TeliaSonera Boosts Kcell Stake for $1.52 Billion Before IPO

December 22, 2011, 8:36 PM EST By Kim McLaughlin

(Updates with ownership details in second paragraph, analyst comment in fourth.)

Dec. 22 (Bloomberg) -- TeliaSonera AB, Sweden’s largest telephone company, will take over its Kazakh business for $1.52 billion before holding an initial public offering for the unit as it seeks to reduce dependence on saturated home markets.

TeliaSonera, which owns 51 percent of GSM Kazakhstan LLP through a venture with Turkcell Iletisim Hizmetleri AS, agreed to buy the remainder from Kazakhtelecom, the Central Asian nation’s fixed-line phone monopoly. It plans to sell a 25 percent holding of the operator in an initial public offering next year, TeliaSonera said today.

TeliaSonera has cut jobs and trimmed expenses in Sweden and Finland as subscribers shift from fixed-line subscriptions to smartphones, and focused on faster growing regions. Tero Kivisaari, the company’s president for central Asia, said June 14 it aims to keep revenue growth in the area in double digits even as long-term growth may slow as markets like Azerbaijian and Kazakhstan near 100 percent mobile penetration.

“They are buying an asset they know well for what seems like a good price,” said Stefan Gauffin, an analyst at Nordea Bank AB who recommends buying TeliaSonera shares. “The expected growth in Kazakhstan will outstrip the current company average.”

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The price TeliaSonera pays is about 4.6 to 4.7 times the phone company’s 2011 projected earnings before interest, taxes, depreciation and amortization, said Gauffin. Peers in the emerging markets are trading at about 5.5 times earnings, he said.

TeliaSonera, formed in a 2002 merger between the former Swedish and Finnish phone monopolies, slid 0.5 percent to 44.79 kronor at 11:49 a.m. in Stockholm. The stock has dropped 16 percent this year, valuing the company at 194 billion kronor ($28 billion)

TeliaSonera controls 51 percent of GSM Kazakhstan through its 58.55 percent ownership in Fintur Holdings B.V., the venture with Turkcell, Turkey’s biggest mobile-phone company. TeliaSonera owns 38 percent of Turkcell.

“This agreement is another step in the execution of our strategy of increasing ownership in core holdings,” Kivisaari said in a statement.

Kcell’s IPO is expected to be completed next year, TeliaSonera said. Depending on the share-price development after the sale, the Swedish company may make an additional payment to Kazakhtelecom, it said. Kcell has about 50 percent of the Kazakh market and some 8.9 million subscribers, according to TeliaSonera’s website.

Turkcell Stake

After the IPO, TeliaSonera will hold an effective stake of 61.7 percent in the operator, it said today.

TeliaSonera and Russia’s Alfa Group are embroiled in a dispute with Cukurova Holding over control of Turkcell and have pressed for the replacement of Chairman Colin Williams. The dispute has prevented the approval of dividends from last year’s profit. A Turkcell spokesman couldn’t immediately be reached for comment.

Kazakhstan, the former Soviet Union’s second-biggest energy producer, plans to sell shares of state-owned companies to citizens in IPOs, Economic Development and Trade Minister Kairat Kelimbetov said in a Sept. 16 interview.

--With assistance from Aydan Eksin in Istanbul. Editors: Kenneth Wong, Simon Thiel

To contact the reporter on this story: Kim McLaughlin in Stockholm at kmclaughlin6@bloomberg.net

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

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