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. Last Updated: 07/27/2016

Vimpelcom Reaches South With StavTeleSot Purchase

The country's No. 2 cellular operator Vimpelcom continued its regional expansion drive with the acquisition of a controlling stake in southern Russia's StavTeleSot for $38.4 million.

Under the deal announced Friday, Vimpelcom purchased 90 percent of StavTeleSot, the country's seventh largest cellular operator: 49 percent from Telenor Mobile and 41 percent from Stavtelecom.

Analysts said the acquisition would help bolster Vimpelcom's competitiveness outside the capital, where rival Mobile TeleSystems has dominated.

"For Vimpelcom it's important to develop its regional business, and while it has fewer subscribers in the regions than MTS, time does matter and acquisitions give it a chance to catch up," said Vyacheslav Nikolayev, a vice president at Moscow's Trust and Investment Bank.

Vimpelcom will also grant StavTeleSot a $9.2 million credit to pay back an outstanding loan. Vimpelcom will further act as a guarantor of StavTeleSot's $1.4 million debt.

The deal came as little surprise to industry watchers, but company officials nonetheless considered it a notable achievement.

"We are very content with the purchase of StavTeleSot," said Alexei Mishchenko, general director at Vimpelcom-R, Vimpelcom's regional arm. "It's a profitable company, the leader in the market, which will allow us to significantly strengthen our positions in the Southern Federal District."

StavTeleSot had 175,200 subscribers at the end of 2002, or 63 percent of the market, Vimpelcom said. Rival Megafon serves an estimated 130,000 subscribers in the region.

ACM Consulting estimates current penetration in the Stavropol region at 12 percent, the nationwide average, and forecasts that 35 percent of the region's residents will be cellular phone users by 2007.

Analysts called StavTeleSot a solid value.

"The price of the purchase is fair given StavTeleSot's average revenue per user of $21, which is rather high for a regional company," Nikolayev said.