09 Jul Russian mobile operator Megafon may sell real estate to cut debt – CEO
* Real estate sales could start this year
* Megafon may sell Tower One telecom infrastructure firm
* Company eyes Russian e-commerce growth prospects
MOSCOW, July 5 (Reuters) – Megafon, Russia’s second largest mobile phone operator, is considering selling some real estate and other assets to reduce debt, the chief executive told Reuters.
Megafon, controlled by USM Holdings which is majority owned by Russian businessman Alisher Usmanov, spent more than $1 billion to delist its shares from the London Stock Exchange in 2018.
Megafon is joining other Russian firms in scrapping overseas listings, citing high costs and limited investor appetite due to sanctions on Russia.
Megafon CEO Gevork Vermishyan said Megafon, whose net debt was 363 billion roubles ($5.7 billion) at the end of March, planned to lower debt by selling assets, as well as by efforts to increase revenues and reduce borrowing costs.
“We did not start it yet but everything which is not strategically important may be offered for sale. One such example is office real estate,” he told Reuters, saying sales of office space held in some Russian regions could start this year.
He said the company would consider selling its Tower One telecom infrastructure company, but said a final decision had not been taken.
He did not say how much could be raised from asset sales.
Megafon has agreed to sell a 9.97% stake in Mail.ru to China’s Alibaba Group Holding Ltd as part of a deal to secure 24.3% of the AliExpress Russia joint venture, which will also include Russian Direct Investment Fund.
Vermishyan said the deal enabled Megafon to turn its Mail.ru stake into “something which grows significantly faster,” adding that e-commerce in Russia accounted for 3.5% of retail sales, compared to 6% in Poland and 20% in China.
He said he expected the e-commerce market to grow in Russia by 17% to 20% a year and Megafon could bring experience in logistics as a retailer of mobile phones, which would help the venture expand its delivery network.
Vermishyan said Megafon was conducting tests with Chinese telecoms gear and phone maker Huawei Technologies Co to prepare for rolling out 5G technology in Russia.
The U.S. government has voiced concerns about Huawei equipment based on security issues and has lobbied U.S. allies to keep Huawei out of next-generation 5G infrastructure.
“It is impossible to ignore Huawei’s multibillion-dollar investments into research and development,” Vermishyan said. “They were and they remain an important supplier of large network elements for us.”