* VTB to sell 50 pct of Tele2 Russia to Russian investors
* Buyers affiliated with businessmen Kovalchuk, Mordashov
* Deal expected to be worth around $2 bln including debt
* Tele2 Russia seen merging with Rostelecom's mobile unit
By Oksana Kobzeva and Maria Kiselyova
MOSCOW, Oct 11 Russian bank VTB is to
sell 50 percent of its mobile phone operator Tele2 Russia to a
group of investors in a deal expected to be worth about $2
billion and which stoked talk of an eventual tie up between
Tele2 and rival Rostelecom.
Russia's mobile market is dominated by three companies - MTS
, Megafon and Vimpelcom. Smaller
players have little room to grow client numbers as many Russians
already own more than one SIM card, fuelling speculation they
will consolidate to step up the challenge to the "Big Three".
"I think this is just the first part of a deal, and the next
step is likely to see Rostelecom join its (mobile) assets with
Tele2 and get a stake in the united company," said Anna
Lepetukhina at Sberbank Investment Research.
Yuri Soloviev, first deputy president of VTB's management
board, said on Friday that VTB would sell 50 percent of Tele2
Russia to a group of investors, including affiliates of Bank
Rossiya and Alexei Mordashov's steelmaker Severstal.
The deal represents a quick turnaround for VTB, which bought
industry No. 4 Tele2 Russia in April for $3.6 billion from
Sweden's Tele2. VTB had said it was not looking to
hold the asset for the long term.
The deal could be worth about $2 billion including debt,
according to the valuation VTB gave for Tele2 Russia in its last
financial report. That valuation - as of the end of June -
showed the asset rose around 20 percent in value in the first
three months of ownership. VTB declined to comment on the price.
A tie-up between Tele2 Russia and the mobile arm of
state-controlled Rostelecom - the country's fifth
largest mobile operator - has long been speculated.
The Vedomosti newspaper reported last month that Rostelecom
had hired JPMorgan, Credit Suisse and
accountancy firm PricewaterhouseCoopers to advise on a possible
joint venture with Tele2 Russia.
Rostelecom's chief executive Sergei Kalugin was quoted as
saying last week that the company could put its mobile assets
under the management of an unspecified partner to focus on cable
TV in a strategy shift.
Analysts speculated Tele2's new shareholders might look to
set up a joint venture with Rostelecom. The new investors
declined to comment on Friday.
Tele2 only has 2G, voice-focused licences, while Rostelecom
has both 3G and 4G permits which allow it to provide fast mobile
"If Tele2 gets 3G licences it will be able to compete with
the Big Three in offering mobile internet ... but it will of
course take time," said Lepetukhina, adding that launching in
Moscow would be crucial for its success.
Bank Rossiya, which is part-owned and chaired by Yuri
Kovalchuk, an old acquaintance of President Vladimir Putin, said
last week it was considering taking part in a deal for a stake
in Tele2 Russia.
A spokesman for the St Petersburg-based bank confirmed it
planned to participate in the deal with VTB, saying the state
competition regulator had given it permission. But it declined
to provide any details or to discuss its plans for Tele2 Russia.
Severstal declined all comment. However, a source familiar
with the situation said that Mordashov's connections rather than
those of Severstal were participating in the deal.
According to media reports, the group of investors included
a third buyer, but neither VTB or Bank Rossiya identified them.
Vedomosti reported last week that Bank Rossiya could partner
with lender Gazprombank and oil firm Surgutneftegas.
In its first-half earnings report, VTB said Tele2 Russia was
worth 126.4 billion roubles ($3.9 billion), suggesting a 50
percent stake would be valued at around $2 billion before
stripping out debt which stood at $1.1 billion as of June 30.