MTS breaks ties with Armenia

MTS is considering exiting business in Armenia, Kommersant was told in the company. Among the possible buyers, local media called Gazprom or the bookmaker 1Xbet. But analysts suggest that MTS Armenia will be of interest to local players from neighboring countries who want to strengthen their presence in this market. The entire company can be valued at 19 billion rubles, experts say, but the desire of MTS to sell the asset will quickly reduce the cost of the transaction.

The MTS subsidiary in Armenia, which owns the Viva-MTS brand, has applied to the Public Services Regulatory Commission (PSRC) of the country for permission to sell, said Interfax. According to Armenian media, Gazprom or 1Xbet bookmaker can become a buyer. MTS Kommersant explained that they “focus on business development in the Russian Federation” and can “consider the sale of the asset if there are buyers with a good assessment.” Gazprom and 1Xbet did not respond to requests.

Viva-MTS previously worked under the VivaCell brand, its managing director, K-Telecom CJSC, was registered in Armenia in 2004. The Russian MTS in 2007 acquired an 80% stake in International Cell Holding Ltd, which was then the sole owner of K-Telecom, also entering into an option agreement to buy and sell the remaining 20%. The deal amounted to 24.9 billion rubles.

Kommersant’s interlocutor on the market believes that the decision of MTS to leave the region was provoked by the US and UK sanctions imposed on MTS Bank in February.

At the same time, he adds, the Armenian market “did not bring significant income to MTS.” According to the company’s financial statements, revenue in Armenia for 2022 increased by 4.1%, to 51 billion drams (9.7 billion rubles), while the group’s total revenues amounted to 541.7 billion rubles.

MTS has been consistently going out of business in the post-Soviet space in recent years. Due to a corruption investigation in Uzbekistan, which the Securities and Exchange Commission and the US Department of Justice started in relation to MTS in 2014 on suspicion of corrupt payments, the company sold the local asset to Universal Mobile Systems (UMS) in 2016. MTS announced a settlement agreement with the US authorities in March 2019 (see below). “Kommersant” dated March 7, 2019). In November 2019, MTS also sold its subsidiary VF Ukraine to the Azerbaijani mobile operator Bakcell for RUB 44.38 billion. Now the company has only 49% in MTS Belarus. The company’s revenue in the region amounted to 43 billion rubles, net profit – 11 billion rubles. MTS does not disclose whether it is planned to sell this asset as well.

In general, the interlocutor of Kommersant believes in the market, the expansion of MTS and other Russian operators in the CIS and other countries was not successful: “These markets are very specific, connections are of great importance there, which makes doing business extremely difficult. Leaving Armenia was a matter of time, sanctions against MTS Bank only became a catalyst.”

According to Finam FG analyst Leonid Delitsyn, MTS is selling the asset, since “the Armenian market is not actively developing and does not particularly affect the financial performance of the holding.” According to him, an asset in Armenia may cost 9-10 billion rubles, but the cost “may vary depending on the desire of the owner to sell quickly.”

Kommersant’s interlocutor on the market believes that the asset can be valued based on a multiplier of up to four OIBDA (according to the results of 2022, it amounted to 27.5 billion drams, or 5.22 billion rubles), but “most likely, the terms of the transaction will be non-market, since The company is in a hurry to sell. MForum agency analyst Aleksey Boyko believes that an asset in Armenia could cost about 19 billion rubles. excluding debt: “But we don’t know if we are talking about selling the whole company or part of it.” According to iKS-Consulting analyst Maxim Savvatin, the buyer is more likely to be “one of the local players in neighboring countries interested in developing in the Armenian market.”

Yulia Yurasova, Yulia Silence