Rostelecom and Tele2 set up joint venture in Russia

Russian operator Rostelecom and rival Tele2 Russia have announced the creation of a joint venture, T2 RTK Holding. Rostelecom said that it will contribute “substantially all” of its mobile assets into the joint venture, and Tele2 Russia will contribute all of its mobile assets.

Rostelecom currently has 27.7 million subscribers according to Informa’s WCIS, while Tele2 Russia has 23.4 million. Their combined subscribers will still fall short of that of market leader MTS, with  71.9 million subscribers, MegaFon with 64.3 million subscribers and third-placed Vimpelcom, which has 56.3 million subscribers.

The set up of the joint venture will happen in two stages. In the first stage Rostelecom will contribute its standalone mobile subsidiaries and assets, including recently acquired operator SkyLink, into T2 RTK Holding. The operator said that at the end of the first stage, it will have a 45 per cent voting interest and a 26 per cent economic interest in T2 RTK Holding.

In the second stage, Rostelecom will spin off its integrated mobile businesses into a new wholly owned subsidiary CJSC RT-Mobile, which will be expected to have Rostelecom’s mobile licenses, including its LTE licenses, re-issued to it. When the spin-off is completed, Rostelecom will contribute its whole stake in CJSC RT-Mobile into T2 RTK Holding. This will increase its economic interest in T2 RTK Holding to 45 per cent.

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According to the operators, T2 RTK Holding will have immediate nationwide reach and enough scale to effectively compete with existing mobile operators in Russia. It will also be able to offer converged fixed-mobile products across the country.

“We are delighted to have reached an agreement with Tele2 Russia to create a new national mobile operator, with tremendous growth opportunities and exciting prospects,” said Sergey Kalugin, president of Rostelecom. “With support from both shareholders, T2 RTK Holding is set to be a story of great success.”

The transaction has been approved by Rostelecom’s board of directors and is subject to regulatory approvals as well as other conditions. The firms anticipate that the first stage of the transaction will close in Q1 2014.

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