Russia's VTB turns quick profit with Tele2 Russia deal

Reuters

* VTB flips Tele2 Russia after six months

* Selling 50 pct stake to investors including Bank Rossiya

* Buyers have background in media investment

By Megan Davies

MOSCOW, Oct 17 (Reuters) - Russian bank VTB hasagreed to sell 50 percent of Tele2 Russia, turning a quickprofit and gaining investors with the expertise that could helpit to challenge the dominance of Russia's big three mobile phoneoperators.

VTB bought Russia's fourth-largest mobile operator fromSweden's Tele2 in April for $3.55 billion.

"It has been a profitable investment for us and we will stayas equal partners," Yuri Soloviev, first deputy president ofVTB's management board, told Reuters.

Soloviev declined to name the sale price, which has been putat $2 billion, including assumed debt, based on the price atwhich VTB has valued the stake on its books.

VTB is selling half to a group of investors includingaffiliates of Bank Rossiya and entities of Alexei Mordashov, abillionaire tycoon who controls steelmaker Severstal.

"Through the sale of 50 percent we get very experiencedpeople in the TMT (technology, media and telecoms) sector, (who)have invested in a number of assets such as TV channels, contentproducers, cable companies," Soloviev said.

"We de-risk the position, we make some money on structuringthe deal and we get a very strong partner in Russia."

4G PUSH

Bank Rossiya is part-owned and chaired by Yuri Kovalchuk, anold acquaintance of Russian President Vladimir Putin. Kovalchukand Mordashov have a background in media investments, combiningtheir media assets in 2008 to create National Media Group (NMG).

Retaining VTB as an owner could help Tele2 Russia's lobbyingeffort to obtain a licence to provide high-speed 4G services.

At a competitive disadvantage since losing a 4G licencetender last year, it has argued for technology neutrality toallow faster internet speeds on its existing radio band.

The Tele2 deal is seen by analysts as likely to lead to aneventual tie-up with state-controlled rival Rostelecom, Russia's fifth-largest mobile operator, and challengethe top three of MTS, Megafon andVimpelCom.

Tele2 Russia's new owners have links to Rostelecom. In 2011NMG sold its stake in cable TV company NationalTelecommunications to Rostelecom. The former chief of the cablecompany, Sergei Kalugin, became CEO of Rostelecom.

VTB's Soloviev said the bank aims to increase Tele2 Russia'spresence in the market and widen its product range throughlicences or joint ventures. He said it is already in talks withpossible partners, including Rostelecom.

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