September 24, 2013 / 1:20 PM / 5 years ago

Russia's Megafon in talks to start bank

MOSCOW (Reuters) - Megafon, Russia’s second-largest mobile phone company, may start up a bank to capitalize on growing interest among consumers in managing their finances on-the-go and to cross-sell services to existing customers.

Ivan Tavrin, CEO of Russian mobile operator Megafon, poses for a photograph at the Reuters Investment Summit in Moscow September 23, 2013. REUTERS/Grigory Dukor

Russian mobile operators, trying to boost profits in a maturing market, have been searching for avenues to earn more from their subscriber base.

Megafon would be following Russia’s top mobile phone operator MTS, which this year bought a stake in a bank from its parent company Sistema.

“We are discussing - we don’t have a decision - creating a Megafon bank,” CEO Ivan Tavrin told the Reuters Russia Investment Summit. “We are very (focused) on value-added services. There are many (new) things we can do inside our industry.”

Tavrin said Megafon would prefer to buy a small bank rather than acquire a banking license, which would likely take more time, and said the firm was already talking to some small lenders. He said he would consider buying a bank which does not have large operations or a branch network.

He is planning to discuss the strategy with Megafon’s board later this year.

“The quality of credit (of our customers) and services we would give is an absolute priority for us,” Tavrin said. “We would not look to get the lion’s share of the (consumer credit) market. For us, the quality will be much more important than the quantity.”

MTS, the first Russian telecoms operator to move into banking, expects financial services to account for up to 5 percent of its total net profit by 2017.


Megafon already has an indirect exposure to financial services through a $1 billion deal last year to buy a 50 percent stake in handset retailer Euroset, which offers online payment services in its stores.

However, Megafon could ultimately sell a part of its stake in Euroset, Tavrin said, when asked whether the retailer could at some point go public.

There has been speculation in the Russian press that MTS is interested in buying a stake in Euroset, which Megafon owns equally with Russia’s No.3 mobile operator Vimpelcom. MTS said it was not considering such a move.

Megafon is also trying to drive growth by increasing the number of smartphones which people buy and have linked to its network. It does not currently sell Apple Inc’s iPhones in its stores and Tavrin would not comment on whether that policy would change.

“(Regarding) iPhones - the most important thing for us is not whether we sell them but whether we have the right penetration of iPhones on our networks, because iPhone users ... consume more data,” said Tavrin.

Fashionable iPhones are out of financial reach of most Russians, who earn an average of 29,020 roubles ($910) a month.

“(Smartphones) are becoming more affordable. (There are models that we sell) for $60 but I can’t say that (any time soon) the Russian population will be using a $1,000 phone,” said Tavrin, who sports an iPhone himself, though not the latest model.

Megafon and its rivals are rolling out the 4G network which allows the downloading of big amounts of data at a much higher speed than previous standards.

($1 = 31.7992 Russian roubles)

Additional reporting by Anastasia Teterevleva; Editing by David Holmes

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