The board of Russian operator Megafon has resolved to set up an LLC to house its towers as it moves towards monetising the assets.
The board of Russian operator Megafon (MCX:MFON) has resolved to set up an LLC to house its tower assets as it moves towards monetising the assets.
In a notice to the London Stock Exchange, Megafon said it would own 100% of First Tower Company, which will be based in Moscow. Speaking in October, Megafon CEO Igor Tavrin said the operator planned to put its 14,000 towers into a new unit ahead of a possible sale.
Tavrin said the separation would take months. Megafon did not comment on whether it had hired an adviser for a sale process. A banker specialising in the region has said that a selection process had been underway, but was then paused.
Rivals also looking at site sales
Megafon’s interest follows that of Vimpelcom (NASDAQ:VIP), which is working with BofA Merrill Lynch, UBS and reportedly TAP Advisors. VimpelCom CEO Jean-Yves Charlier has said one option is an IPO, although the executive said VimpelCom would not contemplate a long-term equity position in a towerco.
The banker said another Russian operator, T2 RTK, could follow suit.
According to the banker, a number of Russian and international financial buyers including private equity and funds with infrastructure experience could also be interested. Russian Towers last summer told TelecomFinance of its interest in domestic tower deals.
US funds such as Providence – the most active private equity fund in towers – were sure to sit out the process due both to geopolitical issues and the fact that a previous tower deal in Ukraine had not gone well.
The banker suggested that Vimpelcom was open to selling just its Russian towers, or all the regional towers in a single package.
Position on towers has changed
A competitive four-player market coupled with an expansive geography and a tough macroeconomic environment means Russia is primed for tower disposals. Operators in the country have been reticent to separate their infrastructure in the past, believing there is strategic importance in wholly owning their networks.
The economic downturn, following both the western sanctions in response to the war in Ukraine and the devaluation of the rouble, which has come during an investment cycle, has led to operators reassessing their traditional views.
The banker warned, however, that tower deals would not be quick: “It will take a while, as is the case with all tower carve-outs, because the technical aspect is lengthy.”
