Kazakhtelecom has signed an agreement on buying the share of Swedish mobile operator Tele2 AB in their joint venture Khan Tengri Holding B.V. and is hoping that this transaction will be closed by the end of June. The national company’s PR service informed on this development on May 23, 2019.

Here is the press-release (text in bold by kz.expert).

«Today, Kazakhtelecom and Tele2 AB have signed an agreement on buying the 49% share belonging to the Swedish mobile operator in their joint venture Khan Tengri Holding B.V.

We will recall that, at the end of February 2016, the parties agreed to create a joint venture in the mobile sector based on the businesses of ALTEL JSC and Mobile Telecom-Service LLP in which Kazakhtelecom JSC’ share constituted 51% of the share capital (49.48% of voting shares). Tele2 has executed the put option mentioned in the shareholders’ agreement on buying the company’s 49% shares in Khan Tengri Holding B.V. by Kazakhtelecom JSC.

CEO of Kazakhtelecom JSC Kuanybek Esekeyev believes that, given the company’s experience in the development of the mobile segment and the implementation of the infrastructure-building projects, the purchasing of Tele2’s share in Khan Tengri Holding B.V. together with the purchasing of 75% shares in Kcell JSC will have a positive impact on the telecommunication industry through implementing a number of synergies when integrating and jointly using the technical capabilities of the three operators. „The completion of this transaction will improve Kazakhtelecom’s investment prospects via the diversification of the business, the increase of the company’s operations scale and the profitability growth“, notes Kuanyshbek Esekeyev.

Kazakhtelecom has also stated that, as the major shareholder of both mobile operators, the company is prepared to facilitate the joint launch of 5G in Kazakhstan. The cooperation of the operators will allow to create an advanced technological platform for providing the high-quality fixed-line and mobile communication services. „We expect to increase the coverage, to improve the quality of the mobile services and to implement, on a large scale, the innovative digital technologies accessible to the public“, underscores Kazakhtelecom.

Tele2 comments on the company exiting the Kazakh market.«Tele2 has built a successful business in Kazakhstan and rolled out a national network for high-quality voice and data. The JV has dramatically increased its customer base, revenue, market share and profitability. Mobile data consumption per customer has doubled since the creation of the JV and is more than a hundred times higher today compared to when Tele2 entered the country», says the company’s press-release citing Anders Nilsson, President and CEO, Tele2. Note that, based on the results of the first quarter of 2019, the number of the company’s clients had surpassed 7 mln people».

The news was immediately retold by a number of the Kazakh media. For instance, Informburo.kz, in the article «Tele2 to leave the Kazakh market at the end of June. Kazakhtelecom to pay 80 bln tenge loan» reminds that «doing business in Kazakhstan made it to the top-10 list of Tele2’s biggest risks».

Forbes.kz, in its article «Tele2 leaves Kazakhstan’s mobile market in June 2019», notes that, after Tele2’s exit, Kazakhtelecom is to control 3 out of the 4 mobile operators in the country — Kcell, Tele2 and Altel. So far, Beeline remains the only independent player in Kazakhstan.

We at kz.expert believe that the sale of Tele2’s share in Khan Tengri Holding B.V. signifies the following.

1. The total price of the political, economic and purely corporate risks in Kazakhstan has lately increased to the point when even the strong and highly-qualified foreign investors that came to the country during the first years of the independence now prefer to leave the republic.
2. The process of the governmentalization of the national economy in Kazakhstan is successfully continuing due to many reasons of the economic and the internal political nature.

First — due to the narrowness of the domestic market when the number of participants cannot surpass a certain optimum (in this case, apparently, two). This is necessary to retain at least some kind of market competition and to keep the profitability on at least a medium level.

Second — because, in Kazakhstan, every state monopoly or a large quasi-governmental structure has a certain elite group (influential figure) standing behind it and lobbying its interests.

Therefore, one cannot but congratulate Tele2 AB on the rather successful exit from Kazakhstan. For, according to Forbes.kz, Tele2 has already agreed with Kazakhtelecom on the price for its share in the joint venture. Upon the deduction of the contingent liability, the seller’s net earnings are to amount to 169 $ mln. Apart from that, Tele2 will collect the entire debt in the amount of 80 bln tenge.

One must agree that, as a whole, this is not a bad deal especially considering the stories of other investors. For instance, that of Anatolie and Gabriel Statis from Moldova and their affiliated parties that are now forced to return their investments through the lengthy and extremely scandalous legal trials conducted all around the globe.

To be continued

NOTE FROM EDITOR: this is the first article from a series of publications on the latest redistribution of property in Kazakhstan’s economy to the benefit of Nursultan Nazarbayev’s relatives.