Russia's MTS eyes stake in cellphone retailer Svyaznoy -paper

MOSCOW, July 22 Tue Jul 22, 2014 5:21am EDT

MOSCOW, July 22 (Reuters) - Russia's biggest mobile phone operator MTS is in talks to acquire a 49 percent stake in cellphone retailer Svyaznoy, business daily Kommersant reported on Tuesday.

MTS denied the report. "MTS is not planning to buy shares in Svyaznoy. And it is not in talks," a spokesman said. He added the company was not even considering such a deal.

According to one of Kommersant's sources, the deal could be closed "in the nearest future" while the other source that the paper quoted said it was unlikely to be completed before end-September.

Svyaznoy owner Maksim Nogotkov has been trying to bring in investors for years, with mobile operators and unrelated businesses alike reportedly considering taking a stake.

According to Kommersant, Svyaznoy, which generated $3 billion in revenues last year, could be valued at $1.5 billion including debt.

A deal could help to increase the number of MTS' retail outlets to beat rivals Megafon and Vimpelcom, although MTS already has a partnership agreement with Svyaznoy which gives it advantage over its rivals in the Svyaznoy chain.

"Acquiring a stake in Svyaznoy would only be value-accretive for MTS if the price is right, as retaining high-income customers is more important than attracting new ones at this stage in the development of the Russian mobile market," said analysts at Uralsib.

Russian mobile phone subscriptions stand at 241.5 million at the end of March, equal to 169 percent of the population, because many people own more than one SIM card.

MTS's controlling shareholder conglomerate Sistema declined to comment. ($1 = 35.0500 Russian Roubles) (Reporting by Maria Kiselyova, editing by Louise Heavens)