Gazprom seeks to acquire one of Russia’s biggest mobile operators

The Bell

  • Megafon is one of the hottest assets currently up for sale. The mobile operator is currently majority-owned by oligarch Alisher Usmanov’s USM, which in 2021 sold the VK internet holding (VK is the former Group, and includes the popular VKontakte and Odnoklassniki social networks). VK was purchased by Gazprom Media and the Sogaz insurance company. The latter is co-owner of a rival media holding, the National Media Group, which is controlled by Yury Kovalchuk, another Russian oligarch and friend of President Vladimir Putin.
  • In late January, Usmanov’s newspaper Kommersant reported that USM was seeking a buyer for Megafon. The newspaper identified Rostelecom (Russia’s largest telecoms company, which counts Kovalchuk among its major shareholders) as the most likely bidder. According to Kommersant, Gazprom was more interested in a rival network, Vimpelkom’s Beeline.
  • Between them, Kovalchuk’s National Media Group and Gazprom Media control a huge share of the Russian media market. They have full or partial ownership of the biggest assets in that sector: TV channels, film and television production companies, radio stations, magazines, news websites, entertainment resources and production studios. Kovalchuk and Gazprom’s media structure are joint owners of VK, one of the biggest tech corporations in the Russian market. They are now looking to reinforce their position in that market by acquiring one of the leading mobile operators.
  • At the same time, we are seeing Usmanov — once one of the biggest media investors in Russia and abroad (for example, until 2018 he owned 30% of the world-famous English football team Arsenal) — steadily divesting from his businesses in Russia and retiring from the media market. He is not alone. Apart from VK, Usmanov’s USM group sold IT group ICS Holding last year. ICS includes IT security developers and projects associated with the creation of a low-orbit satellite data transmission system. After selling off Megafon, USM’s largest remaining assets will include Metalloinvest, one of the world’s leading iron producers; Udokanskaya Med, Russia’s biggest copper mining company; and the Kommersant business newspaper.

Why the world should care

Selling Megafon to either Gazprom or Rostelecom is another chapter in the story of how Russia is constructing its new media power vertical. Structures with close ties to the state continue to “capture” the media market. First, in late 2021, Gazprom Media bought the Group. Then, not so long ago, we saw the redistribution of Yandex (we wrote extensively about this, for example in this article). In the course of that deal, the tech giant’s founder Arkady Volozh took part of his company abroad, while Alexei Kudrin, once the most prominent liberal figure in Putin’s circle, joined the remaining Russian part of the company.

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