MegaFon's potential ownership structure change may be rating positive - Fitch
MOSCOW. April 13 (Interfax) - Fitch Ratings said on Friday that changes to MegaFon's ('BB+'\Positive) ownership structure and governance currently being discussed between Megafon's shareholders may be rating positive, but only if there is evidence of strong corporate governance and no negative impact from the parent.
The agency said in a statement: "MegaFon's current financial and operating profile conforms to a higher rating category than its current IDR of 'BB+', but the company's corporate governance remains a major concern for Fitch, pushing it below investment grade category. Fitch notes that a shareholder dispute exposes the company to financial and non-financial risks.
"MegaFon's current shareholders are TeliaSonera with direct control of 35.6%, AF Telecom with direct control of 8% and 31.3% indirectly through Telecominvest and Altimo with direct control of 25.1%. Altimo also has 24.998% of voting rights in Vimpelcom Ltd, whose Russian subsidiary (Beeline) and MTS are MegaFon's major competitors in Russia.
"TeliaSonera confirmed that discussions are taking place between TeliaSonera, AF Telecom and Altimo regarding its future ownership structure and governance. Altimo has been reported in the media as willing to sell its stake in MegaFon. More clarity after any potential ownership structure change on Megafon's long-term capital structure, dividend payout policy, strategic future (especially in the M&A area) and any strengthening of its corporate governance might lead to a positive rating action. A potential IPO, which has also been reported in the media, is in itself not likely to lead to a positive rating action, unless it is accompanied by improvements in corporate governance.
"AF telecom is controlled by Mr Usmanov, who is a principal shareholder of JSC Holding Company Metalloinvest ('BB-'\Stable), one of the largest metals and mining company in Russia. In Fitch's view the company has relatively poor governance with worse transparency and reporting standards than Russian listed peers. This is reflected in the company's partial use of its its pre-export facility for the acquisition of OJSC Norilsk Nickel shares which led to an increase in leverage not related to the core business operations."