Rostelecom Board OKs Merging Mobile Assets with Tele2 Russia

By Olga Razumovskaya

MOSCOW--Russian state-controlled telecommunication company OAO Rostelecom's (RTKM.RS) board has approved the merger of its mobile assets with those of Tele2 Russia, the company said Thursday.

The deal hasn't been officially signed yet, and the negotiations are still continuing, Rostelecom clarified in a conference call but provided details of the upcoming deal in a statement.

The long-awaited merger will be executed in two stages, the company said.

The first stage will see Rostelecom contributing its standalone mobile subsidiaries and assets, including SkyLink, into T2 RTK Holding. At the end of this first stage, Rostelecom will receive a 45% voting interest and a 26% economic interest in T2 RTK Holding, the statement said.

During the second stage, Rostelecom will spin off its integrated mobile businesses into its new wholly owned subsidiary CJSC RT-Mobile, which will be expected to have Rostelecom's mobile licences, including the LTE licences, re-issued to it.

Upon completion of the spin-off, Rostelecom will contribute its whole stake in CJSC RT-Mobile to T2 RTK Holding and increase its economic interest in T2 RTK Holding to 45%.

The joint venture, T2 RTK Holding, plans to undertake significant investments in the development of the 3G/LTE network as well as in innovative and high-quality mobile services.

The mobile virtual network operator deal will allow Rostelecom to boost its mobile segment, which currently accounts for 13% of the company's revenue. Rostelecom will be able to use Tele2's vast network infrastructure to become the fourth largest actor in the Russian mobile market.

Russia's second-largest lender VTB Bank (VTBR.RS) purchased Tele2 Russia in April from its Swedish parent Tele2 AB (TELE2-B.SK) for $3.55 billion and agreed to sell it in October to companies affiliated with private lender Bank Rossiya.

Rostelecom Chief Executive Sergei Kalugin also said the CEO of the newly merged company will be nominated by the consortium made up of representatives of VTB and Bank Rossiya and will be approved by Rostelecom's board.

Write to Olga Razumovskaya at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires