July 12, 2017 / 5:52 AM / 3 years ago

Russian mobile operators Megafon and Vimpelcom end retail partnership

The logo of Russian mobile operator Megafon is seen on a board at the St. Petersburg International Economic Forum 2017 (SPIEF 2017) in St. Petersburg, Russia, June 1, 2017. REUTERS/Sergei Karpukhin

MOSCOW (Reuters) - Russia’s second and third-largest mobile telecoms operators Megafon and Vimpelcom will end their Euroset retail joint venture to focus on their own distribution channels in an increasingly competitive market, they said on Wednesday.

The Russian telecoms market has become saturated in recent years, with stalling revenue growth prompting operators to cut handset prices and tariffs to win subscribers. That has led to steady declines in profitability and a shift in focus to customer retention rather than contract sales.

Megafon, part of billionaire Alisher Usmanov’s diversified USM holding, and Vimpelcom, a subsidiary of Amsterdam-based Veon, said they will split Euroset, with Megafon assuming complete ownership of the business and Vimpelcom acquiring half of its retail outlets.

“The transaction will allow Megafon and Veon to pursue their independent retail strategies and optimise mobile distribution in Russia,” Megafon CEO Sergei Soldatenkov said in a statement.

The deal follows the move by MTS, Russia’s biggest mobile operator, to end its partnership with Euroset and another retailer, Svyaznoy, to focus on its own network.

“In an environment where maintaining loyalty of high-paying subscribers prevails over new subscriber additions, monobrand (retail) networks can be more attractive than those deemed independent,” Uralsib analysts wrote in a note.

The financial details of the transaction between Megafon and Vimpelcom, which has yet to be approved by regulators, were not disclosed.

Reporting by Maria Kiselyova; Editing by David Goodman

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