Russian Mobile Operator MegaFon Confirms London IPO

on Oct 11, 2012

**MegaFon’s Leap into Stock Exchange**

Russia’s second-biggest mobile operator, MegaFon, announced its plans to list part of its shares on the London Stock Exchange by the end of the year, The Times reported on 10 October 2012. Expected to attract a valuation of $13 billion (£8.1 billion), by selling 15 to 20 per cent of the mobile operator’s existing shares, the deal would be the UK’s biggest initial public offering (IPO) since those of Genel Energy (formerly Vallares) and Glencore International last year. The London IPO of MegaFon is also the largest Russian listing since last year’s New York floatation of internet search firm Yandex.

Some of MegaFon’s shares on offer will be sold by the company’s co-owner TeliaSonera. The Swedish telecoms group said that is planning to sell down its current 36.5 per cent stake but will keep a holding of at least 25 per cent. Meanwhile, MegaFon’s owner Alisher Usmanov – who is Russia’s richest man, according to Forbes, and the second-largest shareholder in Arsenal football club – has said he is keeping his majority stake.

**Another Chance to Tap into Russian Economic Growth**
MegaFon’s chief executive Ivan Tavrin told The Times that the shares would be a tantalising prospect for anyone wanting a straightforward bet on the economic prospects of Vladimir Putin’s Russia: “It’s a pure play on Russia, a pure play on growth. Russia is a growing economy, GDP is growing and the state of the telecoms market is very, very healthy.”

!m[Russia’s Second-Largest Mobile Network Confirms Rumours of $13bn London Flotation ](/uploads/story/555/thumbs/pic1_inline.png)MegaFon’s revenues totalled just under £5 billion in 2011, and have been growing at a pace of more than 15 per cent annually for the last three years. It has 62 million subscribers and a 27 per cent market share which places it as Russia’s second-largest mobile network. Having invested heavily in 3G services, and with its 4G signal now available in 40 Russian cities, MegaFon has also been at the forefront of the smartphone revolution and now controls more data revenues, which are generated by customers using the internet on their handsets, than any other operator.

“We are now positioned to exploit the further growth potential of Russia’s mobile market as it transitions from voice to high-value data services,” Tavrin, said. “This is the right time for our IPO, which will support a new stage in MegaFon’s development.”
**Goldman Sachs May Disagree **
MegaFon’s attempts to gain the support of foreign investors have suffered a setback with Goldman Sachs pulling out of a role as lead bank on the initial public offering of the company. The elite investment bank, whose name lends credibility to many high-profile international floats, will not assist with MegaFon’s transaction. According to The Financial Times, citing people familiar with the matter, Goldman was concerned it would be working on an IPO where the company’s controlling shareholder, Usmanov, was currently undergoing a restructuring which involves merging his assets under a single umbrella company.
MegaFon denied the claims that Goldman Sachs had pulled out of the role since the bank had not been appointed. Goldman Sachs declined to comment.