ON MAY 02 MTS MADE A BID FOR ACQUISITION 90% SHARES OF ARMENIA’S OPERATOR ARMENTEL
Agency WPS
TELECOMMUNICATION SERVICES MARKET (Russia)
June 15, 2006 Thursday
The deal with the Greek holding company OTE at $350-450 million could
make MTS an Armenia’s key cellular operator and operators of AFK
Systema – the monopolists at Armenia’s market of wire communications
Reference: Valery Kodachigov "Systema is ready to become a monopolist
in Armenia," the Kommersant, June 05, 2006, p. 16; Yulia Belous,
Igor Tsukanov "Systema has changed its mind," the Vedomosti, June 05,
2006, p. B8
"We have actually made a bid for 90% shares of the company, it
corresponds to the strategy of our development," said a spokesman
at Mobilnie Telesystemi Mr. Alyavdin. It is known that the Greek
operator OTE acts as a seller of 90% of Armentel shares. According
to the analysts at Aton, MTS may pay $350-450 million for Armentel.
In the experts’ opinion, buying Armentel MTS will do a profitable
purchase not only for itself but for the operators of fixed
communication which are part of AFK Systema and united in the company
Comstar-Obiedinennie Telesystemi. If the deal is completed, Comstar
will become a monopolist at Armenia’s local market and besides, will
get a solvent base of users of international communications. "The
volume of international traffic to and from Armenia is great. Three
quarters of Armenians live outside Armenia, so demand for services
of international communications is great there," said a partner with
the company ACM-Consulting Mr. Alexeev. As for Armentel cellular
business, MTS is making a profitable acquisition. "Penetration of
cellular business in Armenia is four times lower than in Russia,
so potential of the market is very high," he added.
Despite this fact, other key Russia’s operators are cautious about
Armenia’s telecoms assets. MegaFon announced that the company is
not interested in Armentel, "Purchase of Armentel is not the only
way of entering into Armenia’s market." Altimo holding company
(manages Alfa-Group’s telecoms assets) denied comments on the plans
concerning Armentel. However, in 2005 representatives of Altimo were
negotiating with OTE about Armentel. However, the deal never took
place – according to the sources close to Altimo, the parties did not
agree upon the value of the asset. The experts say that suspicious
attitude to Armentel is explained by the fact that any Russian buyer
will inevitably face with the same problems as OTE faced with.
Armentel’s unstable state at the market is one of the problems. Its
primary shareholder VivaCell (sells services under brand K-Telecom)
appeared at the market in July, 2005 but already serves 350 000
subscribers and, according to Armenia’s experts, will leave Armentel
greatly behind by the end of the current year.
Besides, Armenian market of fixed communication is regulated by the
state strictly. "OTE insisted on increasing tariffs and introduction
of per minute payment. However, the parliament of Armenia does not
want to compromise," said director of the department for corporate
finances at Deutsche UFG Mr. Inshutin. "This was one of the reasons
of friction between OTE and Armenia’s power."
In conclusion, Russian telecoms workers emphasize that Armentel is
de facto deprived of monopoly at a long-distance communications market.
"Experience shows that black market of long-distance and international
communications is flourishing and expanding in Armenia.
We watch that 25-30% of telephone traffic from Armenia is generated
not by Armentel but by unknown IP-operators without licenses and
permission," said senior vice president at Corbina Telecom Mr. Malis.
"This anarchy may reduce Armetel’s investment appeal," he added.