Russian mobile operator Mobile TeleSystems (MTS) has been allocated frequencies to offer 3G (UMTS) services in Armenia. The Public Services Regulatory Commission of the Republic of Armenia has allocated the frequencies to K-Telecom, the 80 percent-owned subsidiary of MTS. These frequencies will allow MTS to offer high-speed mobile voice and data services throughout the territory of Armenia. The allocation is valid for a ten-year period. K-Telecom is licensed to offer 3G services by virtue of its overall licence to offer mobile services.
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Russian mobile operator Mobile TeleSystems (MTS) has agreed to buy 80 percent in International Cell Holding, which owns Armenia’s K-Telecom, for EUR 310 million. Of the total purchase amount, EUR 50 million will be paid out to the sellers in the course of three years from 2008 to 2010 provided certain agreed financial targets are met by K-Telecom. At the same time, MTS will extend a EUR 140 million technical loan to the company to refinance existing loan facilities and for further investments. K-Telecom operates under the Vivacell brand. Vivacell had 986,000 subscribers on 1 July, holding a 66 percent share of the market. The company holds a GSM licence which is valid until the end of 2019. MTS also has an option to buy the remaining 20 percent International Cell Holding until 2012.
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Mobile TeleSystems, the country’s largest mobile phone company, will spend up to 310 million euros ($430 million) to buy control of Armenian operator VivaCell, continuing expansion beyond the saturated Russian market, CEO Leonid Melamed said Friday.
Mobile TeleSystems, or MTS, bought 80 percent in the parent company of K-Telecom, which operates under the VivaCell brand. MTS paid $546 per subscriber, Melamed said in a conference call from Yerevan.
The price “implies high multiples with a market capitalization of $791 per subscriber,” Aton Capital Group said in a research note. “We believe the valuation is justified by high growth potential in Armenia,” where mobile phone penetration is 39 percent.
Russian mobile phone companies, led by MTS, had about 162 million users in Russia at the end of July, 20 million more than the country’s population, and are looking at other markets to sustain growth. MTS has more than 78 million subscribers in Russia, Ukraine, Uzbekistan, Turkmenistan and Belarus.
“This acquisition fully complies with our strategy to capture growth opportunities in the fast-growing CIS markets,” Melamed said, referring to the Commonwealth of Independent States, which includes 12 former Soviet republics. “We expect the company will show a double digit growth in the future.”
Aton estimates the deal will add from 2 percent to 3 percent to Mobile TeleSystems’ revenue and earnings before interest, taxes, depreciation and amortization next year.
Melamed said MTS would pay 50 million of the 310 million euros over the next three years if K-Telecom meets financial targets. He declined to be more specific.
K-Telecom was founded by the Fattouche family, a Lebanese investment group that retains 20 percent in the company and may sell it to MTS between 2010 and 2012, Melamed said.
K-Telecom has about a million subscribers and more than 66 percent of the mobile phone market in Armenia, a country of more than 3 million people.
Last year, the company reported sales of $104.1 million and operating income before depreciation and amortization at $57.8 million. OIBDA as a percentage of sales was 54.4 percent and the average monthly revenue per user was $15.60. It stood at $12 in the second quarter this year, Melamed said.
MTS will provide a 140 million euro technical loan to K-Telecom to pay off existing debt and help develop the company. MTS will make an announcement in the second quarter of next year if it decides to use the MTS brand instead of the VivaCell brand in Armenia.
Nikolai Pryanishnikov, executive vice president at VimpelCom, the country’s second-largest mobile phone company, told reporters Friday that his company was “calm” about the deal “because we are competitive with MTS.”
VimpelCom last year paid 341.9 million euros for Armentel, a fixed-line and mobile operator in Armenia.
“It will be even easier for us, as MTS is a traded company and is responsible for making financial results more transparent,” Pryanishnikov said.
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Mobile TeleSystems (MTS) has acquired an 80% stake in Armenian mobile communications operator K-Telecom (VivaCell) for 310 million euro, MTS said in a press release.
K-Telecom is the largest mobile operator in Armenia.
MTS purchased 80% of shares in International Cell Holding Ltd, the owner of 100% of K-Telecom shares.
MTS also acquired an option to purchase the remaining 20% of shares. The option is valid from July 2010 to 2012, with the purchase price to be determined by an independent international bank.
The purchase price for the 80% stake includes 50 million euro that will be paid out over a three-year period, 2008-2010, given that K-Telecom meets certain revenue and earnings targets.
MTS will also provide K-Telecom with a loan of 140 million euro to repay outstanding debt and finance its investment program.
“This acquisition fully complies with our strategy to capture growth opportunities in the fast growing CIS markets,” said MTS President and CEO Leonid Melamed, according to the press release. “Armenia becomes our sixth country of operations in the CIS. We are pleased to gain entry into this exciting market by partnering with the market’s leading mobile operator,” Melamed said.
K-Telecom was founded and has been operated by the Fattouche family, a prominent Lebanese investment group. K-Telecom CJSC operates under the VivaCell brand in the GSM-900/1800 standard covering the entire territory of Armenia. As of July 1, 2007, it provided services to over 986 thousand subscribers and had a 66% market share. The license is valid until the end of 2019.
In 2006, revenues of K-Telecom amounted to $104.1 million, OIBDA of $57.8 million (54.4% margin), ARPU of $15.6.
Mobile penetration in the country is around 39%. There are two GSM operators in the country: K-Telecom and Armentel, owned by Russia’s VimpelCom (RTS: VIMP).
MTS is the largest mobile operator in Russia and the CIS. AFK Systema (RTS: AFKS) owns 52.8% of MTS shares and 46.7% are in free circulation on the New York Stock Exchange, European OTC markets, RTS and MICEX. Another 0.5% are in the hands of other shareholders. jh
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Armenian mobile network operator K-Telecom, which markets services under the VivaCell banner, has announced the introduction of a new system for purchasing its ‘Alo’ pre-paid cards. From 1 July all pre-paid cards will only be given through a written contract, which includes details and the identity papers of the individual subscribers concerned. Armenia is introducing new rules on pre-paid registration amid rising concerns over national security and anti-terrorism measures. On 30 March 2007 the Public Services Regulating Commission ruled that all mobile operators in the country must sign a contract with subscribers who purchase pre-paid cards.
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MTS obtains frequencies to offer 3G services in Armenia (Armenia)
