MTS mulls majority stake in fixed-line sister firm - Mobile World Live

MTS mulls majority stake in fixed-line sister firm

20 OCT 2009

Russia’s largest mobile operator MTS is looking to buy sister firm Comstar in a move that would make it the country’s largest integrated operator by revenue. According to a Wall Street Journal report, sources say that MTS is mulling a deal valued at US$1.28 billion to take a 51 percent stake in the company. Both MTS and Comstar are controlled by conglomerate AFK Sistema. The deal would combine MTS’ mobile business with Comstar’s fixed-line voice and Internet businesses, and would see it overtake rival VimpelCom in terms of revenue. VimpelCom made a similar deal last year to acquire fixed-line provider Golden Telecom for US$4.3 billion. According to Russian newspaper, Kommersant, the offer of US$1.28 billion for Sistema’s 51 percent stake equates to US$5.98 a share, a 20 percent premium to the stock’s closing price last Thursday, but significantly below the US$9.10 at which it was trading a year ago.

“Through the deal, Sistema will add US$1.3 billion to its balance sheet at the holding level, and MTS will be able to purchase the fixed-line assets necessary to become an integrated telecoms operator at an attractive valuation,” analysts at UralSib wrote. Wall Street Journal reports that some analysts have cautioned that MTS will only be able to reap the full reward of a tie-up with Comstar if it buys the whole company. However, a source said that MTS has no plans to buy out Comstar’s minority owners. “In order for MTS to gain all synergies from the acquisition, it would need to buy the entire company, so sooner or later the offer is almost definite in our view,” said Renaissance Capital analyst Alexander Kazbegi.

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