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Usmanov gains control of MegaFon

by Laura Board | Published April 24, 2012 at 8:20 AM

Swedish telecom TeliaSoneraAB said Tuesday, April 24, that it has resolved a dispute with fellow investors in Russian wireless-telecoms provider OAO MegaFon, which will pay its owners $5.15 billion in dividends and pursue an IPO on the London Stock Exchange.

The announcement comes about two weeks after confirmation MegaFon's owners were in talks about its shareholder structure. TeliaSonera currently holds 43.8%, while Russia's AF Telecom and Altimo hold 31.3% and 25.1%, respectively.

Following the agreement, Russian billionaire Alisher Usmanov's AF Telecom will own 50% plus one share of MegaFon, while TeliaSonera will own 35.6% and a MegaFon subsidiary will hold the remaining 14.4% - with Altimo exiting altogether.

The companies also agreed to list up to 20% of MegaFon's shares in London "as soon as practically possible," with TeliaSonera contributing 10.6% of MegaFon and the MegaFon subsidiary 9.4%.

TeliaSonera shares rose 7.3% in Stockholm to trade at 44.50 Swedish kroner ($6.61) late Tuesday morning.

In a research note, analyst Kimmo Stenvall, of Finland's OP-Pohjola Group plc, said the IPO will make TeliaSonera's stake more liquid, in line with the company's long-term objective.

Should an IPO of MegaFon not take place by year-end, TeliSonera will have the right to sell to AF Telecom or the subsidiary of MegaFon, and AF Telecom or the MegaFon subsidiary will have the right to buy, a 10.6% MegaFon stake from TeliaSonera. The price will be based on fair market value.

TeliaSonera and Altimo, the communications arm of Mikhail Fridman's Alfa Group, agreed in November 2009 to combine their stakes in MegaFon and Turkey's Turkcell Illetism Hizmetleri AS into a new company, but the deal was held in limbo by a legal dispute over a stake sale in Turkcell. MegaFon's three main shareholders have reportedly spent the past three months discussing the ownership and governance of that company.

TeliaSonera said Tuesday it expects to receive about Skr22 billion in dividends and proceeds from the divestment of its indirect 8.2% stake in MegaFon. After the IPO, TeliaSonera plans to keep 25% plus one share of MegaFon.

"By reducing our ownership we expect to realize a significant amount of the accredited value generated by MegaFon since its inception," said TeliaSonera CEO Lars Nyberg. "We look forward to continue developing the long-term potential of MegaFon with AF Telecom and the other shareholders."

Altimo stresed that although it is exiting MegaFon, its partnership with TeliaSonera will continue with regard with Turkcell.

MegaFon, founded in 2002, had 62.8 million subscribers in 2011, giving it a 27% share of the Russian wireless services market. It posted sales last year of about 242.6 Russian rubles ($8.24 billion).

Gaining control over MegaFon is a major coup for Uzbekistan-born Usmanov. The tycoon is Russia's richest citizen with a net worth of $1.8 billion, most of it from iron ore and steel behemoth Metalloinvest Managament Co. LLC.

"We value the long-term commitment of TeliaSonera as a strategic partner, to share its telecom experience and contribute to developing the long-term potential of MegaFon," Usmanov said in Tuesday's statement.

Earlier this week, MegaFon became Russia's first mobile operator to offer customers 4G services, beginning in Novosibirsk. In the near future, the company also plans to deploy 4G networks in Moscow, Sochi, Krasnodar and other Russian cities.

MegaFon is led by CEO Ivan Tarvin, who is also chairman and a shareholder of Russian media holding company UTH, whose interests include MUZ-TV and the Disney Channel. The 35-year-old is also a board member of Russia's National Association of Television and Radio Broa.

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Tags: IPO | M&A | OAO MegaFon | TeliaSoneraAB

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