MTS permitted to scoop up MGTS stake

30 Aug 2011

According to Rustele.com, Russia’s Federal Antimonopoly Service (FAS) has approved Mobile TeleSystems’ (MTS) acquisition of Sistema-Inventure, which will allow it take majority control of wireline provider Moscow City Telephone Network (MGTS). Sistema-Inventure, a subsidiary of Russian conglomerate Sistema, currently owns 29.04% of MGTS common shares, equivalent to 24.2% of its total share capital. Sistema acquired the MGTS stake as part of a 2010 asset swap with state-owned telecoms holding company Svyazinvest. MTS currently holds a 70.65% stake in Comstar-UTS, which in turn holds a 70.65% stake in MGTS, meaning that MTS’ enlarged stake in MGTS now exceeds 90%. Based on earlier comments by former MTS chief and current Sistema CEO Mikhail Shamolin, the price will be set at RUB436.2 (USD15.1) per common share, equivalent to RUB10.1 billion for the full stake.

In the past Comstar has operated via a multitude of regional subsidiaries and brand names, the largest of which is MGTS. However, the dispersed nature of the company’s structure has, at times, hindered its development and fractured the deployment of new technologies. In August 2009 Sistema approved MTS’s takeover of sister subsidiary Comstar-UTS, a Moscow-based fixed line carrier. MTS agreed to pay RUB39.15 billion for a controlling 50.9% stake in Comstar, with Sistema CEO Leonid Melamed explaining that the deal would allow the conglomerate to strengthen its leadership position within the Russian telecoms sector and realise the synergies in both companies. The parties involved received approval for the deal from Russia’s anti-monopoly authority in June 2009, and the transaction was completed that October, after MTS obtained the required funding. Sistema is the largest diversified corporation in Russia and the CIS, with operations across telecoms, IT, aerospace, banking, real estate, media, tourism and healthcare, which together count over 100 million customers worldwide.