Global Insight Perspective | |
Significance | Last week Alfa acquired Sky Mobile, announcing plans to make it Kyrgyzstan's third GSM operator. Alfa now appears keen to consolidate its position in the Kyrgyz market through its interest in the country's dominant operator, BiTel. |
Implications | Although no deal has yet been made, such an acquisition would be controversial as the precise ownership structure of BiTel is already a focus of legal debate. |
Outlook | Several companies, including Russia's MTS, would be likely to challenge any move made by Alfa. |
Having only last week purchased Kyrgyz GSM licensee Sky Mobile, Dow Jones reports indicate that Russia's Alfa Group is planning to acquire the assets of Kyrgyzstan's largest mobile operator, BiTel. The potential price of BiTel's assets has not been revealed, but it is expected that should the deal go ahead, Sky Mobile would offer services under the BiTel brand. By the end of January 2006 BiTel held around 90% of the country's mobile market, with 510,000 subscribers, compared with 35,000 subscribers for nearest rival Katel and 15,000 subscribers for CDMA operator Fonex. In April 2006, Russia's third-largest mobile operator MegaFon entered the Kyrgyz market with the purchase of GSM operator BiMoCom (see Kyrgyzstan: 28 April 2006: Russia's MegaFon Begins Operations in Kyrgyzstan).
Outlook and Implications
- BiTel's Chaotic Ownership Structure: The sale of BiTel's assets to Alfa would add further confusion to the ownership structure of the Kyrgyz operator. Russian operator Mobile TeleSystems (MTS) claims to own a 51% stake in BiTel, having purchased this from Tarino Limited in December 2005 (see Kyrgyzstan: 20 April 2006: MTS Refuses to Lose BiTel). However, this claim is opposed by both Alfa's subsidiaries, Fellowes and Rezervspetsmet, and the Kyrgyz Supreme Court, all of whom argue that Tarino never actually owned BiTel, and that the MTS acquisition is therefore invalid. Meanwhile, Fellowes is itself claiming ownership of BiTel, despite a ruling by the Kyrgyz Supreme Court that Fellowes has actually sold the operator to Rezervspetsmet (see Kyrgyzstan: 1 May 2006: Battle For BiTel Takes Another Twist). In this context, it seems unlikely that any prospective sale of BiTel's assests to Alfa-owned Sky Mobile would pass smoothly.
- Alfa's Kyrgyz Operations: Last week, Alfa's telecoms unit Altimo purchased a 100% stake in Sky Mobile, from TDMA and CDMA operator, Katel (see Kyrgyzstan: 29 June 2006: Alfa Buys Kyrgyz Mobile Operator). The price of the stake was estimated to be between US$5 million and US$10 million, and Altimo vice-president Kirill Babaev stated in a press release that Central Asia represented a ”key target” for his group as it pursued a policy of expansion. Babaev announced Altimo's aim in Kyrgyzstan, of establishing Sky Mobile as the country's third GSM operator, and also suggested that investment would take place in developing the group's network throughout the country. The acquisition of Sky Mobile had appeared to be an effort by Altimo to insure against the possible loss of its subsidiaries' ownership of BiTel, by guaranteeing itself a presence in Kyrgyzstan's nascent mobile market. However, the news that Altimo might now also purchase BiTel's assets is an extremely bold move to assert its ownership of BiTel, as well as Sky Mobile. Altimo, it seems, is determined not just to gain a presence in the Kyrgyz market, but also to gain that market's leading operator.
- An Aggressive Player: Such forthright moves from Altimo are not unusual, as the company has previously instigated a controversial acquisition in its capacity as a shareholder on the VimpelCom board and has also incurred the wrath of IPOC regarding ownership of shares in MegaFon (see Russia: 13 January 2006: Alfa and Telenor Remain at Loggerheads over VimpelCom and Russia: 12 June 2006:IPOC Criticises Alfa in MegaFon Row). However, the company's policy of expansion has brought considerable success, as Altimo's footprint now extends across Russia, the Commonwealth of Independent States (CIS) and Turkey. The company holds a 32.9% stake in Russia's VimpelCom, 25.1% in Russia's MegaFon, 43.5 % in Ukraine's leading mobile operator Kyivstar, 29.9% in Russian fixed-line operator Golden Telecom and 13.22% in Turkey's leading GSM operator Turkcell. Although Kyrgyzstan does not represent a market of significant subscriber numbers, it does have organic growth potential, and would allow Altimo to consolidate in the CIS region. Altimo's projected move to acquire BiTel's assets is likely to prompt a reaction from MTS, as well as Fellowes and Rezeryspetsmet, each of which claim ownership of BiTel.