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TeliaSonera Shares Surge On Huge Dividend Announcement From MegaFon Deal

Shares of TeliaSonera AB (TLSNY.PK) increased over 7 percent in Stockholm Tuesday after the Swedish telecommunications firm said governance disputes related to its 43.8 percent shareholding subsidiary MegaFon, a Russian telecom operator, have been resolved.

As per the agreements between MegaFon's shareholders, also comprising AF Telecom and Altimo, the Russia's second largest mobile operator will pay a dividend of $5.15 billion (about 35 billion Swedish kroner). MegaFon would also pursue an Initial Public Offering of as much as 20 percent of its stake on the London stock exchange "as soon as practically possible."

In addition, TeliaSonera will reduce its ownership and Altimo will exit its holding, giving MegaFon's majority control to AF Telecom, owned by Russian billionaire Alisher Usmanov. TeliaSonera further aims to keep a long-term ownership of 25 percent plus one share in MegaFon after the IPO. The dividend and the sale procedures are expected to be completed on April 24.

In MegaFon, TeliaSonera currently holds 35.6 percent directly and 8.2 percent indirectly through its 26.1 percent ownership in Telecominvest. AF Telecom owns 31.3 percent with an 8 percent direct ownership and 23.1 percent indirect ownership through its 73.9 percent holding in Telecominvest. Altimo, owned by Alfa Group, owns 25.1 percent.

As per the deal, TeliaSonera will sell its shares in Telecominvest for $1.45 billion or about 9.8 billion kroner to AF Telecom. Meanwhile, Altimo will exit from MegaFon by selling 14.4 percent of its ownership to a subsidiary of MegaFon for $2.16 billion and the remaining 10.7 percent to AF Telecom for $1.61 billion. Following these deals, AF Telecom will get majority control in MegaFon.

Following these transactions, TeliaSonera will own 35.6 percent, AF Telecom 50 percent plus one share, while MegaFon, through its subsidiary, will own the remaining 14.4 percent.

TeliaSonera would receive about 22 billion kroner in dividends and divestment proceeds, of which approximately 14 billion kroner will be received in the second quarter. The company is also expected to book a capital gain of 4.4 billion kroner in the second quarter related to the sale. TeliaSonera has also agreed to pay $200 million to Altimo in order to complete the transaction.

Altimo will receive total $5.2 billion including dividends from MegaFon.

As per a new dividend policy, MegaFon will pay annually the higher of 50 percent of net income or 70 percent of cash flows in rubles as ordinary dividend.

TeliaSonera added that in the planned IPO of up to 20 percent of MegaFon's shares, TeliaSonera and MegaFon will contribute with up to 10.6 percent and 9.4 percent, respectively. Both TeliaSonera and AF Telecom will send three members each on MegaFon's board.

The parties have also agreed that if an IPO of MegaFon has not been consummated by the end of 2014, TeliaSonera will be able to sell its 10.6 percent stake in MegaFon to any of the other two shareholders. The price paid will be based on fair market value.

"By reaching an agreement with the two other partners, whereby MegaFon will pursue an IPO and adopt an agreed dividend policy, we have resolved the ownership disputes and found a way to increase both the liquidity and value of our asset," the company said in its statement.

In Stockholm, TeliaSonera shares are currently trading at 44.50 kroner, up 3.07 kroner or 7.41 percent, on a volume of 25.5 million shares.

by RTT Staff Writer

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