Pursuant to the decision taken at the Company’s Extraordinary General Meeting of Shareholders1 on 12 September 2013, MegaFon has completed the Acquisition of a 100% interest in Maxiten, 99% of which was acquired directly from Garsdale and 1% was acquired from Kable Global Inc., a wholly owned subsidiary of Garsdale («Kable», and together with Garsdale, the «Sellers»).
The total consideration for the Acquisition was $1,180 million
(the «Equity Consideration») plus the assumption and/or
guarantee of the «Net Debt» of Scartel/Yota
as at 1 October 2013 (the «Closing
Date»), as more fully described below:
In the event that any MegaFon claim arises under the agreements relating to the Acquisition (including any claim relating to litigation questioning the validity of any of the 4G/LTE licenses held by Scartel/Yota) prior to any payment of the Equity Consideration, the amount of that claim can be held back from such payment until such claim is satisfactorily resolved.
In connection with the Acquisition, the Company has entered into a revolving intragroup loan agreement with Scartel / Yota. The proceeds of the loan facility will be used to pay off the third party loans referred to above and to finance Scartel / Yota’s future development.
MegaFon believes that its acquisition of Scartel / Yota
will strengthen its leading position in 4G / LTE Market
in Russia. As previously announced, MegaFon expects
to receive a number of strategic benefits:
«I am happy to announce that we closed the acquisition of „Scartel/Yota“. This transaction is of strategic importance for MegaFon, because we are achieving a unique position in the 4G/LTE market in Russia and special advantages in terms of the provision of 4th generation services. This transaction will help us to expand our 4G high speed networks to significant additional territories, including those where development of infrastructure had been difficult due to economic and technological reasons.», said Ivan Tavrin, CEO of MegaFon.
Additional information related to the Acquisition, including
limited financial information regarding Scartel/Yota,
is available on the Company’s website at http://moscow.megafon.ru/ai/document/4545/file/MegaFon_Presentation_Q2_
2013_results.pdf and http://corp.megafon.com/investors/shareholder_meetings/
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NOTES TO EDITORS
Scartel / Yota is the only operator in Russia with an up-and-running multicity 4G / LTE network. It provides mobile internet services to 605k B2C and 43k B2B customers as at 30 June 2013 (c.82% of total revenues), as well as other telecom operators on an MVNO basis (c.6% of total revenues). Currently, MegaFon is the only operator with an MVNO agreement in place with Scartel. The company also sells user devices (65% USB dongles, 35% of Wi-Fi routers) through its own retail network consisting of 69 points of sales (c.10% of total revenues).
The key assets of Scartel / Yota include 2×30 MHz nationwide spectrum in the 2,500- 2,530 MHz / 2,620–2,650 MHz frequency band and network infrastructure covering over 30 regions in Russia or c.27% of Russian population as at 30 June 2013.
MegaFon OJSC is a leading Russian universal telecommunication service provider, operating in all segments of the telecommunications markets in Russia. MegaFon was incorporated in June 1993 as CJSC «Northwest GSM» and renamed OJSC «MegaFon» in 2002. MegaFon was the first operator with a network covering all regions of Russia. The Company and its subsidiaries have licenses to operate in all of the Russian regions and in the Republics of Abkhazia, South Ossetia and Tajikistan. The Company was the first in Russia to launch 3G for commercial operations and is currently in the number one position among all operators in the provision of mobile Internet, and in the number two position as to the number of active subscribers in Russia.
In 2009, MegaFon was selected as the Mobile General Partner of the XXII Winter Olympic Games and XI Paralympic Games to be held in Sochi in 2014.
As a result of its acquisition of the Synterra Group, one of the leading Russian backbone operators in June 2010, MegaFon substantially increased its fixed-line B2B and B2G businesses, as well as its provision of fixed broadband services. In July 2012 MegaFon was awarded one of four ten-year licenses for the provision of 4G/LTE services throughout the entire Russian Federation and, through its MVNO arrangement with Scartel, has already started providing these services in 30 different regions by the end of June 2013. In September 2012 the Company acquired the VAS Media group of companies, which are now being integrated with MegaLabs, its R&D subsidiary. In December 2012 the Company acquired a 25% interest in the Euroset retail chain, the largest chain in Russia providing telecommunications goods and services, and is committed to acquire a further 25% within the next three years.
In November 2012 MegaFon successfully completed an initial public offering on the Moscow Stock Exchange and the London Stock Exchange. MegaFon has two principal shareholders, companies in the AF Telecom group (approximately 50.01%) and the TeliaSonera group (approximately 25.17%). Additional shares are held by its CEO, Ivan Tavrin (2.545%) and by a wholly owned subsidiary of the Company (7.57%, of which Mr. Tavrin has the right to acquire up to 2.5% at various times prior to 2017), while the public float represents approximately 14.705% of the outstanding shares.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Some of the information in this release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company and/or Scartel / Yota. You can identify forward looking statements by terms such as «expect», «believe», «anticipate», «estimate», «forecast», «intend», «will», «could», «may», or «might» the negative of such terms or other similar expressions. The Company wishes to caution you that these statements are only predictions, and are based upon various assumptions which are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control. We may not achieve or accomplish these plans or predictions. The Company does not necessarily intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward- looking statements of the Company, including, among others, general economic conditions, the competitive environment, risks associated with operating in Russia, rapid technological and market change in the industries in which the Company operates, as well as many other risks specifically related to the Company and its operations and/or Scartel / Yota and their operations.