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. Last Updated: 07/27/2016

MTS Snaps Up Volga Operator

Russia's No. 1 cellular operator, Mobile TeleSystems, on Wednesday said it bought a controlling stake in Taif-Telkom for $61 million, putting the company at the helm of one of the fastest growing regional markets in the country.

Under the deal, MTS bought 51 percent of common shares for $51 million and 50 percent of privileged shares for $10 million.

"MTS continues to operate in accordance with its business development strategy by expanding the geography of our activities in Russia's regions," said MTS president, Mikhail Smirnov, in the company's statement. "We are buying a successful and profitable company in the top 10 Russian cellular operators and strengthening MTS' position in Volga region."

Analysts welcomed the deal.

"MTS paid a fair price for the company with $580 per subscriber," said Vyacheslav Nikolayev, an analyst at Trust and Investment Bank. "MTS doesn't have a license for the Volga super region, and entering this market is very important for the company.

"Taif-Telkom's sound financials are a significant plus for MTS' consolidated regional operations," he added.

MTS said it has also signed an agreement giving it an option to buy out the remaining stakes of Taif-Telkom for a minimum of $59 million within two years. Taif-Telkom, the country's sixth largest cellular operator, is currently owned by shareholders controlled by the locally powerful Taif group, which has businesses in oil refining, construction and wine import.

Taif Telkom operates in Tatarstan under Santel brand and has 240,000 subscribers, a 53 percent share of the local market. According to ACM Consulting firm, Taif Telkom's major competitors include AMPS operator Tatinkom with 110,000 subscribers, Vimpelcom with 65,000 subscribers and Megafon, which launched earlier this year and has 3,000 subscribers.

ACM Consulting estimates current cellular penetration in the region at 13 percent and forecasts 45 percent penetration for 2007. The number of mobile subscribers will more than double by the end of this year, said ACM.