Quad play sees MTS deal for Comstar

Mobile operator MTS will acquire broadband company Comstar in what the industry calls a ‘quad play’ move, bringing its customers bundled broadband, fixed and mobile communications, as well as content.

Coming after VimpelComs buyout of Golden telecom in 2008, MTS is paying $1.2 billion for one of the largest Russian broadband providers, and avoiding boom prices.

It will enable MTS to offer a range of integrated services to customers. Andrey Bogdanov, Head of Research at Gazprombank says the deal will enable significant shareholder value.

“Compared to the similar deal of VimpelCom and Golden Telecom – they are obviously buying Comstar at a significantly lower multiple, and also they may have a chance to consolidate and create synergies more easily because they come from one company – Sistema.”

Analysts said MTS healthy 2Q results showed people were still spending on mobile connection despite the economic downturn.

The Russian mobile giants – MTS, Vimpelcom and Megafon – enjoy high margins – and 80% of the market between them.

Though Megafon remains a pure telecoms company, the others aim to offer bundled services. That means mobile, fixed and broadband communications – along with content and applications to entertain consumers, according to MTS President, Mikhail Shamolin.

“We have a strategy which says that we want to provide the best user experience both at home and on the road – mobile – communication – both voice and internet – plus services inside the internet space.”

After the deal is finalized in late autumn – MTS will consider expanding Comstar's network – pushing broadband into the regions.