May 6, 2011 / 2:58 AM / 9 years ago

UPDATE 3-Vimpelcom buying NTC in $420 mln deal

* Will help Vimpelcom secure subscribers in eastern Russia

* Vimpelcom to buy out all shareholders in $420 million deal

* KT says looking at overseas investment opportunities

* KT reports 62 pct jump in operating profit for Q1

* KT gains over 2 pct in broad market that was down 1.8 pct

(Add Vimpelcom comments, further details, analyst comment)

By Hyunjoo Jin

SEOUL, May 6 (Reuters) - Russian mobile operator Vimpelcom VIP.N is buying New Telephone Company (NTC) from owners including South Korea’s KT Corp (030200.KS) in a $420 million deal that will see it move into eastern Russia.

KT Corp (030200.KS), South Korea’s top fixed-line and No.2 mobile phone company, said on Friday — alongside news of a jump in quarterly profit — that it was to sell its 79.96 percent stake in NTC for $346 million sale.

KT said the acquisition would help Vimpelcom, Russia’s No.3 mobile phone operator, secure a subscriber base in eastern Russia, where NTC is focused.

“KT concluded that it would be better for a nationwide operator to acquire and grow ... NTC,” KT said.

Separately, Vimpelcom said it planned to close the acquisition of a total of 90 percent within four weeks, including shares held by Summit Telecom Global Management, a unit of Japanese group Sumitomo Corp (8053.T).

It also plans to acquire the remaining 10 percent through a mandatory buyout offer, Vimpelcom said, adding the whole deal was based on a $420 million valuation of NTC, not taking into account its debt.

“Given that Vimpelcom lacks a presence in Russia’s Far East, NTC is a good fit, in our view. The purchase price is quite high, but is reflective of a premium for control,” said Ivan Kim, a telecoms analyst at Renaissance Capital in Moscow.

KT bought then loss-making NTC for $22 million in 1997 and turned around the Russian unit in four years, it said. NTC posted $25 million in net profit and $110 million in sales last year and has 1.5 million subscribers, KT said.

“I was doubtful of the NTC sale because NTC was making good money. But KT is expected to use the proceeds to invest in expansion in overseas markets such as Africa,” said Kim Hoi-jae, an analyst at Daeshin Securities.

KT EYES OTHER EMERGING MARKETS

NTC has been one of the few successful overseas acquisitions by South Korean mobile carriers, which have tried to expand abroad as the domestic market nears saturation.

KT said it would continue to look for overseas investments, including acquisitions and alliances, especially in emerging markets such as Africa and South and Central America.

Mobile TeleSystem (MTS) (MBT.N), Russia’s top mobile company, also said in February it had bid for KT’s stake in NTC. [ID:nLDE71D297]

KT, South Korea’s major seller of Apple Inc’s (AAPL.O) iPhone, reported a 62 percent jump in operating profit for the first quarter, helped by solid gains in smartphone subscribers. [ID:nL3E7G6014] (Additional reporting by Maria Kiselyova in Moscow; Editing by Muralikumar Anantharaman and Will Waterman)

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