* MegaFon to complete IPO in fourth quarter
* Offer likely to raise around $2 bln-sources
* To offer stake of around 15pct - source
* MegaFon says Russia focus is key advantage
By Megan Davies and Maria Kiselyova
MOSCOW, Oct 9 Russia's second biggest mobile
operator, MegaFon, announced its plan to sell shares in London
this year and was expected to raise up to $2 billion from
investors seeking a stake in the rapidly growing Russian market.
The initial public offering could value MegaFon at $13
billion and become the biggest by a Russian company since that
of internet firm Yandex last year. MegaFon is
controlled by Russia's richest man, Alisher Usmanov.
Announcing the offer on Tuesday, MegaFon stressed its focus
on the Russian domestic market, where it has been outpacing
rivals such as Vimpelcom that also have entanglements
"We are a pure Russian player," chief executive Ivan Tavrin
told Reuters in an interview on Tuesday. "About 99 percent of
our revenues come from this country."
The share offer is the second part of a restructuring
through which Usmanov took control of MegaFon by buying out
rival tycoon Mikhail Fridman and part of Nordic telecoms group
Russian companies have been jostling to take advantage of a
revival in the European new issues market. Russia just sold a $5
billion stake in Sberbank while private healthcare
group MD Medical has announced plans to list shares in London.
TeliaSonera will sell part of its remaining MegaFon stake
through the listing, giving it a big return on an initial
investment of less than $180 million in 2001.
The rest of the offering would come in the form of treasury
stock bought by MegaFon through the deal in April which gave
Usmanov 50 percent of the company plus one share to end years of
shareholder infighting. MegaFon said its proceeds would go to
As an attraction for investors, MegaFon had the best
subscriber growth and clearest data strategy in Russia as well
as having rolled out fourth generation services before rivals,
said Bruce Bower, a portfolio manager at Moscow-based fund
manager Verno Capital.
"The Russia focus is also a huge differentiator," he said,
pointing to Vimpelcom's expansion outside Russia and problems
MTS has faced in Uzbekistan.
SMALLER THAN EXPECTED
The total offering would be equivalent to 15 percent of
MegaFon's equity, one source familiar with the matter said. That
could bring in up to or around $2 billion, two sources said. The
sale is for less than the 20 percent stake which had previously
MegaFon was not pressed for money so did not need to sell a
bigger stake, Metropol analyst Evgeny Golosnoy said.
"They may be expecting a better price in the future," he
MegaFon did not say how big a stake either it or TeliaSonera
would sell. The Nordic company, which currently has a 35.6
percent stake, had been expected to sell a 10.5 percent share
and MegaFon 9.4 percent.
TeliaSonera would keep at least 25 percent plus one share
after the share offering, it said in a statement.
A MegaFon IPO of around $2 billion would be bigger than
Yandex's $1.43 billion share sale in New York last year and
around the same size as Rusal's $2.2 billion IPO in
A surprise in the line-up of banks running the deal was the
absence of Goldman Sachs, which sources had expected to
be a lead manager. Morgan Stanley and Sberbank
were appointed joint coordinators with Citi, Credit Suisse
and VTB as joint bookrunners.
Tavrin did not comment when asked why Goldman was missing.
One source familiar with the matter said Goldman had stepped
back due to unspecified shareholder concerns that were not
related to Usmanov. The Uzbek-born tycoon has announced that he
would fold his MegaFon stake into a new holding company.