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MegaFon acquires 4G provider for $1.2 billion

Russia’s MegaFon has agreed to buy LTE service provider, Scartel, for $1.2 billion.

Operating under the Yota brand, Scartel delivers high-speed 4G mobile broadband services in Russia, and the deal is expected to allow MegaFon to further enhance its position in this segment.

Russian millionaire Alisher Usmanov holds part ownership of Scartel, and MegaFon will assume $600 million of the company’s debt as part of the deal.

MegaFon plans to refinance this debt as it is reportedly able to borrow at a lower rate than Scartel.

“In terms of strategy, the Scartel acquisition is fully justified as it strengthens MegaFon’s position,” Anna Kurbatova, analyst at BCS Financial Group in Moscow, told Bloomberg.

“However, it’s yet hard to say if MegaFon is overpaying or not as the company didn’t disclose any financial information.”

MegaFon has been in merger talks with Yota since July last year, and seems to be aggressively pursuing the roll-out of LTE across Russia.

“We believe in the mass popularity of this product in the future and we are clearly betting on it, including with this deal," said  Ivan Tavrin, CEO at MegaFon.

"This is why we will do everything to be a leader in this sector."