MTS acquires VivaCell for USD400m

18 Sep 2007

Russia’s leading mobile operator by subscribers, Mobile TeleSystems (MTS), has purchased Armenian counterpart Karabakh Telecom (K-Telecom), which markets services under the VivaCell banner, continuing its expansion into the fast-growing CIS market. It is understood that MTS paid in excess of USD400 million for the cellco, which is considered a fair market valuation given the growth potential in the Armenian mobile sector. As at 31 March 2007 Armenia was home to around 1.08 million mobile users, of which approximately 60% were signed up to VivaCell with rival ArmenTel, itself now backed by another Russian firm (Vimpelcom), controlling the remainder. TeleGeography’s GlobalComms database writes that VivaCell entered the market on 1 July 2005 when it launched commercial GSM-900/1800 services. Lebanese-owned K-Telecom was licensed by the Armenian government on 4 November 2004, with the state issuing no official explanation as to why it awarded the USD7 million wireless concession without a competitive tender.

In July this year, K-Telecom’s Lebanese parent company, the Fattouch Investment Group, said it had no intention of exiting the Armenian telecoms market, scotching an earlier press rumour suggesting that MTS had offered to purchase the VivaCell network. In a meeting held to celebrate the second anniversary of VivaCell’s launch, Pierre Fattouch said the Lebanese group had already invested about USD340 million in its Armenian wireless network and had plans to further expand its operations in the country. Fattouch also revealed that VivaCell has broken the one-million barrier for mobile subscribers at that date, giving it a commanding 70% share of the local wireless market. ‘The one million is just the beginning and we are actively expanding our network to a capacity of 1.5 million subscribers as well as preparing the launch of third-generation services,’ he said.