Agreements signed to consolidate 100% of Tele2 Russia
Moscow, Russia - February 12, 2020 - Rostelecom PJSC (MOEX - RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia's national telecommunications operator, announces that a number of legal agreements have been signed with VTB Bank and a consortium of investors as part of the process to acquire the remaining 55% stake in T2 RTK Holding LLC (Tele2 Russia).
The following agreements were signed by counterparties in line with deal structure approved by the Board of Directors to acquire 55% of Tele2 Russia[1]:
- A barter agreement to acquire a 10% stake in Tele2 Russia through the exchange of 10% of ordinary Rostelecom shares held by MOBITEL (Rostelecom subsidiary). The transaction has a value of RUB 24 billion;
- A share purchase agreement relating to the acquisition of a 45% stake in Tele2 Russia;
- Other legal agreements and documents.
The deal will be financed as follows:
- 17.5% of Tele2 Russia will be acquired for RUB 42 billion in cash;
- 27.5% of Tele2 Russia will be acquired using RUB 66 billion in cash proceeds received from the additional share issue and private subscription of Rostelecom ordinary shares awarded to VTB bank at a price of RUB 93.21 per share.
As a result of additional share issue, the number of ordinary shares will increase by 708,082,975 shares to 3,282,997,929 shares (including shares acquired in-line with preemptive rights).
The transaction is expected to be completed within the coming month.
The further information on the deal is available in the IR section of the company web-site.
Mikhail Oseevskiy, President of Rostelecom, commented: "We have entered the final phase of a complex deal to acquire 100% of Tele2 Russia, the most successful and rapidly growing mobile player in Russia. The largest transaction of the recent years will cement Rostelecom's leading position in the digital service market. We will be updating our strategy in the near future to account for adjustments in our key strategic goals, with focus also on new technology and product development including 5G. By combining the largest fibre backbone and subscriber base in Russia with Tele2's track record in mobile business we have formed an unrivalled integrated platform for rendering telecom, IT and other world-class digital solutions. The deal provides Rostelecom with a significant competitive edge, which has potential to enhance our financial profile, increase margins and attract new clients, whose faith and trust we expect to retain for years to come.
Moreover, as a result of the deal, VTB and its partners will become our shareholders, which provides Rostelecom with supportive and long-term strategic investors whose motivation matches our aim to increase capitalization."
Andrey Kostin, President and Chairman of VTB Bank Management Board:
"VTB made a profitable investment by buying into Tele2's capital. Since the acquisition of the company's shares in 2013, Tele2 has evolved from a niche player into a federal mobile operator. Divesting Tele2's stake provided the bank with a unique opportunity to become a major shareholder of Rostelecom, which following the transaction turns into the country's largest integrated digital services operator with exceptional competitive advantages. The company's infrastructure, expertise and technology platform allow for the implementation of the most complex digital projects nationwide. In this area, we are counting on a major synergy effect from our cooperation with Rostelecom."
Further information is available at https://www.company.rt.ru/en/ir/news_calendar/.
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Rostelecom is the largest digital service provider, operating in all segments of the telecommunications market in Russia, it serves millions of households, the state and private enterprises across the country.
Rostelecom is Russia's undisputed market leader, providing high-speed Internet access to over 13.1 million users and pay-TV services to more than 10.3 million clients, over 5.5 million of which are subscribed to Rostelecom's IPTV services on a national level.
In the nine months of 2019, the Group generated RUB 242.6 billion of revenues, RUB 81.4 billion of OIBDA (33.6% of revenue) and RUB 16.4 billion of net income.
The Group is the leading provider of telecommunications services to government bodies and corporates of all levels.
Rostelecom is a key strategic innovator that provides solutions in the following fields: E-Government, cybersecurity, data-centers and cloud computing, biometry, healthcare, education and housing & utility services.
The Group's stable financial position is confirmed by its credit ratings. Rostelecom has been assigned 'BBB-' and 'BB+' international credit ratings by Fitch Ratings and Standard & Poor's respectively, and AA(RU) by ACRA.
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Certain statements in this press release are forward-looking statements within the meaning of the U.S. federal securities laws and intended to be covered by the safe harbours created thereby.
Those forward-looking statements include, but are not limited to:
- Assessment of PAO Rostelecom's (the Company) future operating and financial results as well as forecasts of the present value of future cash flows and related factors;
- The Company's plans to take ownership stakes in other organisations;
- the Company's anticipated capital expenditures and plans to construct and modernize its network;
- the Company's expectations as to the growth in demand for its services, plans relating to the expansion of the range of its services and their pricing;
- the Company's plans with respect to improving its corporate governance practices;
- the Company's expectations as to its position in the telecommunications market and forecasts on the development of the market segments within which the Company operates;
- economic outlook and industry trends;
- the Company's expectations as to the regulation of the Russian telecommunications industry and assessment of impact of regulatory initiatives on the Company's activity;
- other statements regarding matters that are not historical facts.
Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include:
- risks relating to changes in political, economic and social conditions in Russia as well as changes in global economic conditions;
- risks relating to Russian legislation, regulation and taxation, including laws, regulations, decrees and decisions governing the Russian telecommunications industry, securities industry as well as currency and exchange controls relating to Russian entities and their official interpretation by regulatory bodies;
- risks relating to the Company, including the achievement of the anticipated results, levels of profitability and growth, ability to create and meet demand for the Company's services including their promotions, and the ability of the Company to remain competitive in a liberalized telecommunications market;
- technological risks associated with the functioning and development of the telecommunications infrastructure, technological innovations as well as the convergence of technologies;
- other risks and uncertainties. For a more detailed discussion of these and other factors, see the Company's Annual Report and the Company's other public filings.
Many of these factors are beyond the Company's ability to control or predict. Given these and other uncertainties, readers are cautioned not to place undue reliance on any of the forward-looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements (which are made as of the date hereof) to reflect events or circumstances upon the annual report publication or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.
