Megafon holding company in talks on Tele2 Russia break-up -paper

MOSCOW Thu Jan 17, 2013 4:35am EST

MOSCOW Jan 17 (Reuters) - The owner of Russian mobile group Megafon has been in talks with rivals over a potential carve-up of Swedish telecom group Tele2's business in Russia, Vedomosti newspaper reported on Thursday.

Garsdale, an investment vehicle of Alisher Usmanov, Russia's richest man, the majority owner of Megafon, denied the report.

"The facts quoted by Vedomosti are inaccurate and no negotiations are in place," said Ivan Streshinsky, CEO of Garsdale in a statement made through Usmanov's spokeswoman.

Vedomosti, citing a partner in Garsdale and a manager close to Tele2, said Garsdale was proposing to buy the Tele2 assets, then divide them up between Megafon, Vimpelcom and MTS in a multi-stage deal.

The paper said Tele2's Russian assets could be valued at $2.6 billion to $4 billion, citing an earlier estimate by a source close to Tele2's shareholders.

Such a deal would be positive for MegaFon, MTS and Vimpelcom, analysts at Merrill Lynch said in a research note, as it would reduce competition. But they said it would be negative for state-controlled operator Rostelecom, as it would hamper its chances of building a viable mobile business.

Tele2 is Russia's only foreign mobile operator and its fourth-largest in terms of subscribers. Speculation has circulated that it may seek a merger with one of bigger rivals or Rostelecom.

In November, Vedomosti reported that Tele2 and Rostelecom were discussing a merger of their Russian mobile assets into an entity that would hand control to Tele2.

Vedomosti also reported that Tele2 president Mats Granryd denied that Tele2 would sell the Russian business, as the company still aims to solve a frequency problem in Russia through an agreement with fourth-generation provider Yota.

Yota is operated by Scartel, also part of Usmanov's stable following a deal last summer which saw him combine his telecom assets into a holding company that would own Scartel.

Tele2, Vimpelcom and MTS were not immediately available for comment.

Tele2 has faced obstacles to upgrading its network in Russia, where it does not have a license to operate 3G or 4G services.

Last year, Russia postponed a decision on whether to allow mobile operators to use existing radio frequencies for the higher speed connections needed for mobile internet access, rather than having to buy new radio spectrum licenses. This is seen as crucial for Tele2.

Vedomosti reported that Deutsche Bank is advising Garsdale on the deal.

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