NEW YORK-Mobile TeleSystems, which has 6.7 million subscribers in Russia, plans to raise $400 million in a private placement of dollar-denominated bonds to finance business development, including possible acquisitions of mobile operators in the Russian Federation and the Commonwealth of Independent States.
MTS recently announced an agreement to purchase a 57.7-percent stake in Ukrainian Mobile Communications for $192.4 million, along with an option to acquire the remainder before Nov. 4, 2005.
Within the Russian Federation, MTS operates its GSM network in 48 regions and Belarus. The carrier and its subsidiaries are licensed to offer GSM service in 56 of Russia’s regions, in which 103.1 million, or 72 percent, of the country’s people live.
Moody’s Investors Service assigned a top-tier, speculative-grade rating of Baa3 to the planned debt offering, which will be offered through MTS’ wholly owned subsidiary, Mobile TeleSystem Finance S.A., headquartered in Luxembourg.
“The ratings . reflect the company’s strong position as a leading operator in Russia, expectation it will act as a leading consolidator in the Russian mobile market, the company’s strong historical and projected cash flow generation and its modest levels of indebtedness relative to operating cash flow,” said Eric de Bodard and Michael West, London-based corporate finance analysts for Moody’s.
However, they cautioned that MTS faces risks associated with its rapid expansion, the vagaries of the Russian economy, the uncertain depth of the Russian mobile communications market and “the lack of regulatory transparency in Russia, both in terms of license issuance and renewal and interconnection to the fixed line network.”
