Russian mobile operator MegaFon has confirmed that it has acquired 100% of Moscow-based internet service provider (ISP) NetByNet for USD270 million. NetByNet is believed to be the fourth largest broadband provider in Moscow, and also has a presence in Belgorod, Voronezh, Kursk, Lipetsk and Orlov. The deal effectively green-lights MegaFon’s long-coveted entrance into the lucrative Moscow broadband market. MegaFon has noted that the deal has been structured so that the actual payment is dependent on NetByNet’s 2011 revenues; the ISP is expected to generate USD92 million in sales during 2011, growing its subscriber base from 450,000 to 680,000 by year-end. According to Vedomosti, NetByNet posted revenues of USD52 million in 2010, with EBITDA reported at USD25 million.
Sergei Soldatenkov, general director of MegaFon, commented: ‘The deal to purchase NetByNet is an important step in our strategy of creating a universal service provider. In 2010, with the acquisition of Synterra, we launched inter-carrier and corporate fixed line services, and [the acquisition of] NetByNet [represents] a strategically important market for fixed broadband access to individuals, significantly expanding the range of services for our customers’.
According to local sources, NetByNet was 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 were held by NetByNet’s management. The company was originally put up for sale in October 2010, with national fixed line operator Rostelecom initially expressing an interest in acquiring the ISP. 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.