OREANDA-NEWS. January 25, 2010. According to a report in Kommersant, Svyazinvest is preparing a memorandum of cooperation with AF Telecom, owner of a 30% stake in Megafon. The plan is to switch shares in Megafon with shares of the consolidated Rostelecom, reported the press-centre of OTKRITIE Financial Corporation.

Both parties will have a 6-month exclusivity time period for cementing the deal. Meanwhile, the head of the Federal Anti-Monopoly Service yesterday indicated that FAS views unfavourably the proposed merger of the shares of Megafon’s other shareholders, Altimo and TeliaSonera.  This increases Svyazinvest’s options for obtaining its desired controlling stake in the company. 

View: We view this scenario as a relatively positive potential outcome, at least as concerns MTS and Vimpelcom. Having said that, the risk of a fourth mobile operator remains, since Svyazinvest might use its blocking stake in Megafon to push for MVNO using Megafon's network.

Action: We expect neutral reaction on the news. However, further development of the topic might be an important driver for MTS, Vimpelcom and Svyazinvest subsidiaries. Our top pick among these companies remains MTS.