Another Russian telco merger hits the courts

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Another Russian telco merger hits the courts

TeliaSonera and Altimo fight block on plan to merge Russian and Turkish assets

By CAROLINE GABRIEL

Published: 22 December, 2010

READ MORE: M&A | Europe | TeliaSonera

The Russian telecoms market gets ever more complex as the large players look to build international bases. A day after VimpelCom's board approved its takeover of Orascom - but requiring significant amendments to the deal to please its second shareholder Telenor - another Russo-Nordic partnership is hitting the law courts. TeliaSonera and Russia's Altimo are to appeal a court ruling blocking their plan to merge their respective Russian and Turkish operators.

The two companies want to combine their direct and indirect interests in Turkey's Turkcell and Russia's MegaFon to create a new entity which would have more than 90m subscribers in the two countries and some neighboring CIS states.

But the proposal, first outlined in November 2009, is being contested by AF Telecom, the second largest stakeholder in MegaFon (via its Telecominvest subsidiary). The Russian courts have twice ruled in favor of AF Telecom, most recently in October.

"TeliaSonera and Altimo disagree with the court's decision and believe that it is based on an insufficient analysis of facts and applicable rules and statutes," Telia said in a statement. The Swedish/Finnish carrier owns 43.8% of MegaFon, Russia's third cellco, and 37.3% of Turkcell, the market leader. Altimo owns 25.1% of MegaFon and almost 5% of Turkcell. Under the plan, the new unit would be the largest shareholder in both carriers.

TeliaSonera claims that AF Telecom was invited to join the new company, but it objected to the terms and conditions and filed its claim in a Moscow court in April 2010.

Also in Russia, there are moves to coordinate 800MHz spectrum policy with neighbor Finland, allowing the latter to go ahead with LTE plans, and possibly opening the way to changes of use in Russia in future.

The two countries' regulators have come to a deal under the auspices of the Finnish-Russian Commission for Economic Cooperation. A decision had already been made in Finland to allocate the 800MHz band - the digital dividend in most of Europe - to high speed wireless networks. But in Russia the frequencies are used by air navigation systems, therefore requiring spectrum coordination between the two countries. It is now possible that Finland will begin rolling out LTE in the band from next year.