MOSCOW (Reuters) - Foreign investors venturing into Russia can - and have - made a lot of money, but doing business with the state tends to work out best for the Kremlin capitalists in the end.
So it went with Nordic telecoms group Tele2 (TEL2b.ST), which found its options in Russia narrowed to the point where Chief Executive Mats Granryd and, apparently, its shareholders were grateful to accept the lowest of three offers to sell out.
Denied a fourth-generation license, and with a trade sale hampered for now by a shake-up at state-controlled suitor Rostelecom (RTKM.MM), VTB bank's (VTBR.MM) $3.55 billion offer for Tele2's Russian unit at least ensured a clean exit.
Russia has a history of using its state banks as warehouses for strategic transactions, exploiting its home advantage to secure a favorable price before turning a riskless profit by flipping an asset to a strategic buyer.
One source close to the buyer said, however, that anyone expecting a quick resale by VTB could be "in for a surprise".
VTB's privileged status ensured rapid cartel office approval for its purchase, while positioning it to make a good deal even better by pursuing the very strategic options that were denied to Tele2.
Tycoon Mikhail Fridman was linked to two higher bids, one via his A1 investment group for up to $4 billion, and, as a shareholder in Russian mobile rival Vimpelcom VIP.N, through its joint bid of up to $4.25 billion with MTS MBT.N.
Tele2 and VTB say those offers were not as favorable as they seemed because they entailed unknown execution risks. And, Tele2 has disclosed, it would get half the upside on any resale within 12 months.
"There is the certainty, the speed, and there is the time value of money," said the source close to VTB, who requested anonymity.
Despite the protestations of A1 and MTS-Vimpelcom, no minority owner of Tele2 stock has come forward to denounce the VTB transaction - comprising an equity value of $2.4 billion plus $1.15 billion in assumed debt - as destroying value for shareholders.
"This is Russia; I don't think that Tele2 had much choice," said one Nordic portfolio manager whose fund owns Tele2 shares.
Throughout Vladimir Putin's 13-year-old rule as either president or prime minister, the Kremlin has slaked its thirst for industrial control primarily with oil and gas assets, culminating in the record-breaking $55 billion takeover by state oil major Rosneft (ROSN.MM) of No.3 oil firm TNK-BP last month.
But since Putin put his signature in 2008 to a foreign investment law defining telecoms as strategic, the state has been poised to muscle in to a sector that had been the preserve of private-sector players.
Rostelecom, the former fixed-line monopoly, emerged as a designated acquirer by winning a 4G license last summer together with the 'Big Three' players - MTS, MegaFon (MFON.MM) and Vimpelcom. Tele2, despite having a 10 percent market share and nearly 23 million customers, missed out.
Tele2 was hit again in September with the postponement of a ruling on a regulatory change it had sought - known as "technology neutrality" - to allow operators to recycle old frequencies to offer faster Internet access to smartphone users.
However, ructions at Rostelecom that eventually led to the departure of CEO Alexander Provotorov indicated that matters of control still needed to be resolved.
Those tensions were symptomatic of factional rivalries in the Russian elite that followed Putin's return for a third Kremlin term last spring and job swap with Dmitry Medvedev, now serving as prime minister.
The Putin loyalists eventually prevailed, with construction tycoon Arkady Rotenberg, his old judo partner, last month buying a 10.7 percent stake in Rostelecom from Provotorov's partner in a deal quickly followed by the CEO's departure.
Rostelecom is now run by a protege of Yuri Kovalchuk, a St Petersburg banker whose association with Putin dates back to the early 1990s. Kovalchuk also shares extensive media interests with Kinnevik (KINVb.ST), the Swedish investment group headed by Cristina Stenbeck that is Tele2's largest shareholder.
With state telecoms holding company Svyazinvest to be folded into Rostelecom later this year, the Kremlin may not be ready for the sale of Tele2 to a state buyer to happen just yet.
"We would like to keep Tele2 as a whole business. It's a great company," Yuri Soloviev, first deputy president and chairman of the management board of VTB, said when the deal was first announced last week.
"The future of the company demands a certain strategic development ... and (Tele2) wanted to find someone who could take it to the next stage."
That leaves VTB time to resolve Tele2's license issues - by lobbying again for technology neutrality, buying frequencies or combining frequencies with one of the Big Three or Rostelecom - before it considers a sale or break-up.
Analysts and bankers in Moscow agree that Rostelecom, now the fifth-biggest mobile player behind Tele2, would be the obvious ultimate buyer.
Delaying a sale for more a year would ensure that VTB takes all the upside from a sale, while giving Rostelecom time to complete its merger with Svyazinvest and bolster its financial strength.
Russia's military-industrial complex could yet get a look-in, the source close to VTB said, naming the little-known Osnova Telecom as another possible buyer of Tele2 Russia.
Osnova is majority-owned by Icominvest, which itself belongs to Vitaly Yusufov, son of former Energy Minister Igor Yusufov. The remaining 25 percent in Osnova is owned by the Defence Ministry through state company Voentelekom.
Osnova was created in 2010 and promptly awarded a 4G license without an auction. After Defence Minister Anatoly Serdyukov was sacked by Putin over a corruption scandal last November, his successor Sergei Shoigu offered to return the license.
The Communications Ministry found no reason to withdraw the license, however, signaling that Osnova remains in favor.
Osnova and Rostelecom declined to comment.
Writing by Douglas Busvine; Additional reporting by Megan Davies and Simon Johnson; Editing by Will Waterman