Telenor Ups Stake in Combellga to 100%

Norway's top telecommunications company, Telenor, said Tuesday that it had paid $30 million for the remaining 25 percent of Moscow fixed-line operator Combellga that it did not already own.

In 2000, Telenor bought 75 percent of Comincom, which owns Combellga, from Russia's Foreign Ministry and two Belgian companies, Alcatel Bell and Belgacom, for $120 million.

The remaining stake in the carrier and Internet provider was acquired from "private individuals and public organizations," the company said in a statement.

"Telenor's further investment is based on Telenor's positive experiences in the Russian market and the potential that lies in further leveraging the company's core competencies as a leading operator in the corporate communications market in the advanced Nordic regions," the company said.

"Telenor has opted to take full control of Comincom-Combellga to ensure flexibility in maximizing the value of its investment."

Combellga now controls approximately 11 percent of Moscow's growing alternative fixed-line market, estimated at $750 million to $800 million in 2002, a year in which the company's revenues grew 32 percent to $85 million.

Telenor said it expects Combellga's revenues to hit $100 million this year.

Analysts said the deal opens the gate for Golden Telecom, Russia's leading alternative carrier and Internet provider, to acquire Combellga in exchange for Telenor's receiving a blocking stake in Golden Telecom, which is listed on Nasdaq and valued at some $600 million.

"The speculations that have been in the market are justified," said Dmitry Vinogradov, an analyst at Brunswick UBS. "From the strategic point of view, this would be a good deal, since Combellga is the only independent alternative fixed-line operator in the Moscow market, squeezed in between Golden and Sistema."

"There are hardly any doubts now that this is a step for Telenor toward gaining a blocking stake in Golden Telecom," said Nadezhda Golubeva, an analyst at Aton investment bank. "A 100 percent stake in Combellga is currently worth about 22 percent to 23 percent of Golden Telecom."

If merged with Golden Telecom, the combined company would control 39 percent of Moscow's alternative fixed-line market, leaving only one real competitor, City Hall-connected Sistema, which has roughly 34 percent of the market through its subsidiaries -- Comstar, Golden Line, MTU-Inform and Telmos, according to Golubeva.

"Both Telenor and Golden Telecom would benefit from such a transaction," Vinogradov said.

He added that the potential deal will depend on Combellga's valuation.

Both Telenor and Golden Telecom declined to comment Tuesday on the possibility of the deal.

"The deal is good for Telenor, regardless of whether it is going to get a stake in Golden Telecom or not, as the price the company paid for the 25 percent is less than what it could have paid at the rate it paid for a 75 percent stake in 2000," Vinogradov said.