April 1, 2013 / 5:31 PM / in 5 years

Russia's MTS urges Tele2 to start talks over $4.25 bln offer

* MTS, Vimpelcom offered $4-$4.25bln for asset

* Bid topped agreed deal with VTB

* MTS urges Tele2 to consider its offer

* MTS says would be open to MegaFon joining its bid

By Megan Davies and Maria Kiselyova

MOSCOW, April 1 (Reuters) - Russia’s top mobile operator MTS on Monday urged Tele2 to start talks over the Nordic operator’s Russian asset after making a bid of up to $4.25 billion, and said it was strange for management to ignore such an offer.

MTS joined with rival Vimpelcom Ltd, part-owned by billionaire Mikhail Fridman, to bid for Tele2’s Russian unit on Thursday, topping a lower bid by Fridman’s A1 investment group and an agreed deal with state-controlled bank VTB.

New York-listed MTS and Vimpelcom are bidding for Tele2 Russia to try and prevent government-controlled Rostelecom from taking the asset, some analysts have speculated.

MTS said it has still had no response from Tele2.

“Our predominant focus is to get the Tele2 management and shareholders and board to the table to consider our offer and to show a sign of life,” said Michael Hecker, MTS’ VP, Strategy and Corporate Development, in an interview. “We are waiting for an answer from Tele2 to our request, to acknowledge our offer, to get into a process, and put the VTB process on hold.”

Hecker added that it was “strange and dubious” for management and the board to ignore a financially superior offer.

VTB has said that its deal is concluded and legally binding.

Hecker, however said that he was not aware the deal was closed.

MTS and Vimpelcom’s offer to buy Tele2 was for $4.0 billion to $4.25 billion, topping A1’s all-cash bid of $3.6-$4 billion and VTB’s $3.5 billion deal. A1 said on Friday that it may take legal action to defend its right to buy.

MTS said that some minority shareholders had expressed their concern with the process, but declined to comment on which shareholders these were or how much they controlled.

Tele2 is Russia’s fourth-biggest mobile operator with around 23 million subscribers in 2012 after MTS, MegaFon and Vimpelcom. Focused on Russia’s regions, it does not have a 3G or 4G license in Russia. Without the ability to offer data services, analysts say its growth prospects are limited.

Analysts say there is little reason for VTB to hold the asset long and have speculated that the bank bought Tele2 on behalf of Rostelecom or that it will carve the asset up and sell it to the “Big Three” - MTS, Vimpelcom and MegaFon.

MTS said the “door is fully open” should MegaFon want to join up to bid.

“The fact that Vimpelcom and MTS teamed up together does not mean that MegaFon might not at a later stage also join,” Hecker said.

MTS said it sees a strategic rationale in buying Tele2 as it would give Tele2 customers access to data services and superior network quality. MTS and Vimpelcom would be able to realize economies of scale, he said by integrating Tele2’s customer bases, network assets and sales.

MegaFon said it is not in talks with VTB, MTS or Vimpelcom but is watching how the situation develops. Tele2 could not immediately be reached for comment.

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