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MTS Climbs as Prospect of Sistema Indian Buyout Reduced

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Feb. 3 (Bloomberg) -- OAO Mobile TeleSystems gained in U.S. trading after controlling shareholder AFK Sistema’s Indian mobile-phone business lost most of its licenses, reducing concern that MTS may be forced to buy the unit.

American depositary receipts of MTS, Russia’s largest mobile-phone operator, rose 1.4 percent to $17.02 in New York, advancing 2 percent this week. MTS’s shares on Russia’s Micex Index rose 0.5 percent to 214.23 rubles, or $7.10. One ADR is equal to two ordinary shares.

Sistema -- which owns 50.82 percent of MTS according to data compiled by Bloomberg -- will contest a decision made yesterday by the Supreme Court of India revoking 21 of the 22 licenses held by Shyam TeleServices Ltd., which sells mobile-phone services in India under the MTS brand, according to a Sistema statement today.

The prospect that the Indian company won’t be merged with MTS represents “a significant reduction of risk for MTS,” said Konstantin Chernyshev, head of research at UralSib Financial Corp in Moscow. “MTS is a very good company, however, there has been a risk of value erosion if the company is forced to buy Shyam.”

Moscow-based MTS has a history of purchasing assets from Sistema.

The company acquired CJSC Sistema-Inventure, which owns 29 percent of the Moscow City Telephone Network, for 10.6 billion rubles ($342 million), according to a Dec. 1 statement on its website. As part of the deal, MTS agreed to repay 10.4 billion rubles of CJSC Sistema’s debt owed to AFK Sistema by the end of 2011.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net;

To contact the editor responsible for this story: Emma O’Brien at Eobrien6@bloomberg.net