WPS: Russian Finance Report

On March 3, Renova Capital fund of direct investments of Victor Vekselberg officially announced acquisition of a 100% stake in the Russian alternative operator Corbina Telecom for $146 million. Experts say that obtaining this investor Corbina Telecom may become one of the largest players on the market of broadband Internet services in Moscow.

The sum of the deal amounted to $146 million. For this sum, Renova Capital bought out 100% of Corbina Telecom shares from American IDT Corporation. Dmitry Levonyan, Director of Renova Capital explained, "Renova Capital is a fund of direct investments and we make all acquisitions for the purchase of growth of the acquired companies. That is why it is possible that three or four years later we may conduct an IPO of Corbina Telecom. Now we are going to broaden presence of the company in the segments of cellular and fixed-line communication, as well as to continue construction of a high-speed optical fiber line in Moscow."

Not long before announcement of the deal between Renova Capital and IDT Corporation representatives of Corbina Telecom announced an ambitious project worth $72 million in the framework of which the operator was going to bring optical fiber communication channels to every apartment in Moscow and to establish control over more than one-third of the market of broadband Internet services in Moscow by 2008. Now the share of Corbina Telecom in this segment does not exceed 4%.

Corbina Telecom was established at the end of 1995. Now it has fourth place according to turnover among the Russian alternative communication operators (in 2004, its turnover amounted to $73 million). Corbina operates in 24 regions of Russia providing a broad range of services from mobile telephony to Internet access services.

Experts remark that Corbina Telecom may become one of the largest players on the Moscow telecommunication market but for this purpose the company will have to solve several serious problems. Analyst Konstantin Ankilov, of iKS-Consulting comments, "The broadband network construction project of Corbina is immature in many aspects yet and the company will inevitably encounter insufficient demand for its services even in Moscow. Corbina also starts working on a quite divided market where there are already several large players including potential monopoly Comstar-UTS that can bring cable to majority of apartments in Moscow already now. Along with this, the market of broadband Internet services is the most attractive for investors now. In 2005, it grew 72% in Russia. Financial capabilities of Renova Capital make the plans of Corbina quite realistic."

Representatives of Comstar-UTS do not expect aggravation of competition on the market of broadband Internet services in Moscow from the deal. Semen Rabovsky, General Director of Comstar-UTS, comments, "Money is not a problem for communication operators now. That is why acquisition of Corbina by Renova Capital does not strengthen market positions of the operator."