Russia's Megafon to buy 4G provider Scartel for $1.2 billion

Thu Aug 8, 2013 4:04am EDT
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By Maria Kiselyova

MOSCOW (Reuters) - Megafon (MFON.MM: Quote) (MFONq.L: Quote), Russia's second-biggest mobile phone operator, is to buy next-generation service provider Scartel for $1.2 billion to extend its lead in the race to provide high-speed internet.

The deal unites assets belonging to Russia's richest man Alisher Usmanov, and boosts Megafon's position against rivals MTS (MBT.N: Quote) and Vimpelcom VIP.N in a fast-growing segment of the telecoms market.

Scartel, which operates under the name Yota, provides wireless services using the extra fast Long Term Evolution (LTE) technology expected by analysts to become the industry standard worldwide.

Megafon leapt ahead in the race to sell LTE, or so-called fourth-generation (4G), services last year by providing services in Moscow in May 2012 using Scartel's infrastructure, two months before it and three rivals were awarded their own 4G licenses.

"We believe in the mass popularity of this product in the future and we are clearly betting on it, including with this deal," said Megafon CEO Ivan Tavrin. "This is why we will do everything to be a leader in this sector."

Megafon's shares rose 4.9 percent in early London trade.

Megafon is buying Scartel from Garsdale, the telecoms holding company of Usmanov, who is also a controlling shareholder in Megafon with more than 50 percent.

Usmanov owns an 82 percent stake in Garsdale while the remainder is owned by Telconet Capital and state-backed Rostec.   Continued...

Customers and staff are seen through the partially cleaned window of a Megafon shop in Moscow November 28, 2012. REUTERS/Sergei Karpukhin