MTS ACQUIRES VIVACELL FOR USD400M

TeleGeography, DC
Tuesday, 18 September 2007

Armenia

Russia’s leading mobile operator by subscribers, Mobile TeleSystems
(MTS), has purchased Armenian counterpart Karabakh Telecom (K-Telecom),
which markets services under the VivaCell banner, continuing its
expansion into the fast-growing CIS market. It is understood that MTS
paid in excess of USD400 million for the cellco, which is considered
a fair market valuation given the growth potential in the Armenian
mobile sector. As at 31 March 2007 Armenia was home to around 1.08
million mobile users, of which approximately 60% were signed up to
VivaCell with rival ArmenTel, itself now backed by another Russian firm
(Vimpelcom), controlling the remainder.

TeleGeography’s GlobalComms database writes that VivaCell entered
the market on 1 July 2005 when it launched commercial GSM-900/1800
services.

Lebanese-owned K-Telecom was licensed by the Armenian government
on 4 November 2004, with the state issuing no official explanation
as to why it awarded the USD7 million wireless concession without a
competitive tender.

In July this year, K-Telecom’s Lebanese parent company, the Fattouch
Investment Group, said it had no intention of exiting the Armenian
telecoms market, scotching an earlier press rumour suggesting that
MTS had offered to purchase the VivaCell network. In a meeting held to
celebrate the second anniversary of VivaCell’s launch, Pierre Fattouch
said the Lebanese group had already invested about USD340 million
in its Armenian wireless network and had plans to further expand its
operations in the country. Fattouch also revealed that VivaCell has
broken the one-million barrier for mobile subscribers at that date,
giving it a commanding 70% share of the local wireless market.

‘The one million is just the beginning and we are actively expanding
our network to a capacity of 1.5 million subscribers as well as
preparing the launch of third-generation services,’ he said.