3 Dec 2009 11:31

MTS files for clearance to buy Eurotel

MOSCOW. Dec 3 (Interfax) - Mobile TeleSystems (MTS) has filed for clearance with the Russian Federal Antimonopoly Service to buy trunk like operator Eurotel, Konstantin Senichkin, head of the FAS department for transport and communications, told Interfax late yesterday.

The request was filed on November 25. Senichkin did not say how much of Eurotel MTS wanted to buy.

MTS spokeswoman Yelena Kokhanovskaya told Interfax that MTS was in talks on the Eurotel acquisition and that a decision would be reached when the FAS has responded to the request.

The businessman Leonid Melamed controls Eurotel, which owns 19,000 kilometers of fiber-optic networks.

Melamed finished consolidating his telecom assets Eurotel and OJSC Enifcom under the Eurotel umbrella in October. Firms controlled by Melamed bought a controlling interest in Eurotel from Synterra in the spring. One of the terms of that deal was an agreement to buy the St Petersburg - Petrozavodsk - Murmansk fiber-optic network from Synterra. Melamed bought the operator Enifcom from a group of private investors in the winter of 2008.

The Eurotel acquisition would be consistent with MTS's strategy to expand its trunk network, which currently stretches approximately 15,000 kilometers (including the Comstar UTS network). Another 11,000 km are close to being completed and should be commissioned in Q1 2010. So the Eurtotel acquisition would give MTS 45,000 km.

Mikhail Shamolin, the MTS president, recently said the company's goal was to increase its trunk line network to 60,000-70,000 km in the next three years at an estimated cost of $100 million-$200 million, depending on the network's configuration. MTS also plans to build new networks, and to buy and exchange fiber with other operators.

Shamolin said Russian broadband providers were being held back by the underdevelopment of trunk lines. "Even at a 100-Mbit/second last-mile speed, you can only really download data at 1 or 1.5 Mbit/second at best," he said. "If you want to become a broadband Internet market player you have to invest in your own infrastructure," Shamolin said.

Rostelecom has Russia's biggest trunk line network at approximately 150,000 km, including analog infrastructure. Transtelecom has just over 53,000 km. Synterra has said its network is 75,000 km, but it does not disclose how much of this it owns and how much it leases. One market expert has told Interfax that Synterra only owns 17,000 km itself.

MTS is the biggest Russian and CIS cellular provider by subscribers, with more than 100 million customers in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia and Belarus.

MTS closed the acquisition of 50.91% of fixed line provider Comstar UTS from the Sistema holding for $1.272 billion in October. Sistema is the biggest shareholder in MTS.