Lukashenko to receive $1bln from Russian operators?

Telecom Business

The Byelorussian BeST and MDC (Velcom trademark) might soon work under Russian companies. The country's president, Alexander Lukashenko said $500mln was offered for BeST, the same amount could be offered for Velcom. Only one company out of the "big three", VimpleCom, proved interest in the operators of the republic. Analysts say the price mentioned is obviously overestimated.

Byelorussian President Alexander Lukashenko told the reporters they are now considering the offer to sell the country's youngest GSM operator, Byelorussian Telecommunications Network ( BeST) and the state belonging share of the Mobile Digital Communication (Velcom trademark). "We received an offer to sell one third of the BeST operator for $500mln", said Mr. Lukashenko, adding that no decision has been taken on the matter so far. "That's a good sum and the offer is quite profitable", he said.

Besides, according to Mr. Lukashenko interest has been proved in the Mobile Digital Communications company's share, which could be sold at $300-$400mln, and even $500mln. BeST is the youngest Byelorussian operator. In 2004 the Byelorussian government announced a tender on creating the third GSM network in the republic but suddenly changed its mind and founded a state company. According to iKS-Consulting the company now has some 130 thousand customers (2% of the country's customer base), most of them joined the operator in the recent few years.

Velcom now has 2,7mln customers (43% of all mobile users in the republic), which is 600 thousand less than MTS's daughter company has, the market leader. 51% of the opeartor's shares belong to the state, the remaining part is controlled by the Cyprian SB Telecom.

"The price of $500mln announced by Mr. Lukashenko for the controlling share of Velcom is quite realistic", said Maxim Savvatin, iKS_consulting analyst. "The operator is a market leader, it owns a rather developed network and a stable customer base. That is why it is so attractive for Russian companies". Meanwhile Mr. Savvatin believes the price for the BeST operator is obviously overestimated. "BeST is not a serious competitor to Velcom and MTS", he said. "His appearance on the market was late, and it's time has passed. He will definitely stay on the market and considering the low penetration level of cellular communications in Byelorussia (over 60%) and in terms of solid investments it might expect 15% market share". He said the highest price for BeST is $100mln.

The "big three" reacted mildly to Mr. Lukashenko's statement. So far the only company interested in acquiring Byelorussian assets is VimpelCom. Alexander Izosimov has already announced the company's strategy on business development in CIS. "It would be interesting for us to enter the market. Byelorussia would well complement to our CIS presence", said VimpelCom PR Manager Yekaterina Osadchaya. "We haven't held talks with the Byelorussian side so far. We will first consider how profitable the deal might be for us".

MTS didn't prove interest in Byelorussian companies. Experts say the company already has good positions on the Byelorussian market. MegaFon didn't comment much on the matter. "Such decisions are taken by the company's shareholders", said Marina Belasheva, the company's spokeswoman. She reminded the company proved interest in the tender on the creation of GSM-network in Byelorussia, but didn't apply in the end.

The "big three" comprises VimpelCom, MegaFon, and MTS.

VimpelCom Group includes cellular companies operating in Russia, Kazakhstan, Ukraine, Uzbekistan and Tajikistan, and recently acquired companies in Georgia and Armenia. The Company operates under the 'Beeline' brand. The VimpelCom Group's license portfolio covers approximately 240 million people. Geographically it covers 78 regions of Russia with 136.5 million people, representing 94% of Russia's population as well as the entire territories of Kazakhstan, Ukraine, Uzbekistan, Tajikistan, Georgia and Armenia. The company's net income and revenue for Q3 2006 was $268,4mln and $1,358mln respectively.

MTS (Mobile TeleSystems) is the largest mobile phone operator in Russia and the CIS. Together with its subsidiaries, the Company services over 72.86 million subscribers. The regions of Russia, Belarus, Turkmenistan, Ukraine, and Uzbekistan, in which MTS and its associates and subsidiaries are licensed to provide GSM services, have a total population of more than 230 million. MTS completed its IPO and listed its Level III ADRs on the New York Stock Exchange in July 2000, under the symbol MBT. The Company's shares have been listed locally on MICEX since November 2003, under the symbol MTSI. The Company's GDRs are also traded in Europe. The free float of the Company's shares is approximately 46.7%. MTS is 52.8% majority-owned by Sistema, the largest private sector consumer services company in Russia and the CIS. The company's revenue for the third quarter of 2006 was $1,797mln.

MegaFon is the first all-Russian mobile operator in GSM 900/1800 standard. The company was founded in May 2002 as a result of renaming and reorganization of Open Joint Stock Company and integration under one brand with CJSC (Moscow), CJSC , CJSC , CJSC , CJSC , CJSC , OJSC , CJSC and CJSC . The company's total revenues in 2005 and 2006 were $1,7mln and $2,6mln respectively.