Moody’s
London, 13 August 2013 — Moody’s Investors Service has today said that it views as credit neutral for MegaFon OJSC (Baa3 negative) the company’s potential acquisition of Scartel/Yota, which is the owner of 2×30 megahertz (MHz) nationwide 4G/LTE spectrum in the 2.5-2.6 gigahertz (GHz) frequency band and a network covering 27% of the Russian population. Scartel/Yota is 99% owned by Garsdale group, which also controls 50% plus 100 shares in MegaFon.
Moody’s considers that for MegaFon, the long-term positive effect from making savings on capital expenditure (capex) in the expansion of its 4G/LTE network and owning a wider 4G/LTE spectrum is likely to be balanced by an extended period of deleveraging following the company’s anticipated repayment of the bulk of Scartel/Yota’s $600 million debt in 2013 or consolidation of that debt as of the year-end in MegaFon’s financial statements.
On 8 August, MegaFon announced that its board of directors has approved the acquisition of a 100% stake in Scartel/Yota for a total consideration of $1.18 billion (excluding debt). The payment will be made in two equal instalments deferred by one and two years, respectively, from the date of the deal closing, plus interest at 6% per annum. The acquisition is yet to be approved by the majority of MegaFon’s disinterested shareholders.
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