Azerbaijan-based oil and gas holding NEQSOL signed a binding agreement to buy mobile operator Vodafone Ukraine for $734 million, including $84 million in a postponed payment, the companies announced on Nov. 25.
NEQSOL makes the acquisition through its company Bakcell, Azerbaijan’s leading internet provider and mobile operator, which has three million subscribers. This is the company’s first acquisition in Ukraine.
Vodafone Ukraine is a much bigger carrier than Bakcell, with more than 20 million users and $74 million in net profit in 2018, it’s the second-largest mobile operator in Ukraine. It works under the British Vodafone brand but its owner is the Russian telecom company MTS that belongs to Russian oligarch Vladimir Yevtushenkov.
Ukraine’s Anti-Monopoly Committee allowed the purchase on Oct. 24. Bakcell was previously allowed to buy equity in the Dutch mobile operator Preludium B.V., through which MTS owns Vodafone Ukraine. As a result, MTS signed an agreement to give away 100% Vodafone Ukraine’s shares to Bakcell.
“The transaction is complementary to MTS strategy, which involves a concentration of efforts on the Russian market, where it generates over 90% of the group’s revenue,” MTS stated on its website on Nov. 25, adding that Ukraine is an “insignificant” market for the Russian firm.
Net profit of Vodafone Ukraine dropped by 20% in 2018 as the company increased investments to deploy 4G and 3G networks, according to a company statement.
The change of ownership will not affect the company’s operations, customer services or interactions with partners, suppliers and contractors, Vodafone Ukraine spokesperson Victoria Pavlovskaya told the Kyiv Post. The company will continue to provide services under the Vodafone brand.
Bakcell’s parent company NEQSOL owns firms in telecoms and construction but also focuses on the oil and gas industry, where it began in the early 1990s. Today NEQSOL operates in the United Kingdom, the United States, Turkey, Azerbaijan, Kazakhstan, the United Arab Emirates and Bangladesh.
Reportedly, NEQSOL is closely tied with the Azerbaijani government’s oil and gas holdings, while Azerbaijan itself is one of Ukraine’s main oil suppliers.
It is unknown who owns Bakcell.
Independent telecoms expert Roman Khimich qualifies Bakcell as an ‘unexpected’ buyer and doesn’t see any obvious reasons for the Azerbaijani firm to enter Ukraine.
“No matter who the actual owners of the company are, they will not want and will not be able to arrange a ‘revolution’ on the market,” Khimich said.
And whoever they are, Khimich thinks they will have to confront the same problems other mobile operators are trying to solve: a very low average revenue per user (about $14), massive investments in network coverage and the deployment of the 4G networks across Ukraine.
The difference of scale between the buyer and the seller could lead to speculations over the move, Khimich thinks. To avoid them, the company must come out with a clear message about its plans regarding the future of Vodafone Ukraine.
“If they have a clear and adequate strategy, they should hurry to make it public in order to avoid speculation over their intentions,” Khimich added.
Vodafone Ukraine owner Russian oligarch Yevstuschenkov was looking for opportunities to sell his Ukrainian assets back in 2015. While French mobile operator Orange was among the possible buyers, the agreement never happened.
