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. Last Updated: 07/27/2016

Paper: Usmanov Behind Telekominvest Stake Buy

Billionaire Alisher Usmanov is behind a company buying into Telekominvest, a major shareholder in No. 3 mobile phone company MegaFon, Vedomosti reported Monday.

Fixed-line operator North-West Telecom said last week that it had approved the sale of its 15 percent stake in Telekominvest for $410 million.

The sale of the stake in Telekominvest, which holds holds 31.3 percent of MegaFon, would give Usmanov a 4.7 percent stake in MegaFon, and could herald changes in the ownership structure of the mobile firm.

Usmanov is behind the little-known buyer of the stake, AF Telecom Holding, two sources close to North-West Telecom said, Vedomosti reported.

In the sale, AF Telecom Holding was represented by Renaissance Capital, according to a May registry entry cited by Vedomosti.

No one at North-West Telecom or Usmanov's Gazprominvest was available for comment.

IT and Communications Minister Leonid Reiman was one of the founders of St. Petersburg-based North-West Telecom and Telekominvest in the '90s.

Mikhail Fridman's Alfa Group has been locked for years in a bitter legal dispute with IPOC, a Bermuda-registered fund that owns a stake in Telekominvest, for control of a 25.1 percent stake in MegaFon bought by CT Mobile, an Alfa Group private equity vehicle.

The deal, if confirmed, would be Usmanov's first foray into the mobile phone business. Usmanov, the president of GazpromInvest Holding and owner of Gazmetall and Metalloinvest Group, has a wide range of holdings from metals to the media.

MegaFon is valued at $14 billion to $15 billion by MDM Bank.

Sweden's TeliaSonera, which owns 43.9 percent of MegaFon, said Monday that the acquisition of the stake in Telekominvest was a surprise.

"We were stunned to learn that a Cyprus company has indirectly bought into MegaFon by buying Telekominvest," TeliaSonera spokesman Thomas Westlind said by telephone from Sweden. "We are planning great [things] for the company, we are hoping to have an IPO to expand the company."

Westlind said TeliaSonera was not consulted before the sale but added that a provision in the shareholders' agreements may have allowed such a step.

MDM said in a note to investors last week that the price of the deal implied at least a 37 percent discount.

Alexander Shugal, an analyst with J'son and Partners, said the price was not of utmost importance to MegaFon, "which is a major player and a company with lots of administrative resources.

"There must be other reasons for selling the stake below their estimate of fair value. There must be some realignment of forces within the enterprise," Shugal said.

UralSib analyst Konstantin Chernyshev said though his company valued the Telekominvest stake at $500 million, Usmanov's offer of $410 million would make quick funds available for expansion in a market that is highly saturated.

"MegaFon has a lot of powerful investors and the addition of Usmanov may signal a sea change in the company," Chernyshev said.