VTB Group to acquire Tele2's Russian phone unit for $2.4 billion

08:57, 28 March 2013

STOCKHOLM. March 28. KAZINFORM VTB Group, Russia's second-largest lender, agreed to acquire Swedish phone company Tele2 AB (TEL2B)'s Russian business for $2.4 billion in cash in Europe's largest wireless transaction this year.

VTB will also take on $1.15 billion in net debt, Stockholm- based Tele2 said yesterday. Tele2 plans to pay shareholders 12.5 billion kronor ($1.9 billion), or 28 kronor a share, after the deal is completed.

Tele2's exit from Russia after 12 years followed its failure last July to win a wireless license to run faster services in the country, leaving it with an outdated network just as consumers devour more data with smartphones and tablets. The transaction may pave the way for a takeover of the business by a Russian operator such as former fixed-line monopoly OAO Rostelecom, said Aalandsbanken analyst Lars Soederfjell.

"We're open to any proposals," VTB Chief Executive Officer Andrey Kostin said in an interview in Stockholm. "We're basically a financial investor, we want to increase the value of the company."

VTB, a state-run lender based in Moscow, isn't in talks with the country's carriers over a Tele2 deal, Kostin said. Russia's three largest wireless providers are OAO Mobile TeleSystems (MBT), VimpelCom Ltd. (VIP) and OAO MegaFon, Kazinform refers to Bloomberg.

Deal multiples

The deal values Tele2 Russia at 4.9 times its 2012 earnings before interest, taxes, depreciation, and amortization, Tele2 said. That compares with a median multiple of 4.3 times among transactions in the European wireless industry over the past three years, data compiled by Bloomberg showed.

Tele2 shares fell 1.1 percent to 108.50 kronor in Stockholm yesterday. The stock is down 7.3 percent this year. Investment AB Kinnevik (KINVA), Tele2's biggest holder with a 30.5 percent stake, said it would receive about 3.8 billion kronor in cash in the proposed redemption program.

The sale will be completed "shortly" and should allow Tele2 to focus on Sweden, the Netherlands, Norway and Kazakhstan, the company said. In December, Tele2 acquired a wireless license in the Netherlands.

"We are in an investment phase," Chief Financial Officer Lars Arne Nilsson said in an interview. The deal will "help us come closer to our leverage targets."

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