Putin’s billionaire ally buys up Russian telecom operator

The deal gives him control over the country's third largest carrier.

Topics: Bloomberg, Putin, russian, telecommunications, wireless networks, Russia, , , ,

Oct. 17 (Bloomberg) — President Vladimir Putin’s billionaire ally Yury Kovalchuk is buying half of Tele2 Russia Holding AB with partners, seeking to make the wireless carrier a stronger competitor to the country’s three dominant operators.

Kovalchuk’s Bank Rossiya and partners including steelmaking billionaire Alexey Mordashov bought 50 percent of the business from VTB Group, a state-run bank. VTB, which bought the Russian unit of Sweden’s Tele2 AB for $2.4 billion this year, said in its statement today that the selling price for the stake was “in line with expectations.”

With Kovalchuk’s backing, Tele2 Russia will become a more powerful contender in a market benefiting from rising demand for mobile Internet-browsing and video viewing. The Russian wireless market is dominated by billionaire Vladimir Evtushenkov’s OAO Mobile TeleSystems, billionaire Alisher Usmanov’s OAO MegaFon and billionaire Mikhail Fridman’s VimpelCom Ltd.

The next step may be combining Tele2 Russia with the wireless business of state-controlled phone company OAO Rostelecom. The two mobile carriers may be merged, VTB Chairman Andrey Kostin said this month. In the tie-up, which would form the country’s fourth nationwide mobile operator, Tele2 Russia owners would probably have majority control, he said.

“Kovalchuk managed to agree with VTB and may become a beneficiary of Russia’s new nationwide operator,” Anna Lepetukhina, an analyst at Sberbank CIB in Moscow, said by phone. “Tele2 Russia is a good asset which has great potential if combined with Rostelecom’s mobile business.”

RUSSIAN GROWTH

Tele2 Russia and Rostelecom’s mobile unit together would have about 37 million customers, trailing the 57 million to 72 million users at the larger rivals, according to AC&M Consulting.

In contrast to Western Europe, the Russian wireless market is expanding as more consumers browse the Web and watch video on smartphones and tablets. Russia’s total mobile revenue climbed 9 percent to 837.4 billion rubles ($26.1 billion) last year, according to AC&M Consulting. Data revenue surged 33 percent to account for 100.7 billion rubles of that amount.

Shares of MTS, the wireless-market leader, fell 2.7 percent to 341.92 rubles at 12:47 p.m. in Moscow. MegaFon, the No. 2, dropped 0.7 percent to $36.75 in London. VTB declined 1.1 percent to $2.70.

KOVALCHUK’S PARTNERS



The Tele2 Russia purchase marks an expansion into a new area for Kovalchuk, who owns CTC Media in Russia with Tele2 AB founder Cristina Stenbeck and her family. He is the main shareholder of St. Petersburg-based Bank Rossiya, which owns stakes in National Media Group and insurance company Sogaz and has an indirect interest in Gazprombank.

Kovalchuk, 62, had a fortune valued at $1.1 billion by Forbes Russia magazine this year. He has known Putin since the early 1990s, and both are from St. Petersburg. Mordashov, a billionaire owner of Russian steelmaker OAO Severstal, is Kovalchuk’s partner in the bank and in National Media Group.

Rostelecom Chief Executive Officer Sergey Kalugin, appointed in March, had previously worked for Kovalchuk’s companies. Gazprombank holds a 7.2 percent stake in Rostelecom, according to the Prime newswire.

Rostelecom plans to rely on partners to develop mobile business, spokeswoman Kira Kiryukhina said Oct. 7. President Putin is backing measures that would allow Tele2 Russia to use so-called second-generation frequencies to develop fourth- generation networks for faster data speeds, Vedomosti reported today.

–Editors: Ville Heiskanen, Torrey Clark

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 11
  • Close
  • Fullscreen
  • Thumbnails
    Burger King Japan

    2014's fast food atrocities

    Burger King's black cheeseburger: Made with squid ink and bamboo charcoal, arguably a symbol of meat's destructive effect on the planet. Only available in Japan.

    Elite Daily/Twitter

    2014's fast food atrocities

    McDonald's Black Burger: Because the laws of competition say that once Burger King introduces a black cheeseburger, it's only a matter of time before McDonald's follows suit. You still don't have to eat it.

    Domino's

    2014's fast food atrocities

    Domino's Specialty Chicken: It's like regular pizza, except instead of a crust, there's fried chicken. The company's marketing officer calls it "one of the most creative, innovative menu items we have ever had” -- brain power put to good use.

    Arby's/Facebook

    2014's fast food atrocities

    Arby's Meat Mountain: The viral off-menu product containing eight different types of meat that, on second read, was probably engineered by Arby's all along. Horrific, regardless.

    KFC

    2014's fast food atrocities

    KFC'S ZINGER DOUBLE DOWN KING: A sandwich made by adding a burger patty to the infamous chicken-instead-of-buns creation can only be described using all caps. NO BUN ALL MEAT. Only available in South Korea.

    Taco Bell

    2014's fast food atrocities

    Taco Bell's Waffle Taco: It took two years for Taco Bell to develop this waffle folded in the shape of a taco, the stand-out star of its new breakfast menu.

    Michele Parente/Twitter

    2014's fast food atrocities

    Krispy Kreme Triple Cheeseburger: Only attendees at the San Diego County Fair were given the opportunity to taste the official version of this donut-hamburger-heart attack combo. The rest of America has reasonable odds of not dropping dead tomorrow.

    Taco Bell

    2014's fast food atrocities

    Taco Bell's Quesarito: A burrito wrapped in a quesadilla inside an enigma. Quarantined to one store in Oklahoma City.

    Pizzagamechangers.com

    2014's fast food atrocities

    Boston Pizza's Pizza Cake: The people's choice winner of a Canadian pizza chain's contest whose real aim, we'd imagine, is to prove that there's no such thing as "too far." Currently in development.

    7-Eleven

    2014's fast food atrocities

    7-Eleven's Doritos Loaded: "For something decadent and artificial by design," wrote one impassioned reviewer, "it only tasted of the latter."

  • Recent Slide Shows

Comments

Loading Comments...