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Svyazinvest unit to buy telecom holding Akado

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Russian wireless carrier Centertelecom, a subsidiary of telecom holding company Svyazinvest, is expected to close the buy of broadband and cable TV operator Akado, Russian daily Kommersant reported today citing informed sources.
Akado had 670,000 broadband and 446,000 pay-TV subscribers, the vast majority of which (600,000 and 423,000 respectively) were in the capital itself, as of Q1 this year. Its analogue (‘social TV’) subscriber base meanwhile stood at 985,000. According to the sources, the company was priced at USD 630-650 mn, net of a USD 350 mn debt, and is presently undergoing due diligence.
Akado is priced at 9.8-10 on 2010 EV/EBITDA, which we regard as quite a hefty valuation. However, Svyazinvest has an excellent reason to pay through the nose: by purchasing Akado, the state holding should get access to the Moscow market and take control of 5% of the total Russian broadband subscriber base and 7% of the cable TV market.
The transaction has a dual phase scheme and allows for an option. At the first phase, Svyazinvest is to acquire up to 50% of Akado shares in exchange for cash, shares of Center Telecom subsidiaries and, what is less likely, Rostelecom shares. In the second phase, the remaining portion of Akado equities could be acquired by united Rostelecom.
Svyazinvest and Akado's owners, Russian business group Renova Group and Yury Pripachkin, have recently inked a memorandum of intentions and now a due diligence is being carried out, the daily wrote. Centertelecom may pay for Akado in both cash and shares.
The report continues that Centertelecom plans to finish the buy in two stages by taking first up to 50% of the company. The rest of the shares is expected to be acquired within the next two years by Svyazinvest's subsidiary Rostelecom after its restructuring.
A spokesman of Svyazinvest told Kommersant that the company would not comment unfinished deals.

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