In an attempt to strengthen its mobile commerce business, Russia’s Mobile Telesystems (MTS) has agreed to buy up to a 25.095% stake in MTS Bank for up to Rbs5.09bn (US$160m) from its own parent company Sistema.
Under the terms of the non-binding…
In an attempt to strengthen its mobile commerce business, Russia’s Mobile Telesystems (MTS) has agreed to buy up to a 25.095% stake in MTS Bank for up to Rbs5.09bn (US$160m) from its own parent company Sistema.
Under the terms of the non-binding indicative offer, MTS Bank (formerly the Moscow Bank for Reconstruction and Development) will issue new shares to MTS for up to Rbs5.09bn (US$160m), MTS said in a statement.
MTS Bank has also agreed to grant MTS an Rbs2.1bn (US$67m) subordinated loan to finance the development of its MTS Dengi (MTS Money) project, which provides customers with payment tools such as credit and SIM cards. The 10-year, ruble-denominated loan will have an annualised rate of 8.8%.
At completion, Russian conglomerate Sistema, the controlling shareholder of both MTS and MTS Bank, will reduce its direct ownership in the latter from 87.1% to 65.3%.
Given the green light by MTS’s board of directors, the transaction is still subject to the approval of the Sistema and MTS Bank boards, MTS Bank shareholders, regulatory bodies and the completion of the requisite documentation. MTS expects the transaction will be completed in early 2013.
MTS said the deal aligns with the company’s ‘3i Strategy’, which promotes expansion into complementary business sectors.
President and CEO Andrei Dubovskov said MTS is moving into financial services to take advantage of forecasted double-digit growth in the Russian sector, describing it as “one of the largest unbanked markets in the world”.
“The addition of financial products and services enable us to better monetise our asset base, including our telecommunications networks, our customer base in Russia and extensive mobile retail network of over 4,200 stores,” he said. “Deeper cooperation with MTS Bank allows MTS to stimulate sales of smartphones in the retail network, increase customer loyalty and reduce churn through joint bonus programs with the bank.”
The deal will also help MTS to develop its mobile commerce and payment capabilities, he added.
Dubovskov said MTS expects financial products to provide at least 5% of the group’s net income by 2017.
Citigroup Global Markets provided a fairness opinion” to MTS on the deal, while Ernst & Young handled tax and financial diligence. Debevoise & Plimptom acted as legal advisers, while Liniya Prava provided legal diligence.
