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

“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.

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