Kyrgyzstan’s largest cellco changes hands amidst political and legal wrangling

14 Apr 2005

Kazakhstan-based bank Alliance Capital announced yesterday that it has bought Bitel, the largest wireless operator in Kyrgyzstan. Alliance acquired the three offshore owners of Bitel, Isle of Man-registered Kyrgyzstan Mobitel, Flaxendale and George Resources, for an estimated USD70 million. The Kazakh buyer acted in partnership with its affiliated company Seimar, which previously co-owned Kazakh mobile operator Kar-Tel, but sold out to Russia’s Vimpelcom last year.

Alliance declined to name any of the individual owners of Bitel’s three holding companies and released only very scant details of the purchase, but rumours are circulating that the family of former Kyrgyz president Askar Akaev is involved. Alliance denies that it had any contact with Akaev or his relatives while negotiating the deal. The president was ousted in the 24 March revolt against the government of Kyrgyzstan, when Bitel’s headquarters were attacked and looted by protesters who alleged that Akaev’s family were profiteering from the country’s most profitable businesses. Since then prosecutors have been investigating Bitel with the aim of unravelling its true ownership. Bitel countered corruption allegations by claiming that the investigation masked an attempt by the incoming government to take over the cellco for its own interests.

To add to the confusion, Bitel’s assets have been frozen since 30 March under a court order resulting from a dispute with Russia’s Alfa Group, which claims that Bitel’s owners failed to execute an option for Alfa to purchase it. The 100%-buyout option was apparently bought from a subsidiary of Bermuda-registered offshore company IPOC in 2003 by Kazakh firm Fellowes, which, in turn, was bought out by Alfa Telecom last year. A spokesperson for Fellowes claims that Alfa will challenge yesterday’s Bitel deal in several courts, including the Isle of Man. However, buyers Alliance and Seimar appear unworried, with Seimar head Erlan Seisembaev stating that any court action ‘has no future…we have purchased Bitel’s holders, not Bitel itself’.

Bitel’s new indirect owners are planning to invest up to USD50 million in expanding Bitel’s infrastructure, according to Alliance head Kurmangaza Iklazbekov. The finance house estimated the cellco’s 2004 turnover at USD32 million, although other analysts put the figure at closer to USD55 million. Bitel is Kyrgyzstan’s only GSM mobile operator, with an estimated subscriber base of between 300,000 and 330,000 at the end of February 2005, up from 180,000 in June 2004. The country is home to two other cellcos: TDMA network operator Katel and Aktel, which launched a CDMA2000-based network in 2003.

Kyrgyzstan, Sky Mobile (Beeline)
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