Vodafone Expands Partnership with Mobile TeleSystems in Ukraine
October 16 2015 - 12:20PM
Dow Jones News
LONDON—Vodafone Group PLC said Friday it had expanded a
partnership with Russian telecommunications firm Mobile TeleSystems
PJSC, agreeing to expand services in Ukraine and rebrand that
service under the Vodafone name.
Vodafone said the non-equity partnership will allow it and MTS
to roll out 3G mobile service in parts of the country, in addition
to other services like international calling plans, roaming and
bundled services. The two companies will offer 3G in Ukraine "in
coming months" under the Vodafone brand, and will rebrand MTS's
retail outlets and most of its dealerships under the Vodafone
name.
The move comes amid lingering tensions between Moscow and the
West over Russian involvement in Ukraine. Russia annexed Crimea
from Ukraine in 2014, triggering sanctions by the U.S. and European
Union. Ukraine accuses Moscow of supporting anti-Kiev rebels, who
control territory in eastern Ukraine.
The Western sanctions don't target most Russian publicly listed
firms, like MTS. Still, European and U.S. companies have been
careful about new ventures inside Russia or with Russian partners
amid the political tensions.
MTS is the biggest telecommunications operator in the former
Soviet Union. It is majority owned by AFK Sistema, the conglomerate
of Russian tycoon Vladimir Yevtushenkov.
Underscoring the delicate nature of the deal, Vodafone said its
brand won't be used in territories "not under the direct control of
the Ukrainian government."
The rebranding could help MTS, which has struggled with customer
growth, compared with its biggest competitor in Ukraine, VimpelCom.
It could also provide some insulation from any customer or
government backlash against MTS's Russian ownership amid the
tensions.
The conflict in Ukraine has led to a surge in hostility among
Ukrainians toward Russia and increasing skepticism of Russian
companies within the Ukrainian government. By switching to a
Western brand from a Russian one, the company may assuage doubts
among Ukrainian consumers and authorities.
The change could also help address security concerns about a
Russian-owned firm controlling a critical Ukrainian mobile
operator. In a Kiev news conference on Friday, Oleg Prozhivalsky,
the head of MTS Ukraine, emphasized that the change meant the
operator would upgrade the security of its network and the
protection of its users' personal data.
The political tensions between Russia and the West didn't impact
the deal, Vodafone spokesman Adam Liversage said.
The standoff has cast a pall over other proposed deals involving
Russia partners. The U.K. government intervened earlier this year
in an agreement by German utility RWE AG to sell its oil and
natural-gas business to an energy firm controlled by Russian
billionaire Mikhail Fridman, forcing the divestiture of the
business's North Sea assets.
More recently, some European firms have become more comfortable
engaging with Russian partners again. Last month, German
conglomerate BASF SE and Russia's state-controlled OAO Gazprom
revived a multibillion-dollar asset swap they had abandoned last
year because of strained European-Russian relations over
Ukraine.
Vodafone and MTS initially struck up a partnership in 2008 in
which MTS gained access to Vodafone consumer and corporate products
for its Ukrainian customers. MTS's Ukraine unit has more than 20
million customers. Vodafone provides mobile services in 24
countries, and in 55 markets where it doesn't hold equity but has
partnership agreements with local mobile operators like MTS.
Paul Sonne in Moscow contributed to this article
Write to Tapan Panchal at Tapan.Panchal@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 16, 2015 13:05 ET (17:05 GMT)
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