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Fitch Places Tele2 Russia's Ratings on Rating Watch Evolving on VTB Acquisition
March 28, 2013 / 4:00 PM / 5 years ago

Fitch Places Tele2 Russia's Ratings on Rating Watch Evolving on VTB Acquisition

(The following statement was released by the rating agency) MONTERREY/SAN SALVADOR, March 28 (Fitch) Fitch Ratings has placed Tele2 Russia Holdings AB's (Tele2 Russia) ratings on Rating Watch Evolving (RWE) following the announcement that Tele2 Russia is to be acquired by Bank VTB (JSC) (VTB;'BBB'/Negative) from Tele2. The RWE is likely to be resolved once there is more clarity on the company's long-term shareholding and capital structure. A full list of rating actions is at the end of this release. VTB announced that it reached an agreement to acquire Tele2 Russia from its former 100% shareholder, Tele2. The deal is subject to a regulatory approval but the parties do not foresee any regulatory objections and expect the transaction to be closed within a short period of time. KEY RATING DRIVERS The new shareholder announced that it is a financial investor, and is likely to divest of this asset at some point. If VTB commits itself to this investment for a few years and puts in place a sustainable capital structure for Tele2 Russia, the ratings are likely to be stabilised with a subsequent sale viewed as an event risk. Fitch notes that Tele2 Russia may be of strategic interest to key Russian telecom players including Rostelecom ('BBB-'/Stable), Megafon ('BB+'/Stable), MTS ('BB+'/Stable) and Vimpelcom (unrated). If any of these groups become controlling shareholders in Tele2 Russia or strategic shareholders in partnership with VTB, Tele2 Russia's ratings are unlikely to come under downward pressure. An emergence of a weaker shareholder without a ring-fence around Tele2 Russia would likely lead to a negative rating action. A more complicated shareholder structure without a ring-fence around Tele2 Russia and/or a more aggressive capital structure may be concerns, as would be material asset divestments by Tele2 Russia. Rouble bonds issued by Tele2 Russia's subsidiary do not have change of control clauses and remain outstanding. Fitch understands the bonds cannot be called by the issuer. The bonds were issued by OJSC Saint-Petersburg Telecom, a subsidiary of Tele2 Russia. They benefit from the irrevocable undertaking by Tele2 Russia Holdings AB and Tele2 Financial Services AB, a treasury company for Tele2 Russia. RATING SENSITIVITIES More clarity on Tele2 Russia's long-term shareholding and capital structure would likely lead to a rating watch resolution. FULL LIST OF RATING ACTIONS Long-Term IDR: 'BB+'; Placed on RWE National Long-Term Rating: 'AA(rus)'; Placed on RWE Senior Unsecured Debt: 'BB+'/'AA(rus)'; Placed on RWE Contact: Principal Analyst Sergei Egorov Analyst +7 495 956 9931 Supervisory Analyst Nikolai Lukashevich, CFA Senior Director +7 495 956 9968 Fitch Ratings CIS Ltd 26 Valovaya Street Moscow 115054 Committee Chair Mike Dunning Managing Director +44 20 3530 1178 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable criteria, 'Corporate Rating Methodology', dated 08 August 2012, are available at Applicable Criteria and Related Research Corporate Rating Methodology here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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