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26 November, 2019

MTS sells Ukrainian unit as it focuses on Russia

Country’s largest mobile operator steps up efforts to capitalise on digital market

MTS, Russia’s largest mobile operator, has sold its Ukrainian operations as it vowed to double down on attempts to capture more of the country’s fast-growing domestic digital market. On Monday, MTS announced the sale of its Ukrainian subsidiary to Azerbaijan’s Bakcell for $734m as it presented a new strategy aimed at diversifying into streaming, finance and digital services for businesses. The deal ends longstanding political tensions over MTS’s presence in Ukraine after Russia annexed the Crimean peninsula in 2014. MTS rebranded as Vodafone in Ukraine a year later in an apparent attempt to draw attention away from its Russian roots. The deal was part of a strategic partnership but did not see Vodafone become a shareholder in MTS Ukraine. David Akhramia, leader of the ruling faction in Ukraine’s parliament, said the deal was “the first in 90 days [since president Volodymyr Zelensky’s party took power] — $734m and one less Russian operator in the country”. Kyivstar and Lifecell, Ukraine’s other two big mobile operators, are both part-owned by the Alfa Group of Russian oligarchs led by Ukraine-born Mikhail Fridman. MTS chief executive Alexei Kornya said the deal was “opportunistic” and claimed the company had no immediate plans to sell its other foreign subsidiaries in Armenia and Belarus. The Ukrainian unit was relatively small, accounting for just 10 per cent of the group’s total revenue, and appears to have been sold at a discount, according to analysts at BCS. Mr Kornya told the Financial Times that the move was part of a plan to develop MTS’s non-telecoms businesses at a time when big Russian participants in industries from banking to supermarkets were expanding their online “ecosystems”. MTS wants to draw its 78m mobile subscribers to its other services through its app, lifting the number of customers who use more than one of its services from 1m, or 1.3 per cent of the total, to 40 per cent by 2022. The company hopes to do that by increasing its television customers from 4m to 10m in that period, while tripling regular customers of its bank from 3m to 10m, Mr Kornya said. “We are probably the only player that has all four major means of bringing content to the customer,” Mr Kornya said. MTS was not worried about competing for screen time with deeper-pocketed “ecosystems” run by state bank Sberbank and search group Yandex, he added: “Each customer will have more than one supplier [ . . .] That will open windows for new products to attract customers into your ecosystem.”

https://www.ft.com/content/4a5a21ee-0f9b-11ea-a7e6-62bf4f9e548aFinancial Times

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