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MegaFon seeks $14B price tag in IPO

by Andrew Bulkeley  |  Published November 15, 2012 at 8:26 AM
Moscow-based OAO MegaFon, Russia's No. 2 wireless telecom, on Wednesday, Nov. 15, announced details of a share sale that will raise at least $1.69 billion and value the entire company at up to $14 billion.

MegaFon will list at least 15% of itself by selling shares on Russia's Micex exchange and global depository receipts on the London Stock Exchange. The shares and GDRs will be priced at between $20 and $25 on Nov. 27.

"We believe there is already a high regard for MegaFon and its track record of innovation and profitable growth as well as appetite for quality exposure to the Russian telecoms growth story," MegaFon CEO Ivan Tavrin said in a statement.

The initial public offering is part of AF Telecom's summer buyout of former MegaFon shareholder Altimo, leaving AF Telecom with just over 50% of MegaFon. AF Telecom is an investment vehicle of Russian billionaire Alisher Usmanov, who owns 29.9% of London's Arsenal Football Club, while Altimo is the telecoms investment vehicle of Russian billionaire Mikhail Fridman and his Alfa Bank.

AF Telecom will maintain its majority MegaFon stake following the sale but the company's third owner, Stockholm-based TeliaSonera AB, will cut its 35.6% investment to about 25%. TeliaSonera said it expects to get up to 11 billion Swedish kronor ($1.6 billion) from the sale.

This is the second planned IPO of a TeliaSonera unit. The Swedish telecom's Kcell Kazakh cellular provider, formally known as GSM Kazakhstan LLP, is also planning on listing a minority stake on its home exchange as well as London. Pricing hasn't yet been announced in that sale, which is being managed by Credit Suisse Group and UBS.

Analysts have championed the MegaFon listing because of MegaFon's promises of tidy dividends. The company has also already paid out to construct its next-generation LTE network, which allows better broadband access.

In anticipation of a run on smartphones in Russia, MegaFon last month agreed to buy half of Euroset Holding NV, the country's biggest cellular phone retailer. The deal puts MegaFon in a venture with VimpelCom Ltd., Russia's No. 3 wireless company.

In the third quarter, MegaFon's sales rose 12.3% over the third quarter of 2011 to 71.2 billion rubles ($2.25 billion) with net profit increasing 19.6% to R14.9 billion. MegaFon has 64.8 million subscribers.

MegaFon has not yet said exactly how many shares it will sell. It said the banks managing the list have a right to increase the total offering by 10% if they fell there's sufficient demand.

Morgan Stanley and Sberbank CIB are joint global coordinators and joint bookrunners with Citigroup Inc., Credit Suisse and VTB Capital also pitching in as bookrunners.

Tags: AF Telecom | Alfa Bank | Alisher Usmanov | Altimo | Arsenal Football Club | Citigroup Inc. | Credit Suisse | Credit Suisse Group | Euroset Holding NV | GDRs | global depository receipts | GSM Kazakhstan LLP | Ivan Tavrin | Kcell Kazakh | London Stock Exchange | LTE | Micex | Mikhail Fridman | Morgan Stanley | OAO MegaFon | Sberbank CIB | TeliaSonera AB | UBS | VimpelCom Ltd. | VTB Capital

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