UPDATE 1-Russia's MTS offers $1 bln for SMARTS-paper

(Adds MTS, analyst comments, background)

MOSCOW, April 3 (Reuters) - Russia's largest mobile operator, Mobile TeleSystems (MTS) MBT.N, has offered $1 billion for 97 percent of regional operator SMARTS, Vedomosti business daily reported on Thursday, quoting sources. Smarts, which operates in the Volga region in central Russia, is the country's seventh-largest cellphone operator by subscriber numbers with 4.03 million clients as of Feb. 29.

Among others, SMARTS has a presence in the Penza region, the only territory in Russia which is not covered by the MTS network. According to AC&M, there are 1.43 million mobile phone users in Penza, where SMARTS has a 30-percent market share.

“We see the potential deal as positive for MTS, as the company could substantially enhance its subscriber base in the Volga Region and get rid of a strong player in a quite competitive market at a reasonable EV/subscriber multiple,” said Alexander Kazbegi, analyst at Renaissance Capital.

MTS, controlled by services conglomerate Sistema SSAq.L, has around 88 million subscribers in Russia and former Soviet states. Its revenues exceeded $8 billion in 2007 compared with $6.4 billion in 2006, according to its preliminary estimates.

“We have repeatedly said that we are studying all assets in Russia but no decision has been taken as yet,” MTS spokeswoman Yelena Kokhanovskaya told Reuters.

SMARTS shareholders have been seeking to sell the company for years. In December last year, media reported that Russia's number two mobile operator, Vimpelcom VIP.N, offered $750 million for SMARTS, which both companies denied.

The operator is majority owned by private investors the Kiryushin family and Boris Skvortsov. Angentro Trading and Investments Ltd has around 20 percent.

Fixed-line operator Volgatelecom NNSI.MM owns 3 percent of SMARTS and had also expressed interest in buying out the firm. (Additional reporting by Anastasia Teterevleva; Writing by Maria Kiselyova; Editing by Paul Bolding)