29 November 2012, 16:00

Megafon: second largest London IPO

Megafon: second largest London IPO
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Russia’s second largest mobile phone operator has successfully launched its initial public offering in London. Megafon raised 1-point-7-billion pounds by selling in both London and Moscow to raise the cash needed to repay existing debt and for corporate expansion.

Megafon’s initial public offering is a second biggest stock market listing by Russian company since producer Rucell floated in Hong Kong in 2010. The Telecom’s firm is majority-owned by the internet tycoon Alisher Usmanov, Russia’s richest man. The listing appeared to have taken off well with reports that the IPO had been oversubscribed. The offer consists of 84, 5 million shares priced at 20$, giving the entire company a market value of 11.1 billion dollars. Alexander Osin is Russian economist. He says Russian companies’ list in London is in the search for liquidity.

"Possibly, they could be able to place appetites on Russian market in the midterm, but currently the monetary policy of Russian Central Bank, of Russian ministry of finance is that there’s not enough liquidity for the market."

Megafon is Russia’s second largest mobile phone operator which provides Wi-Fi and data services. They have the biggest market share of mobile data revenue with nearly 40% of the market in the second quarter of 2012. Their flotation marks the end of a challenging few months for the company after some initial delays on its IPO. This was partly due to the U.K. listing authority and financial services authority taking three weeks longer than expected to review the deal, forcing Megafon to postpone the listing. But this month the company’s fortunes changed, when they appointed the British ex-city minister Lord Myners as chairman ahead of the listing. The company expects to use half of the proceeds from the offer to repay or refinance existing debt, with the remainder – for development and expansion of its network. Alexander Osin says the IPO is designed to boost awareness of Megafon and attract investment.

"There’ll be a growing interest in making our bills, because there were a lot of plans to go public for the Russian companies. All these plans were delayed due to instability on Russian market."

The move is likely to be followed by more offerings from Russian companies in 2013. These include several state-owned companies due to be sold under Russian privatization program. The Russian government has already announced plans to sell 25% of shipping group Sovcomflot and across-border IPO. Russian land of ETB and Rosneft, the oil and gas group are both posed for secondary offerings. Russian economist, Alexander Osin, agrees that London could see more offerings from the Russian companies in 2013.

"Megafon is a company that is known world-wide. There’s an opportunity for Megafon to attract resources."

The IPO market in the U.K. has been relatively quiet this year with a number of high-profile withdrawals and disappointing post-IPO performances. So success of Megafon may help boost the sentiment about London listings.

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