Megafon are discussing the division of Euroset's business into two parts (each of the operators owns 50% of the company), three people who know about the and VimpelCom negotiations from the managers of both operators told Vedomosti. A person close to Euroset itself confirmed the information and said that there is no final decision, it may appear soon.

According to all Vedomosti’s interlocutors, each of the operators expects to take over half of the stores (there are more than 4,000 in total) in order to join mono-brand retail chains.

Euroset representative Ulyana Smolskaya said that there was no decision of the Euroset board of directors on the division, and she was not authorized to comment on the shareholders’ discussion of the future.

One of those who heard about the division knows that the Euroset brand may disappear after the transaction. Operators thought about dividing their business for financial reasons, says another interlocutor: operators consider it more effective to work with mono-brand retail, and maintaining a conditionally independent network, it seems to them, has lost its meaning.

According to another Vedomosti interlocutor, Euroset’s business came into conflict with the tasks of operators: Euroset’s main income is selling phones, and the operators’ task is to create as many contracts with subscribers as possible. One of the reasons for the division of Euroset, according to two Vedomosti interlocutors, could be persistent rumors about the sale of the Russian business of VimpelCom.

At the end of last year, representatives of the shareholders of T2 RTK Holding (Tele2 brand) and VimpelCom (owned by Vimpelcom Ltd.) discussed the merger of companies; those negotiations did not end in anything, but the deal is still being discussed, according to Vedomosti’s interlocutors.

The first of the current owners to buy a stake in Euroset was VimpelCom - in 2008 it acquired 49.9% of the retailer for $226 million from Alexander Mamut; he, in turn, shortly before acquired 100% of Euroset from its founders Evgeny Chichvarkin and Timur Artemyev. Then Mamut and VimpelCom tried to carry out an initial public offering of shares of the retailer, but they did not succeed, and in December 2012 Mamut sold the remaining part of Euroset for $1.07 billion: VimpelCom bought 0.1%, at 25 % was acquired by Megafon and the Garsdale company (combined the assets of Alisher Usmanov with partners: 100% of the shares of Scartel and more than 50% of the shares of Megafon). VimpelCom increased the share to 50%, and two new buyers entered into an option under which Garsdale’s share passed to Megafon in July 2014: Megafon exchanged 25% of Euroset for 3.65% of its shares.

Brotherly "Svyaznoy"
Since last year, the brother of Euroset CEO Alexander Malis, Oleg, has owned the second largest cellular retail network, Svyaznoy. Svyaznoy does not belong to any of the operators, but just like Euroset, it works only with VimpelCom and Megafon....
Read in full

Brotherly "Svyaznoy"

Since last year, the brother of Euroset CEO Alexander Malis, Oleg, has owned the second largest cellular retail network, Svyaznoy. Svyaznoy does not belong to any of the operators, but just like Euroset, it works only with VimpelCom and Megafon.

Last year, Euroset entered into a price war with its competitor, the retail chain MTS: it announced a reduction in prices for smartphones almost to cost. Thus, the operator, which had just stopped cooperating with the independent network of cellular stores Svyaznoy, hoped to attract additional visitors and at the same time connect more subscribers. Soon after this, Euroset itself stopped selling devices from one of the leaders in the mobile market - Korean Samsung. The brand stores of its shareholders and Svyaznoy did the same - and MTS became the largest seller of Samsung smartphones.

The conflict did Euroset a disservice: its revenue for the nine months of 2015 decreased by 15% compared to the same period in 2014. True, the company managed to increase its net profit: in the nine months of 2015 it received 1.09 billion rubles. – the same period in 2014 brought 175.5 million rubles. net loss. The company and its shareholders did not disclose revenue for the entire 2015. But the net profit of Euroset amounted to 1.48 billion rubles. against 0.87 billion a year earlier (an increase of 70.6%).

The parity business ownership structure in this case has not shown its effectiveness, says FC Otkritie analyst Alexander Vengranovich: the operators still compete with each other and they probably could have disagreements in Euroset’s development strategy. Perhaps the reason is that in mono-brand stores, operators manage to attract higher-quality subscribers who stay on the network longer, suggests Vengranovic.

Deloitte Corporate Governance Director Oleg Shvyrkov points out that there are very few companies on the Russian market with two large owners. Deloitte calculated that at the end of 2015, out of 120 public Russian companies, only four had such an ownership structure (two large shareholders with at least 25%); in 2012 there were 11 of them. Shvyrkov points out that this is not a purely Russian situation: in world practice there are also few such companies. “Another thing is that there are more companies in the world that do not have a controlling shareholder,” the expert concludes.

Representatives of Megafon and VimpelCom declined to comment.

Brotherly "Svyaznoy" Since last year, the brother of Euroset CEO Alexander Malis, Oleg, has owned the second largest cellular retail network, Svyaznoy. Svyaznoy does not belong to any of the operators, but just like Euroset, it works only with VimpelCom and Megafon.... Read in full

Brotherly "Svyaznoy"
Since last year, the brother of Euroset CEO Alexander Malis, Oleg, has owned the second largest cellular retail network, Svyaznoy. Svyaznoy does not belong to any of the operators, but just like Euroset, it works only with VimpelCom and Megafon....
Read in full

Euroset can be divided into two parts