Armenian experts in shock: Orange can buy VivaCell-MTS

YEREVAN, September 16. /ARKA/. Russian mass media disseminated information on Thursday about the intention of Sistema Joint Stock Financial Corporation to sell control package of shares of MTS (its share is 52.8%).

Such deals on acquisition, merging and consolidation take place regularly, but this time the issue directly affects the Armenian market. As a possible buyer of control package of MTS shares, which owns such assets in Armenia, as the company VivaCell-MTS, indicated the French telecommunication group France Telecom, presented in the Armenian market under the brand Orange Armenia.

Experts in wonder

For comments of the situation and consequences of the transaction for the Armenian market, news agency “ARKA” applied to the experts whom the given news shocked.

According to the expert on information security Samvel Martirosyan, currently the telecommunications market is growing very actively, including the eastern region where MTS has serious assets. In this regard, interest of Orange to enter the market is clear, as buying MTS can make it a springboard for the expansion of its services in the region.

”It is unclear why MTS wants to sell this asset, because despite the saturation of mobile market, Internet and voice services only grow”, said Martirosyan.

As for Armenia, according to the expert, such a sharp transition can lead to dualistic confrontation of two providers and negatively influence on the final user.

”In telecommunications sector in Armenia today is a diversified situation – there are three operators, and the fact that Orange will depart assets of one of the players in the local market is fraught with theoretical risk of increased competition”, said Martirosyan noting that after the arrival of the third operator in Armenia the market began to operate more actively.

Therefore, according to the experts, it would be better to preserve competition in Armenia on the level of three operators.

According to some market experts, the news about a possible deal was unexpected, and for the person familiar with the realities of the Armenian mobile market is difficult to imagine such a union of different orientation and the nature of brands. Experience of international merging and acquisitions shows that in such situations, preference is given to the brand, which is better positioned to the market of the country, and the services under the second brand stop going forward.

So, after the purchase of Armenian company VivaCell by Russian operator MTS rebranding did not take place. The second operator appeared in the market - VivaCell- MTS, as a result of co-branding. Maintenance of local brand was explained by its popularity in Armenia.

It is worth mentioning that Armenian “daughters” of operators do not comment on the situation, not wanting to take the responsibility of their “mother” companies.  

Mobile alignment

What consequences can have implementation of the given deal for the Armenian market? First of all, it is possible that merging of two companies under a single brand can lead to some difficulties.

The Armenian mobile communication market was once a monopoly, but after leaving its monopolistic rights and legislative regulation of the market in 2005, the second operator – VivaCell appeared, the control package of which was later obtained by the company MTS. Appearance of the second operator has considerably stepped forward the market as in the context of growth of subscribers, as well as service availability.

Appearance of the third operator in Armenia in 2008 in the face of global company France Telecom under the brand Orange Armenia has spurred the market, including in the context of mobile Internet.

Incase of a deal between the two operators again competition will occur in the Armenian market between two operators, which tried to prevent Armenian authorities in 2008 through a tender for mobile communication services. In addition, the deal could lead to a serious redistribution of market share, as well as to a possible outflow of subscribers from the new “giant”.

What do Russian experts think?

Information that Sistema Joint Stock Financial Corporation controlled by Vladimir Yevtushenko plans to sell its share in Russian mobile operator of communication MTS, did not inspire confidence of analysts. In their opinion, the deal to sell a control package of share of telecommunications company is the case of future.

One of the interlocutors of RBK daily, familiar with the business “Sistema” considers that Joint Stock Financial Corporation as investment corporation understands that the business of MTS by itself will not show past growth of income. Moreover, in the asset of Joint Stock Financial Corporation oil companies appeared which significantly increased financial positions of the group. Currently, we consider the possibility of selling the control share or merging with one of any largest international operators.

”MTS is a strategic asset, so selling the control share to foreign shareholders and transfer of the headquarters of the company is considered not reasonable”, says RBK daily.

The Head of "Sistema" Joint Stock Financial Corporation Vladimir Yevtushenko, despite widespread information announced that "Sistema" Joint Stock Financial Corporation has not received an offer from France Telecom and refused to give more detailed comments of the situation.

According to the analyst of information company “FINAM” Tatyana Zemtsova, at this stage, such a news background is rather ambitious. MTS is definitely one of the key assets of Joint Stock Financial Corporation, so the scenario of selling the package in short-term perspective seems unlikely.

According to the experts, the fact that MTS is still one of the most profitable business units in the structure of Joint Stock Financial Corporation will play its role.

However, the experts noted that they will not completely exclude the possibility of selling MTS and they believe that in case of change of ownership, MTS brand will probably be maintained in Russia and other CIS countries, since the position of the operator in the region is rather firm and this brand is known in the region.

Who benefited from rumors?

Rumors – rumors, but in this situation to win in any case remains "Sistema" Joint Stock Financial Corporation, which trading of shares were held today in the Russian stock market.

Trading of "Sistema" Joint Stock Financial Corporation’s shares in the Russian stock market was suspended on Thursday by the end of the working day due to the rise in prices by over 30%. According to the assessments of the analyst of “Investcafe” Ilya Rachenkov, the reason for this rise in prices was the tight news background arisen around Joint Stock Financial Corporation in recent days.

"First, it accounts for the half year of the company, second that media reports that the company can sell its share in MTS in exchange for a minority package in a large foreign telecommunications company. The media talk about France Telecom. Thirdly, the message that “system” can require compensation for relocation of MTS WiMax operator on other frequencies. However, after this increase deep correction to confirm or deny the rumors is quite possible”, said Rachenkov. -0-

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20:55 09/16/2011