MegaFon poised to snap up Moscow ISP NetByNet for USD360 million

1 Jun 2011

According to Vedomosti, Russian mobile operator MegaFon is close to finalising the acquisition of NetByNet, the fourth largest internet service provider (ISP) in Moscow, in a transaction valued at around USD360 million. Citing insiders on both sides of the negotiations, Vedomosti reports that the ISP is valued at approximately nine times its estimated EBITDA for 2011. As previously reported by TeleGeography’s CommsUpdate, MegaFon and domestic cableco MultiRegion were both granted permission by Russia’s Federal Antimonopoly Service (FAS) to acquire NetByNet in late-March. If the deal goes through as planned it will signal MegaFon’s long-coveted entrance into the lucrative Moscow broadband market.

Founded in 2006, NetByNet provides broadband internet access and some 90 television channels across its cable network, and currently counts around 450,000 subscribers (including 6,000 corporate customers), of which around 85% are situated in Moscow and the surrounding region. Its largest competitor in that region’s broadband segment is Comstar United TeleSystems (Comstar-UTS), which is believed to have a 30% market share in the city. According to Vedomosti, NetByNet posted revenues of USD52 million in 2010, with EBITDA reported at USD25 million.

According to local sources, NetByNet is currently owned by Fairlie Holding & Finance Limited, whose main shareholder is the enigmatic Gregory Bernstein, with a 34% stake. Other shareholders include Gazprombank (31%), Aton Capital Private Equity Group (16%) and Ivan Tavrin (16%). The remainder of the company’s shares are held by NetByNet’s management. The company was put up for sale in October 2010, with national fixed line operator Rostelecom initially expressing an interest in acquiring the ISP.

Russia, MegaFon, NetByNet (owned by MegaFon)