TeliaSonera’s Eurasian divestment plans heralds M&A opportunities in Caucasus, Central Asia and Nepal

IHS Technology

September 17th 2015

TeliaSonera’s Eurasian divestment plans heralds M&A opportunities in Caucasus, Central Asia and Nepal

By Julian Watson, Analyst, IHS Technology

TeliaSonera’s Eurasian divestment plans heralds M&A opportunities in Caucasus, Central Asia and Nepal

·     TeliaSonera’s President and CEO Johan Dennelind has confirmed that TeliaSonera plans to exit Eurasia and focus on core areas such as connectivity and convergence in its Sweden and “Region Europe” regions.

·     TeliaSonera’s Eurasian region spans Azerbaijan, Georgia, Kazakhstan, Moldova, Nepal, Tajikistan and Uzbekistan. The mobile assets in Azerbaijan, Georgia, Kazakhstan and Moldova are co-owned (through Fintur Holding) with another operator Turkcell, in  which TeliaSonera owns a 38% stake.

·     In IHS view, full divestment from the Eurasia may take several years, but represents an opportunity for groups such as MegaFon, Mobile TeleSystems (MTS), Tele2, Turkcell and VimpelCom to expand their geographical footprint.

Our analysis

TeliaSonera has decided to divest from its Eurasian assets and focus on its core markets of Sweden and Region Europe, which spans the Nordics (Denmark, Finland, Norway and Sweden), Spain and the Baltics (Estonia, Latvia and Lithuania). The announcement shortly follows the abandonment of the proposed merger of its Danish mobile assets with those of Telenor. The failure of the deal to get approval from the European Commission will mean that TeliaSonera will need to bear the cost of running a separate mobile operation in Denmark. TeliaSonera also faces headwinds in the shape of greater competition in the Nordics from an expansionist TDC, which acquired the Norwegian cable operator Get last year.

For the purposes of future divestments, these assets fall into two categories:

·         Those majority owned on a direct basis: Nepal (60.4%), Tajikistan (60%) and Uzbekistan (94%)

·         Those majority controlled on an indirect basis (through its stakes in Fintur and Turkcell): Azerbaijan, Georgia, Kazakhstan  and Moldova.

It may be easier for TeliaSonera to divest from its directly controlled assets. Divestment from Azerbaijan, Georgia, Kazakhstan and Moldova will be complicated by the ongoing legal battle for control over Turkcell, in which it holds a 38% stake and is its co-investor in Fintur. Russia’s Alfa Group, which is seeking to gain control over Turkcell, may be interested in expanding its presence the region, although its ownership of a 47.9% stake in VimpelCom, which has an extensive Eurasia presence, may complicate matters. Among the other potential bidders for assets are Russia’s Mobile TeleSystem (MTS), which lacks a presence in Kazakhstan and Tele2, which is present in Kazakhstan.