Alfa-group and TeliaSonera to merge telecoms assets

Alfa-group’s telecom branch, Altimo, and Scandinavian holding company, TeliaSonera, will merge their shares in Russian cellular provider, Megafon, and Turkey’s Turkcell.

Stockholm based TeliaSonera, said the aim was to create a leading international operator for subscribers in Russia, Turkey and the former Soviet states.

The move will end previous legal disputes between the two companies, over the ownership of Turkcell, with TeliaSonera trying for more than four years to force Turkish partner, Cukurova, to honor a commitment to sell 29.6 % of Turkcell.  Troika Dialog telecoms analyst, Anna Lepetukhina, believes it will simplify management. 

“I think, the companies decided to solve the existing conflicts this way and to simplify the management structure.”

TeliaSonera President and CEO Lars Nyberg expressed relief at the agreement, saying it would lead to a balance between the companies in management of their assets.

“I am very pleased that we have reached an agreement with Altimo to combine our efforts in resolving the legal disputes, which have been going on far too long. The real value of the agreement is in the execution of it. We have focused on creating a governance structure where all major parties will have good possibilities to influence without single-handedly controlling the management of the new telecommunications group.”

Altimo CEO Alexey Reznikovich called the benefits of the agreement “evident” with the new company to have significant growth prospects.

“We aim at creating a leading and one of the most dynamic players in the emerging markets with huge potential for further expansion. The new operator will possess broader possibilities for business development and expansion into other emerging markets bringing high quality services for subscribers and more value for all shareholders.”

Senior telecoms analyst at Otkrytie, Tibor Bokor, believes a key driver of the agreement is the need to not just reduce conflict but increase dividends.

“The companies are generating huge cash flows and there were several conflicts about how much of this should be paid in dividends. In the times of crisis, they all need as much dividend as possible, and this is how they were able to come to an agreement. They are creating a new company in which all the share holder agreements will be much clearer. Less conflict between shareholders, and more dividends. This is the main idea.”

The board will be headed by an independent chairman and include independent members with the right to settle disputes. Bokor said the deal was particularly positive for MegaFon.

“Consolidation of the market is positive. For example, in the Ukraine the market was almost destroyed by too much competition, too many players. Fewer players means more money.”

The combined subscriber base Turkcell and MegaFon is estimated at about 90 million, with the companies planning to list part of the merged entity in New York. Trokia Dialog’s Anna Lepetukhina said the deal will open Megafon to international investors.

“I’d say, the deal is more beneficiary for public companies, as the new joint holding has announced its intention to list its shares on the NYSE. So, as soon as the company starts trading at the international floor, other companies will be able to get a stake in Megafon and the holding will become open to foreign markets. Before that it was impossible to get a stake in the Russian telecom giant, as Megafon was privately owned.”

The companies also agreed on further expansion into countries where they already have a presence. Alisher Usamonov’s AF Telecom, which owns 31 percent of MegaFon, has also been invited to join in.

The legally binding agreement is subject to regulatory approvals being obtained and is very similar to the deal that the Alfa-group and Norway’s Telenor reached when merging their stakes in Russia’s VimpelCom and Ukriane’s Kyivstar.