You're reading: MTS could sell some of Ukraine business off

Moscow - Mobile TeleSystems (MTS) is thinking of selling some of its MTS Ukraine business off, the Vedomosti newspaper quoted sources close to the Russian telco as saying.

A source at AFK Sistema, which owns 53.5 percent of MTS, confirmed this.

Vedomosti’s sources said the difficult political environment and tense relations with the Ukrainian August were behind the possible sale. The Ukrainian regulator may, for example, be unhappy with the fact that the telco’s Ukrainian subsidiary only pays dividends to its Russian parent company, which received Hr 2.23 billion ($270 million) in 2013.

One option might be to share the business with a Western foreign partner, which would invest in 3G networks in return for dividends, Vedomosti’s sources said. They said MTS had already hired a bank belonging to “a major international group” to value the Ukrainian asset.

MTS spokesman Dmitry Solodovnikov did not comment on the possible sale of part of the Ukrainian subsidiary but did say the company did not intend to pull out of the Ukrainian market.

The MTS business in Ukraine came under threat after the Ukrainian government came up with an initiative to bar companies with more than 50 percent Russian ownership from bidding at 3G frequency tenders, however the National Commission for Communications Regulation removed this clause from a draft government decree on the matter early in October.

MTS Ukraine halted operations in Crimea on Aug. 7 after Russia’s LLC K-Telecom launched a mobile network there using frequencies previously belonging to MTS Ukraine.

The only operator in Ukraine with 3G frequencies at present is 3Mob, which is owned by Rinat Akhmetov’s Ukrtelecom. 3Mob LLC recently said it could not provide mobile communications services on the territory of Sevastopol due to the closure of the Sevastopol branch of Ukrtelecom. MTS Ukraine planned from Oct. 1 to serve subscribers in Crimea only via the roaming service of the 3Mob network.

MTS Ukraine has a 38 percent share of the Ukrainian mobile communications market. Ukraine accounts for 7.8 percent of the MTS Group’s revenue. MTS Ukraine increased revenue 2.2 percent in Q2 2014 to Hr 2.56 billion, however in Russian rubles, revenue plummeted nearly 23 percent due to the Ukrainian currency’s devaluation. OIBDA fell 3.1 percent to Hr 1.3 billion.