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UPDATE 2-Russia eyes top-three merger to boost Svyazinvest

Published 06/23/2009, 10:39 AM
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* Best to merge mobile assets with 1 of 'Big Three'-minister

* Merger with a regional carrier is an alternative

* Aims to boost state role in cellular sector

(Adds more quotes, analyst comment, background)

By Maria Kiselyova

MOSCOW, June 23 (Reuters) - The optimal path for the development of telecoms giant Svyazinvest mobile business would be a merger of its mobile assets with one of the top three wireless operators, Russia's Communications Minister said on Tuesday.

The Russian government, which wants to play a bigger role in the telecoms sector and especially in the high-yielding mobile business, last month cleared the reorganisation of Svyazinvest, the state-controlled telecoms holding company.

Svyazinvest General Director Yevgeny Yurchenko has said the holding company could consolidate the mobile assets held by its subsidiaries and spin them off as part of the reorganisation and as a first step towards playing a greater role in the mobile sector.

"The most optimal way is to merge (Svyazinvest) with one of the three operators in the 'Big Three'," Communications Minister Igor Shchyogolev told a business conference, adding that the specifics of such a merger were not a matter for immediate discussion.

The Big Three of Russian wireless, which have a market share of 30 percent each, include MTS, Vimpelcom and MegaFon, which is partly owned by the Nordic region's biggest telecoms operator, TeliaSonera.

"The question is whether they (the Big Three) will have an interest (in the merger). There are a number of aspects that could hold the reform. Talks of such a level never go fast," Shchyogolev said.

A banking source said MegaFon, Russia's No.3 mobile provider, was likely to become Svyazinvest's partner if there was to be a merger.

However, a source close to one of MegaFon's shareholders said MegaFon was unlikely to figure in any scheme.

"We see the option proposed by the minister as the easiest way for Svyazinvest to become an equal player in the sector (with the Big Three operators)," VTB Capital wrote in a note.

Shchyogolev said an alternative to a merger would be the creation of Russia's fourth largest mobile operator, by pooling Svyavinvest's mobile assets with one of the regional providers outside the Big Three.

Local media reported this week that Svyazinvest is aiming to become Russia's No.4 wireless operator by consolidating its mobile assets and partnering with private regional providers such as Sweden's Tele2.

Svyazinvest controls seven predominantly fixed-line regional operators. The operators are actively developing mobile and internet businesses, which offer higher sales growth and margins than fixed-line calls.

The government has a stake of 75 percent minus one share in the telecoms giant, while fixed-line provider Comstar, part of services conglomerate Sistema, hold the rest. (Additional reporting by Olga Popova and Anastasia Teterevleva; editing by Karen Foster)

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