Vedomosti: the merger of operators to launch 4G in Russia may fail due to the cost of the deal

The merger of cellular operators to launch a fourth generation (4G) network in Russia may not take place due to the cost of the transaction, Vedomosti writes .

As the newspaper learned, the shareholders of Scartel (the management company is Yota Group) asked for $1 billion for the company.

The consortium of operators appeared after the Big Three and Rostelecom realized that it would be difficult for them to obtain frequencies for LTE on their own. The only company that had such frequencies was Scartel. In March 2011, Megafon, MTS , Vimpelcom, Rostelecom and Scartel shareholders - Rostekhnologii and Sergey Adonyev - in the presence of Prime Minister Vladimir Putin, solemnly signed a memorandum on the construction of a unified LTE network on the basis of Scartel, which these operators will all be used together. The agreement provided that the Big Four would buy 80% of Scartel (another 20% would remain with Russian Technologies). Since then, the negotiations still have not left the “final stage”.

Meanwhile, the memorandum expired on June 1, so formally there is no longer any consortium, sources close to the parties to the agreement told Vedomosti. According to them, almost each of the parties has considerations that impede the deal.

Alfa Group, a shareholder of VimpelCom, is not satisfied with the price: Scartel shareholders are ready to sell the company for at least $1 billion. Meanwhile, Alfa Group does not want to increase Vimpelcom’s debt burden, which has already increased due to the deal with Wind Telecom ltd. An Alpha representative declined to comment on this.

AFK Sistema, a shareholder of MTS, has a competing project. It owns 50% of Kosmos-TV, an operator that uses MMDS technology and owns approximately 60 MHz of frequencies in Moscow suitable for the construction of LTE. The other 50% of Kosmos-TV belongs to the Russian Television and Radio Broadcasting Network, and Sistema is negotiating their buyout. Next, AFK wants to sell Cosmos-TV to market participants using the Scartel model, claiming that it will cost less. So far, Sistema is not conducting any negotiations with operators on this issue, says a source close to Sistema. According to him, first we need to decide whether it is technologically possible to build an LTE network at Cosmos-TV frequencies. Sistema does not link the project for Scartel and Cosmos-TV, says AFK representative Irina Potekhina .

The “Big Three” mobile operators also have their own networks, which are already in many ways ready for the transition to LTE, and the need to build another network at their own expense is not obvious, Vedomosti’s interlocutors explain.

The situation may change on September 8, when a meeting of the State Commission on Radio Frequencies (SCRF) is scheduled. At this meeting, Scartel may be the first in Russia to receive permission to build LTE networks.

Representatives of Megafon and MTS declined to make official comments. The general director of Scartel, Denis Sverdlov, did the same. A Rostelecom representative did not answer the newspaper's questions.

Vedomosti: the merger of operators to launch 4G in Russia may fail due to the cost of the deal - Gazeta.Ru | News