Rostelecom board approves Tele2 mobile merger

13 Dec 2013

The board of directors of Russian national operator Rostelecom has approved the contribution of its mobile assets into a joint venture with Tele2 Russia, to be known as T2 RTK Holding. Based on data for 3Q13, T2 RTK Holding will have a pro forma subscriber base of approximately 38 million, with pro forma 2012 revenues of around RUB101 billion (USD3.1 billion). As part of the transaction, Rostelecom will contribute substantially all of its mobile assets and licences to T2 RTK Holding, while Tele2 Russia will contribute all of its mobile assets. The contribution from Rostelecom will take place in two stages.

The first phase will see Rostelecom contributing its standalone mobile subsidiaries and assets, including SkyLink, into T2 RTK Holding. At the end of this process, Rostelecom will receive a 45% voting interest and a 26% economic interest in T2 RTK Holding. During the second stage, Rostelecom will spin off its integrated mobile businesses into its new wholly owned subsidiary, CJSC RT-Mobile, which will have Rostelecom’s mobile licences – including Long Term Evolution (LTE) concessions – re-issued to it. Upon completion of the spin-off, Rostelecom will contribute its whole stake in CJSC RT-Mobile into T2 RTK Holding, and increase its economic interest in T2 RTK Holding to 45%.

The transaction is now subject to regulatory approvals as well as other customary closing conditions. It is anticipated that the first stage of the transaction will close in 1Q14, while the second stage of the transaction will be subject to the completion of Rostelecom’s reorganisation. This process requires shareholder approval, with a general meeting scheduled for 30 December 2013. The second stage of the deal is expected to conclude in the first half of 2014. Credit Suisse and JP Morgan acted as financial advisors to Rostelecom, while VTB Capital and UBS provided the same service to Tele2 Russia’s shareholders.

Sergey Kalugin, president of Rostelecom, commented: ‘We are delighted to have reached an agreement with Tele2 Russia to create a new national mobile operator, with tremendous growth opportunities and exciting prospects. With support from both shareholders, T2 RTK Holding is set to be a story of great success’.

Russia, Rostelecom, Tele2 (Russia), SkyLink,

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