Putin’s Billionaire Ally Buys Half Of Tele2 Russia Operator

Kovalchuks Bank Rossiya (ROSS) and partners including steelmaking billionaire Alexey Mordashov bought 50 percent of the business from VTB Group (VTBR) , a state-run bank. VTB, which bought the Russian unit of Swedens Tele2 AB (TEL2B) for $2.4 billion this year, said in its statement today that the selling price for the stake was in line with expectations. With Kovalchuks 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 Evtushenkovs OAO Mobile TeleSystems (MBT) , billionaire Alisher Usmanov s OAO MegaFon (MFON) and billionaire Mikhail Fridmans VimpelCom Ltd. (VIP) 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 countrys 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 Russias 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 Rostelecoms mobile business. Russian Growth Tele2 Russia and Rostelecoms 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. Russias 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. in Moscow. MegaFon, the No. 2, dropped 0.7 percent to $36.75 in London. VTB declined 1.1 percent to $2.70.

Russia’s VTB turns quick profit with Tele2 Russia deal

VTB bought Russia’s fourth-largest mobile operator from Sweden’s Tele2 (TEL2b.ST) in April for $3.55 billion. “It has been a profitable investment for us and we will stay as equal partners,” Yuri Soloviev, first deputy president of VTB’s management board, told Reuters. Soloviev declined to name the sale price, which has been put at $2 billion, including assumed debt, based on the price at which VTB has valued the stake on its books. VTB is selling half to a group of investors including affiliates of Bank Rossiya and entities of Alexei Mordashov, a billionaire tycoon who controls steelmaker Severstal (CHMF.MM). “Through the sale of 50 percent we get very experienced people in the TMT (technology, media and telecoms) sector, (who) have invested in a number of assets such as TV channels, content producers, cable companies,” Soloviev said. “We de-risk the position, we make some money on structuring the deal and we get a very strong partner in Russia.” 4G PUSH Bank Rossiya is part-owned and chaired by Yuri Kovalchuk, an old acquaintance of Russian President Vladimir Putin. Kovalchuk and Mordashov have a background in media investments, combining their media assets in 2008 to create National Media Group (NMG). Retaining VTB as an owner could help Tele2 Russia’s lobbying effort to obtain a license to provide high-speed 4G services. At a competitive disadvantage since losing a 4G license tender last year, it has argued for technology neutrality to allow faster internet speeds on its existing radio band. The Tele2 deal is seen by analysts as likely to lead to an eventual tie-up with state-controlled rival Rostelecom (RTKM.MM), Russia’s fifth-largest mobile operator, and challenge the top three of MTS (MBT.N), Megafon (MFON.MM) (MFONq.L) and VimpelCom (VIP.O). Tele2 Russia’s new owners have links to Rostelecom. In 2011 NMG sold its stake in cable TV company National Telecommunications to Rostelecom. The former chief of the cable company, Sergei Kalugin, became CEO of Rostelecom. VTB’s Soloviev said the bank aims to increase Tele2 Russia’s presence in the market and widen its product range through licenses or joint ventures.