Russia’s second-largest mobile operator MegaFon plans to buy smaller 4G operator Scartel (Yota) for US$1.18bn.
The Moscow-based company announced today that its board of directors has recommended shareholders approve the acquisition from Garsdale, the…
Russia’s second-largest mobile operator MegaFon plans to buy smaller 4G operator Scartel (Yota) for US$1.18bn.
The Moscow-based company announced today that its board of directors has recommended shareholders approve the acquisition from Garsdale, the telecoms holding company which also owns 50% plus one share of MegaFon.
Oligarch Alisher Usmanov holds 82% of Garsdale via USM Holdings while the remainder rests with Telconet Capital and Russian Technologies.
MegaFon said the total consideration for the deal, expected to boost its 4G network development, is US$1.18bn plus the assumption, purchase or pay-off of Scartel’s net debt at closing. The company is looking to complete the deal at the end of September.
The consideration is to be paid in two stages: US$590m on the first anniversary of closing, and the remainder on the second anniversary. Interest accrued at a rate of 6% between closing and payment will also be payable.
Scartel’s net debt is capped at US$600m plus US$20m per month from 1 July until closing. The debt currently consists of loans of about US$400m from Garsdale and affiliates. MegaFon will pay the outstanding amount at closing along with third-party loans, but not working capital liabilities.
MegaFon has already received regulatory clearances for the deal, which is however subject to other customary conditions and Scartel’s 4G licences remaining in full effect.
The London and Moscow-listed operator has scheduled an EGM for 12 September to vote on the deal. As it is an interested-party transaction under Russian law, Garsdale and affiliate shareholders will not vote. Approval from a majority of minority shareholders is needed and the largest of these, Sweden’s TeliaSonera, has said it will vote in favour.
Garsdale issued its own statement expressing its support for the deal, saying benefits for MegaFon and its minority shareholders have been confirmed by independent international financial and legal advisers.
“According to the experts, the acquisition of Scartel will not only proved MegaFon with an undisputed leadership in terms of the capacity and quality of its LTE infrastructure and subscriber base, but would also serve as a foundation for sustainable long-term growth … in data services, currently the fastest-growing segment in the market,” the holding company said.
Garsdale CEO Ivan Streshinsky said that while Scartel has a “significant advantage” over local rivals in terms of 4G technology deployment, it needs additional investment and competencies to grow.
“Combining Scartel’s and MegaFon’s resources will provide the required momentum to both companies and the LTE market as a whole …,” he said.
Commenting on the deal, MegaFon CEO said the deal will enable the company to significantly improve its cash flow in term of 4G network rollout and maintenance. He said the company will be able to provide high-speed internet access in urban and rural areas in “the shortest possible period of time”.
MegaFon noted that Scartel is currently the only Russian operator with an active 4G/LTE network.
MegaFon’s board does not expect the deal to have a material impact on the company’s 2013 guidance for revenue growth, OIBDA margin, capex or dividend policy.
