Swedes Enter Russian Cellular Market at National Level
// Tele2 will compete with the Big Three
There will soon be a fourth nationwide provider on the Russian cellular communications market. The Swedish Tele2 is concluding negotiations for the purchase of SMARTS and the MCT Corp., which operates under the brand name Indigo. By uniting the two, Tele2 will have about 8 million customers in 33 regions of Russia and have a sufficient client base for effective business operations, in spite of the dominance of three Russian operators on the market.
Kommersant has learned that a memorandum of understanding has been signed between Tele2 and SMARTS shareholders. A source said that the deal could be worth $700 million. The deal could be delayed, however, because arbitration courts in Samara and St. Petersburg have frozen all of the Russian company's stock. However, the conflict between the Sigma Capital Partners raiders group and other SMARTS shareholders, which was the cause of the freeze on the stock, has been settled and Sigma will receive about $30 million for 0.125 percent of the stock in SMART and court proceedings are winding down. The Russian and Swedish offices of Tele2 and SMARTS shareholders, including Sigma, all declined to comment. None of them denied the information.
Market insiders say that Tele2's plans will not stop there. The next step may be the acquisition of the assets of the MCT Corp. A SMARTS employee confirmed that information on the condition of anonymity. MCT owns four regional operators – Arkhangelsk Mobile Networks, Novgorod Telecommunications, Parma Mobile (which operates in the Komi Republic) and Murmansk Mobile Network. Those companies have an annual turnover of just under $20 million per year with 260,000 subscribers as of the end of May. MCT confirmed yesterday that it was seeking a buyer for its cellular assets, but declined to whether it was negotiating with Tele2.
Tele2 Russia, a subsidiary of Tele2, already operates in 13 Russian regions, including St. Petersburg, Niznhy Novgorod and Rostov-on-Don. Its 2005 turnover came to $140 million, while the main company's turnover was $6.84 billion worldwide.
ZAO SMARTS is the sixth largest cellular provider in Russia, with 3.2 million subscribers in 16 regions. Its proceeds in 2005 amounted to 2.49 billion rubles. About 80 percent of the company's stock belongs to its general director Gennady Kiryushin, his children Yulia and Konstantin and the Marshall telecom Investments Co., which is affiliated with him. Boris Skvortsov, chairman of the company's board of directors owns 15 percent of the stock, Volgatelekom owns 2.95 percent, president of the Solidarity Design Bureau Alexey Titov owns less than 2 percent and Sigma 0.125 percent.
After their merger, Tele2, MCT and SMARTS will be the fourth largest operator on the Russian market with an annual turnover of $380 million. The three largest operators, MTS, VimpelCom and Megafon, have 118 million subscribers combined.
Valery Kodachigov; Olga Pasternatskaya, Samara
All the Article in Russian as of June 23, 2006
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Photo: Alexey Kudenko
