MTS Ukraine pulls out of TriMob purchase; leaves Ukrtelecom in financial danger?

29 Nov 2016

Mobile operator MTS Ukraine (Vodafone Ukraine) has cancelled its proposal to acquire TriMob, the 3G mobile subsidiary of fixed line incumbent Ukrtelecom, the Russian-backed company’s press department confirmed. MTS has withdrawn its application documents seeking approval of the purchase from the Antimonopoly Committee of Ukraine (AMCU), which had been due to give its decision on the merger plan on 1 December, following a period of public comment on the deal – first publicised as a preliminary agreement between Ukrtelecom and MTS in January. Ukrainian news service BizLiga notes that the finalisation of Ukrtelecom’s spin-off of its mobile asset remains contingent on consent from the State Property Fund (SPF), which has not given clear indication of its position on the MTS deal in recent statements. MTS’ press announcement appeared to blame the SPF, whilst not ruling out a further attempt to complete the deal, saying: ‘It was decided to withdraw the documents, because there is no harmonisation of the SPF, but if anything changes, we do not exclude the [possibility] that [we] return to this point.’

TeleGeography notes that time may be running out for Ukrtelecom to wrap up the long-delayed sale of TriMob, which it earmarked for paying off debts to state-owned banks, as an extended bond redemption deadline of March 2017 looms: reports this year have speculated that the state-owned bondholders could exercise rights to take controlling stakes in the fixed network operator if a settlement is not reached, although in such a scenario the position of Ukrtelecom’s current controlling shareholder – SCM Group, owned by Ukraine’s richest man Rinat Akhmetov – has not yet been clarified. Having lost its monopoly on W-CDMA/HSPA-based 3G services in 2015, and with a dwindling 3G user base of less than half a million, TriMob also offers slower 3G data speeds compared to larger rivals Kyivstar, MTS and Lifecell, which all operate dual-carrier or triple-carrier versions of HSPA+ technology. Furthermore, the CEO of MTS Ukraine Olga Ustinova recently told local journalists that the acquisition of TriMob has gradually become less important, as MTS has built out its own 3G HSPA+ network in most major cities over the past year. Regardless of its current operations, TriMob’s largest value to MTS is its UMTS licence, which would double the purchaser’s 2100MHz 3G spectrum allocation to 2×30MHz, should the AMCU allow the transaction without conditions.

Elsewhere, the MTS Ukraine CEO has also recently indicated that the cellco may completely withdraw the MTS brand from the Ukrainian market in favour of the Vodafone trademark by Q2 2017. Vodafone/MTS branded mobile packages, services and products have co-existed since November 2015 via an expanded non-equity strategic partnership with UK giant Vodafone Group, whilst a programme to replace MTS branded retail stores with Vodafone outlets nationwide is ongoing.

Ukraine,Ukrtelecom (incl. TriMob), Vodafone Ukraine,

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