MegaFon enters Uzbekistan with Ucell investment

12 Feb 2021

Russian mobile operator MegaFon and its parent company USM Telecom have agreed to buy a majority stake in Uzbekistan’s mobile market leader Ucell. Announced on Ucell’s website, the deal involves the Uzbek government’s Agency for State Assets Management (ASAM) transferring 100% of the authorised capital of Coscom (trading as Ucell) into a new joint venture named Digital Holding – also comprising USM’s existing Uzbek assets CRPT Turon and ICS Holding Uzbekistan – owned by Digital Invest (51%, itself owned equally by MegaFon and USM Telecom) and ASAM (49%). MegaFon/USM Telecom will contribute USD100 million investment into Digital Holding. The transaction is set to be completed later this year, although an exact timeframe was not given.

Digital Holding will focus on developing telecoms infrastructure to improve communications access and quality of services in Uzbekistan, alongside the introduction of advanced digital technologies and systems in areas such as information security and data storage. Ivan Streshinsky, CEO of USM Telecom, commented: ‘The creation of a leading player in the digital services market in Uzbekistan is in line with both MegaFon’s and USM Telecom’s strategy, which is to build a technology leader in the CIS and Eastern Europe. We are confident that the long-term expertise in implementing digital projects, which MegaFon, CRPT and ICS Holding have, will help develop the largest market player in Uzbekistan.’

Gevork Vermishyan, CEO of MegaFon, said: ‘In terms of consumption of digital services, Uzbekistan is one of the most promising markets in the CIS, having shown a more than threefold increase in mobile subscribers over the past ten years, yet still remaining far from saturation. We are not planning major structural changes within Ucell in 2021; we will rather focus on finding synergies and implementing best practices in Ucell to grow its business.’

Ucell, with around eight million mobile subscribers, currently leads the Uzbek cellular sector ahead of close rival Beeline (owned by Netherlands-based, Russian-backed VEON). Third-placed mobile player Uzbektelecom (including Uzmobile) is state-owned, as is fourth-ranked Mobiuz, while a fifth network operator, CDMA-based Perfectum, is a public-private sector joint venture. TeleGeography notes that state-held stakes in Mobiuz and Perfectum are next in line for privatisation under a government asset reform programme.

MegaFon operates networks in Russia, Tajikistan and the breakaway republics of Abkhazia and South Ossetia. Its parent USM Telecom is the digital division of the USM holding company (controlled by Russian metals and tech tycoon Alisher Usmanov), owning 100% of MegaFon and the ICS Holding IT group. The shareholders of USM Telecom are USM (80%), Ivan Streshinsky (10%) and Anton Cherepennikov (10%).

Regarding Ucell’s new partner companies, ICS Holding is a Russian diversified IT group focused on digital transformation of large enterprises, information security, data storage systems, cryptography, quantum computing, machine learning, neural networks, blockchain tech and AI. CRPT (Centre for Research in Perspective Technologies) – a joint venture of USM (50%), Rostec (25%) and Elvis-Plus Group (25%) – implements large-scale digital economy projects including a track-and-trace system for goods in Russia; CRPT Turon is a public-private partnership which has implemented a system of digital product labelling in Uzbekistan.

Uzbekistan, MegaFon, Perfectum, Ucell (Coscom), UMS (Mobiuz)