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Billionaire Evtushenkov Eyes Expansion in Russia, Beyond

Billionaire Vladimir Evtushenkov, with his wireless carrier facing stiffer competition in Russia, said he is studying takeover targets including Telefonica SA (TEF)’s Czech unit to expand his telecommunications business abroad.

Evtushenkov, owner of Russia’s largest wireless operator OAO Mobile TeleSystems (MBT), said in an interview he is considering targets in various markets and doesn’t have any concrete proposals pending. He is also analyzing growth opportunities in Russia, with a continuing interest to buy Tele2 Russia, and India, where he already has wireless operations.

MTS, founded by Evtushenkov two decades ago, is growing at its slowest pace since 2009 after amassing 101 million subscribers in Russia and former Soviet republics. A purchase such as Telefonica SA’s Czech business would mark a leap toward Europe, a hotbed for telecommunications consolidation.

“We are considering all possibilities everywhere,” Evtushenkov, 64, said this week in the Moscow office of his holding company AFK Sistema. (SSA) “We receive different proposals and we study everything very thoroughly.”

Telefonica Czech Republic AS rose to its highest since June 17, closing up 4 percent at 296.4 koruna. Sistema fell 0.5 percent to 28.70 rubles in Moscow, while MTS rose 0.6 percent to 282.21 rubles.

Photographer: Andrey Rudakov/Bloomberg

The logo of OAO Mobile TeleSystems sits on display outside one of the company's stores in Moscow, Russia. Close

The logo of OAO Mobile TeleSystems sits on display outside one of the company's stores in Moscow, Russia.

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Photographer: Andrey Rudakov/Bloomberg

The logo of OAO Mobile TeleSystems sits on display outside one of the company's stores in Moscow, Russia.

Telefonica’s Czech unit is the country’s largest operator with 9.3 million users in the Czech Republic and Slovakia. Its stock had lost more than a quarter of its value in the past year through yesterday, cutting the company’s market capitalization to about $4.7 billion.

Topping VimpelCom

“We never comment on rumors and we have no comment on this one,” Hany Farghali, a spokesman for Telefonica Czech, said from Prague.

Telefonica, Spain’s biggest phone company, is seeking to sell regional assets to help cut its debt, with the Czech unit high on a list of potential businesses for sale, people with knowledge of the matter said in April.

A Telefonica spokesman in Madrid declined to comment.

While demand for wireless data keeps rising in Russia, voice revenue is slowing as almost everyone already has a mobile phone. MTS’s first-quarter revenue advanced 2 percent, also hurt by a legal dispute in Uzbekistan that forced the company to shut its operations in the country.

Sistema is developing MTS as a company which “makes value-accretive acquisitions and not just acquisitions at any price,” Evtushenkov said.

India, Russia

That’s why MTS’s market value, at about $20 billion, tops that of rival VimpelCom Ltd. (VIP), which operates in 15 countries and has twice as many users, Evtushenkov said. Billionaire Mikhail Fridman’s VimpelCom, struggling to cut debt after buying assets in Africa, Asia and Italy, is valued at about $18 billion.

Sistema’s biggest foreign asset is in India, where it has spent about $3.6 billion since 2007 to develop wireless unit Sistema Shyam TeleServices Ltd. The unit operates under the MTS India brand and may be sold to MTS once it turns operationally profitable, Sistema has said.

The Indian unit has about 10 million subscribers, while local market leaders Bharti Airtel Ltd. (BHARTI) and Vodafone Group Plc (VOD) have more than 150 million users each, according to the Telecom Regulatory Authority. Sistema had been looking into buying Indian operators such as Tata Teleservices Ltd. or Aircel Ltd. which have over 60 million users each, the Economic Times of India reported this year.

Tele2 Russia

Evtushenkov declined to comment on any acquisition targets in India.

“We came to India for at least 20 years and we don’t expect success immediately,” he said. Indian authorities have pledged to pass merger regulations by year-end which will make the situation clearer, he said. “Things are progressing each and every week.”

At home, Evtushenkov doesn’t see the recent acquisition of wireless operator Tele2 Russia by state-run lender VTB Group (VTBR) as a sign of an increase in the government’s role in the economy. MTS tried to buy Tele2 Russia first from its Swedish owners and then approached VTB after it had bought it.

“I don’t exclude that this year VTB will resell this asset to some private structure in Russia,” he said. “It may be me or a consortium of investors. We made an offer to VTB and are ready to buy.”

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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