Risky business: MTS buys Kyrgyzstan’s leading cellco Bitel for USD150 million

13 Dec 2005

Russia’s largest cellco, Mobile TeleSystems (MTS), has acquired a majority stake in Kyrgyzstan’s wireless market leader Bitel in a deal valued at USD150 million. MTS, controlled by Russian services group Sistema, says it bought 51% of Bitel from Kazakhstan-owned Alliance Capital, in the process gaining an option to acquire the remainder before the end of 2006. The deal could put an end to a bitter ownership dispute between Alliance, linked to Kyrgyzstan’s former ruling family, and Alfa Group, the private equity group headed by Russian billionaire Mikhail Fridman. In a recent ruling, a court in the Kyrgyz capital Bishkek found Alliance to be the sole owner of Bitel, overturning an earlier decision in favour of Alfa. However, Alfa has vowed to continue litigation against Alliance, and MTS has conceded that there is a possibility it could lose control of its new asset. Despite this, an MTS spokesperson declared: ‘We could not have done this deal if we were not certain we could eliminate these risks…We have entered a very promising market at just the right time.’ GSM operator Bitel had around 430,000 mobile customers at the end of October 2005, representing around three quarters of the Kyrgyz market; its turnover for 2004 was estimated at between USD32 million and USD55 million.

Kyrgyzstan, Mobile TeleSystems (MTS), Sky Mobile (Beeline)