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Yota: isn’t worth one billion dollars


MTS considered Scartel's (brand name Yota) appraised value of $ 1 billion as being too high. And this number is not the only reason for which the purchase agreement of "Scartel Ltd" by “Big Four” operators is still stuck.

One billion dollars for 100% of Scartel Ltd stock is an "irrelevant figure," even taking into account that it is supposed to be divided between the four Russian biggest cellular communications operators, said on Friday MTS president Andrew Dubovskov (quoted by "Interfax").

O ne billion dollars equals 80 of last year's EBITDA figures of Scartel Ltd. But to value a company on last year's figures isn’t correct, because the agreement defines the purchase of a new business with a new set of frequencies, an analyst of Uralsib Konstantin Belov points out. The draft decision of SCRF also had plans to grant to Scartel two bands in the 2.5-2.7 GHz range, 30 MHz each with the right to build LTE networks instead of current 70-MHz spread in range and not intended for LTE.

In March, the "Big Four" -- MTS, VimpelCom, MegaFon, Rostelecom and stockholders of Scartel Ltd signed a memorandum of understanding providing the sharing of company’s network and frequency in order to provide mobile communication services of the fourth generation (4G) in LTE standard. In addition, participants of the "Big Four" were given the right to acquire a 20% share of Scartel’s stock in 2014. Also they decided to sign the binding agreement by June 1, 2011, but never did.

All operators were waiting for the regulator to define the terms of building LTE networks, says an informed source at one of the “Big Four” companies. Alliance with Scartel, which had a wide frequency band for LTE in a suitable range of 2.5-2.7 GHz, was conceived as a means to accelerate the launch of 4G networks in Russia, but in addition, each of the participants expected to receive frequencies for themselves. The mechanism of its distribution by the State Commission for Radio Frequencies (SCRF) has been approved on September 8: up to December 1, 2011 four tenders must be declared on the frequency band of 791-862 MHz, the winners of which will have to spend money on their clearance, but will also gain access to the bands in the ranges of 698-880 MHz and 2.5-2.7 GHz.

Repurchase price of Scartel Ltd has not even been discussed by the “Big Four”, adds the source. Appraiser will be hired which will determine the market price within a specified corridor, said earlier to the Vedomosti the chairman of “LTE Union” (association of operators of "Big Four" preparing proposals for SCRF) Oleg Malis. $1 billion - the lower limit of the corridor, say two managers close to members of the "Union”.

MTS continues consultations with stakeholders, but the parameters of the agreement are still not clear, said a representative of MTS Elena Kochanowskaya. This agreement is the first of its kind, so all participants need time to take into account mutual interests, said the spokesman of VimpelCom Anna Aybasheva. She declined to comment further as well as representatives of MegaFon did.

But the deal is ready to be supported by Rostelecom, said on Friday its president, Alexander Provotorov. Price of $ 1 billion will suit both MegaFon and Rostelecom and they would be willing to buy Scartel even in half, recently told Vedomosti a manager close to one of these companies. However, he doubted that the less decisive parties of the “Big Four” will agree to stay away from the deal and give competitive advantage to others. Even if MTS does not agree with the price, it does not mean that it won’t sign the agreement, agrees a manager of another party of the “Big Four”. |

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