both camps, Swedish-Finnish operator TeliaSonera is certain to be following current events with interest. The Scandinavian group has had no direct involvement in the sale of North-West Telecom's stake, but its presence in the background is impossible to ignore. TeliaSonera holds a 26.1% stake in Telecominvest, and also a 43.7% stake in MegaFon. It is currently engaged in talks with Russian holding Alfa over a possible asset swap, which would see it gain Alfa's stakes in both MegaFon (25.1%) and Turkcell (13.2%), with the Russian group securing a stake of between 10% and 20% in TeliaSonera (see Europe: 4 June 2007: Reports Indicate Altimo and TeliaSonera Resume Talks on Possible Asset Swap).
A Reaction to the MegaFon Situation Likely From TeliaSonera: TeliaSonera's interest in MegaFon is therefore no secret. Having recently struggled in its domestic sphere, heightened interest in the massive Russian mobile market would make sense, particularly as MegaFon has now gained a 3G licence. Moreover, following the recent resignation of CEO Anders Igel, the Nordic group has appeared keen to pursue a more adventurous policy of expansion, and has already acquired assets in the previously unexplored region of Eurasia (see CIS: 9 July 2007: TeliaSonera Board Signals Intent with Purchase of Uzbekistan's Coscom). However, if TeliaSonera were desperately keen to raise its stake in MegaFon, the cut-price sale of a 15% stake in Telecominvest, in which TeliaSonera is already a shareholder, would have been an obvious opportunity to raise its stake. Further opportunities may yet arise. Given the Scandinavian group's ongoing interest in MegaFon, it is almost certain that it will have been monitoring current events. Global Insight anticipates some sort of reaction from TeliaSonera in the short-term future that will clarify its intentions towards MegaFon.