RealTime IT News

Golden Times Two: Golden Telecom Buys Again

Making its second splash in the IT sector in as many days, Golden Telecom announced Wednesday that it had acquired 100 percent of the country's second leading ISP, Cityline, and a controlling stake in Yekaterinburg-based ISP Uralrelcom.

The deals put GTI over the top as the country's leading Internet provider, ahead of Sistema-owned MTU-Intel. GTI spokesman John Rose refused to name the price his company paid for the acquisitions, but did say it was the company's largest ISP investment.

The transaction brings the company a subscriber base of just over 150,000.

"There are a lot of ways to grow in this market and one of them is to acquire a subscriber base," Rose said. "Because that's ultimately what you're paying for and that's what the deal is wrapped around."

The announcement came minutes after a press conference officially announcing that an Alfa Bank-led consortium had acquired a 51 percent stake in GTI for $125 million.

GTI's Moscow-based Russia Online already has 90,000 subscribers, Uralrelcom has 8,000 in Yekaterinburg and Cityline has 46,500 in Moscow and more than 15,000 in other cities, including St. Petersburg and Nizhny Novgorod. GTI head Stewart Reich estimated that within five years, half of all Internet revenues will come from the regions. Second place MTU-Intel boasts around 100,000 active subscribers, said marketing director Dmitry Dronov.

GTI chief operating officer Stan Abbeloos said in the news release that the deal would reduce the company's dial-up costs. Subscribers should hope that the quality of Russia Online's service would improve as well: They have complained that busy signals are more common than with MTU-Intel.

Reich said the company's business focus would not change based on the new ownership structure, since Alfa does not control the company.

"Alfa Group doesn't actually know that much about telecoms, so we spent many hours with them so they could understand the business they were thinking of getting into," Reich said. "If they didn't agree with the strategy, they wouldn't make the investment."

The terms of the deal say that Alfa is not permitted to buy a controlling stake for two years. "After two years, there are no restrictions whatsoever. But as we said before, we have no intentions to buy more than what we have," said Alfa Bank managing director Alexander Tolchinsky.