Swedish Tele2 buys controlling stake in Kazakh mobile operator

business and economy

Swedish Tele2 buys controlling stake in Kazakh mobile operator

By SRI ⋅ December 15, 2009 ⋅

(SRI) - Swedish telecom operator Tele2 has acquired a 51-percent stake in Kazakhstan’s smallest GSM operator Mobile Telecom Service for SEK550 million ($77.3 million) on Monday from the state telecommunications company Kazakhtelecom.

Mobile Telecom Service has been providing mobile services under the Neo brand since 2007 and has about one million subscribers, compared with seven million each for VimpelCom and KCell, its larger rivals on the Kazakh mobile market.

Tele2, which is already active in Russia, reportedly plans to relaunch the Neo brand within a year, and has agreed to invest a further SEK360 million ($50.7 million) to help increase the operator’s market share to 20 percent. The deal is expected to close in early 2010.

Tele2 has an option to buy the other 49 percent of Mobile Telecom Service from private investment group Asianet Holdings BV five years after the initial deal is finalized.

According to Tele2 CEO Harri Koponen, Kazakhstan is a large market with only two dominant telecom operators, and Neo will grow market share by offering good quality at a lower price than rivals. Tele2 expects Mobile Telecom Service, which has debt of $220 million, to break even 2-3 years after relaunch.

The company may expand further in the Commonwealth of Independent States but will initially focus on Kazakhstan.

Kazakhtelecom first announced its plans to sell its stake in Mobile Telecom Service in June.