MOSCOW—The biggest Russian carrier Mobile TeleSystems (MTS) officially confirmed it has reached an agreement on the purchase of a controlling stake in the fourth-biggest regional carrier Kuban GSM in the Krasnodar territory in the south of the country.
“The companies have signed preliminary documents, which reflect the terms of a possible acquisition by MTS of a controlling stake in Kuban GSM,” both carriers said in a joint press release.
Although the stake has not been specified, wireless market experts estimate it at 62 percent, while the total cost of Kuban GSM with its 390,000 subscribers is estimated at US$ 150 million.
Kuban GSM shareholders comprise Kubtelecom (54 percent), Kubanelektrosvyaz (24 percent), private individuals (20 percent) and Sochitelecom (2 percent). Kubanelektrosvyaz has already announced the decision to sell its entire interest to MTS, which is likely to also buy some equity of Kubtelecom. However, the decision on an additional stock issue is to come first.
“According to the reached agreements, MTS is planning to buy out up to 3,600 shares of the additional issue of ordinary shares of Kuban GSM… The placement price of one share is US$14,000,” the press release said, adding that the terms of the additional issue are to be determined on 15 February by an extraordinary meeting of Kuban GSM shareholders.
“The structure of the deal envisages the possibility of purchasing the stock of current Kuban GSM shareholders. The amount of such shares and the final acquisition terms will be determined by separate agreements after Kuban GSM shareholders decide on the additional stock issue in MTS’ favor,” said the press release.
However MTS warned “a considerable delay in receiving the necessary permissions or their unprofitable terms can exert a negative influence on the business, the financial state or activities of MTS and trigger the cancellation of the deal.”
The purchase of Kuban GSM is the only way for MTS to enter the Krasnodar market, where GSM licenses are owned by the pan-Russian Megafon project of St. Petersburg-based Telecominvest and Vimpelcom (BeeLine). In its turn, Kuban GSM has been looking for a partner after Megafon launched its network in the region last year.
A week before the purchase deal was announced Kuban GSM received a GSM 1800 MHz license from the Communications Ministry. Market experts immediately attributed the success to MTS lobbying possibilities.
