Russia’s second-largest mobile operator Megafon is to acquire smaller operator Scartel, which holds valuable LTE spectrum, under a proposed deal worth $1.18 billion.

Scartel, which operates under the Yota brand, owns 2 x 30 MHz of LTE spectrum nationwide in the 2.5-2.6 GHz band. Its network covers 27 per cent of the Russian population. Yota is the only operator with a commercially available LTE network, according to Megafon.

The Russian operator will also assume $600 million of Scartel’s debt if the deal goes ahead.

Billionaire Alisher Usmanov has majority control of Megafon through a holding company and is also one of the owners of Scartel. Essentially, the current deal represents a manoeuvring of assets he already controls. Usmanov took control of Scartel in a deal last year, it was reported.

The LTE operator had 648,000 subscribers, both B2C and on a B2B basis, at the end of June. It has a number of MVNO partners including Megafon.

Russia’s second-largest operator has 63 million subscribers, although it lags behind larger rival MTS with 72 million (GSMA Intelligence, Q2 2013 figures).

Megafon shareholders are scheduled to vote on the deal on 12 September, 2013. TeliaSonera, the operator’s second largest shareholder after Usmanov’s AF Telecom group with a 25 per cent stake, has said it will support the deal.

“The transaction allows us to strengthen our leading position in the 4G / LTE market in Russia and achieve significant improvement in cash flow in terms of 4G / LTE network rollout and maintenance going forward,” said Ivan Tavrin (pictured), CEO of Megafon.