North-Western GSM, Sonic Duo merge into Megafon project

MOSCOW—The St. Petersburg-based North-Western GSM and the Moscow-based Sonic Duo carrier, as well as six Russian regional operators merged into a new company, which would deal with the pan-Russian Megafon project of the Telecominvest holding.
The deal, which market experts dubbed as “the merger of the year,” is to be legally finalized the first quarter of 2002 and is also to include regional carriers Mobicom-Caucasus, Mobicom-Novosibirsk, Mobicom-Khabarovsk, MCC-Volga, Volzhsky GSM and Mobicom-Kirov. Talks on buying the Ural GSM carrier are to begin shortly. Thus, Megafon is to become the first pan-Russian carrier licensed to work in seven out of eight major Russian license territories with 80 percent of the population or 122 million people. So far Megafon has launched operations only in North Caucasus.
The stock of the new carrier, Megafon, will be divided between St. Petersburg-based Telecominvest holding (31.3 percent), major Sonic Duo shareholders (Finnish Sonera 26 percent and CT-Mobile 25.1 percent), as well as Swedish Telia (8.1 percent), IPO Growth Fund (6.5 percent), St. Petersburg-based West-Link (3 percent) and Contact-C (3 percent).
The Norwegian Telenor, which possessed a 12.74 percent in North-Western GSM, abandoned the merger and sold its interest to Telia and Sonera for US$44 million. “Telenor cannot sit on two chairs at a time,” the company explained, meaning that it has a blocking interest in the competing Vimpelcom (BeeLine) carrier.
Telenor Mobile Vice President Dag Vangsnes said the balance cost of the North-Western GSM stake was US$4 million, so the deal gave Telenor a more than 1000-percent profit.
Telia Senior Vice President Annika Kristiansson said more than US$600 million will be invested in the Megafon project in the next three years. Sonera VicePresident Marti Huttonen believes Megafon will occupy at least one-third of the Russian wireless communications market by 2009.