With competition intensifying in Russia's mobile sector, MegaFon, the country's second biggest mobile operator, has acted swiftly to pick a stake in cellphone retailer Euroset which operates 5,500 stores across Russia and Belarus.
MegaFon, controlled by Russia's richest man Alisher Usmanov, gained 50 percent control of Euroset in a $1.07 billion through Lefbord investments, which is owned equally by MegaFon and Usmanov's Garsdale Services Investment.
Lefbord bought the stake from Russian tycoon Alexander Mamut, who was looking to exit from Euroset for nearly a year. Mamut bought Euroset in September 2008 from the company's founder Yevgeny Chichvarkin.
Under the deal, MegaFon will pay an additional $100 million if Euroset achieves certain targets. The mobile operator, which already operates 1,750 own stores and 2,000 franchisee outlets, will also reportedly buy Garsdale's stake in Lefbord after a year for $535 million plus 8 percent interest per year, and gain complete control over the 50 percent stake in Euroset.
MegaFon believes the Euroset deal will help stabilize the prices in the mobile market and allow the operators to go to subscribers with new offerings and raise the average spends.
"For MegaFon, the acquisition of shares in Euroset is an investment in a strong and successful company," MegaFon's chief executive Ivan Tavrin, said. "As an investor we will support the growth of Euroset's business and its further development, through effective implementation of a competitive strategy."
"This deal definitely is the most important for telecommunication market," Alexandr Malis, President of Euroset, said in a release. "It involved hard work and energy. As a result, the market now approaches to highest standards, it changed the face and the purposes."
Meanwhile, Russia's No. 3 mobile operator VimpelCom has upped its stake in Euroset by 0.10 percent to take its overall stake in company to 50 percent. As a result, MegaFon and VimpelCom will enjoy joint control over Euroset. The combined forces will pose serious competition to Russia's biggest mobile operator MTS.
"Euroset is a strategic partner for VimpelCom and a major distribution and customer service channel," Anton Kudryashov, Chief Executive Officer, OJSC VimpelCom, said in a company release. "This transaction is the next step in the process of building a more efficient and sustainable operational model between VimpelCom and the largest telecom retailer in Russia, which will help us to provide better service to our customers."
These developments suggest a new round of intense competition in Russia's mobile space.
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