Tele 2 AB Divests Tele2 Russia

It is rumored that Rossiya Bank might buy 30% of Tele2 from VTB Group, which had bought the whole Tele2 business on March 27, 2013, but the transaction has not yet been finalized. The rumor that Rossiya Bank would be the intermediary buyer to sell its stake to Rostelecom, the fifth largest Russian Carrier in terms of subscription, had also been widespread.


Swedish telecommunication company Tele2 AB sold its Russian business to bank VTB Group in a cash transaction worth US$2.4 billion in equity value and US$1.15 billion in net debt. The EV/EBITDA multiple was 4.9 based on 2012 financial results. Furthermore, the deal was completed in less than 7 days. Under the terms of the sale, if VTB was to sell its stake in Tele2 within a year of completing the transaction, half of any profit created by VTB would be allocated to Tele2. In addition, the Tele2 branding could be kept for a decade.

Tele2 set foot in the Russian market in 2003, launching GSM services in several regions. Through 10 years of operation in Russia, Tele2 became the fourth largest national operator there, with mobile subscriptions of 22.9 million by 1Q 2013. In addition, in 2012 Tele2 had successfully tested LTE 1800 network in Russia.The 3G penetration and smartphone ownership was still lower, assuring the growth in data services which could cut into the revenue of voice services. However, Tele2 could only offers GSM services, far behind other national operators in Russia, because it failed to obtain 3G spectrum in April 2007 and 4G spectrum in July 2012 to boost its mobile data services. Tele2 had placed hope on the regulators allowing it to reform its existing spectrum for the higher speed network construction but, so far, no agreement has been reached. Therefore, the operation of Tele2 had been hampered by the intense competition and a mature telecommunication market.