Moscow City Telephone Network (MGTS)

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JSC Moscow City Telephone Network (MGTS) is one of Russia's biggest local fixed telecommunications companies in Russia and Europe. It accounts for 80% of the Moscow fixed telecommunications market. MGTS is the basic telephone operator of the Moscow city and the surrounding regions. MGTS offers local, national and international telephones services to its subscribers. The latter two services are offered through Rostelekom and Moscow Long Distance and International Telephone Co. The company also provides data transmission and cellular service through its subsidiaries Comstar, MTU-Inform, MTU-Intel, and Telmos. The company’s revenues in 2003 totaled US$ 383 million and the fixed line tele-density in its area was 41.58 per 100 inhabitants in 2003. The company was privatized in 1993, after the formation of the Svyazinvest, the state holding company. MGTS was registered in 1994. The main owners of the common shares were Svyazinvest (35%); AO Moscow Committee for Science and Technology, MKNT, (33%); Bank of Bermuda Ltd. (6%); CF First Boston (5.69%). MKNT gained full control of the company in 1998 when it increased its shares from 25% to 33% by acquiring shares from Svyazinvest in February 1998. In accordance with the terms of the initial auction held in 1993, MKTN gained the right to increase its shares by fulfilling the promise of investing $150 million into the company. MKTN is a subsidiary of AFK System, a company that held interest in Mobile Telesystems of Moscow, Rosiko, and Russian Telephone Company by 1998. MGTS has formed joint ventures with foreign partners for cellular, paging and the provision of overlay network services. The company invested US$150 million since it was privatized. The funds were used for the following projects: upgrades including 2861 km of fiber and 1,830 km of coaxial cable (increasing the total capacity to 83,776 km), and 6 new switches. In 1998, the company planned to spend $20 million for the installment of SHD equipment. It has also been involved in the $200 million Golden Bullet project, which aimed at the construction of a digital transport network for 1 million subscribers. The first stage was completed in September 1996 (costing $6 million), and the second stage of implementing SHD equipment started in March 1998. In 2000, MKNT transferred a 28.67% stake in MGTS to OLMA Investment Co. MGTS invested US$ 113.6 million in 1999 and US$ 142.2 million in 2000. Starting from 2004 the investment of the MGTS company in the reconstruction of its network were expected to be around US$120.73 million a year during the next 5 years. Since the end of 2005 Svyazinvest held 28% of MGTS voting rights and 23% of capital shares and Comstar (AFK Sistema controlled) 56% of capital shares. In 2009 Mobile TeleSystems (MTS)acquired, through a series of transactions, a 61.97% stake in OJSC Comstar – United TeleSystems (“Comstar-UTS”), a provider of fixed line telecommunication services in Russia and the CIS, from Joint-Stock Financial Corporation Sistema (“Sistema”). In 2009, according to a memorandum of understanding between MTS, AFK Sistema and Svyazinvest, the latter disposed of its 28% stake in MGTS to Sistema. In 2010, MTS had a 51.3% stake in MGTS, according to their annual report. MTS and Comstar-UTS merged under MTS. In December 2011, Mobile TeleSystems (MTS) bought 29% of the votings tock in MGTS from AFK Sistema for US$ 331.5m (RUB 10.41 billion). MTS acquired Sistema-Inventure which in turn owned 295 of the voting stock in MGTS. As a result of the sale MTS owns 94.1% of the company charter capital. As of 31 December 2012 MTS owned 94.6% of MGTS shares. % private (before 2009) = 100 - 23.33%*75% http://www.mgts.ru/ company website 2007 report does not provide capex figure for the company separate from the parent Comstar-UTS. Comstar-UTS record has the overall capex. 2007 capex updated during the 2008 update. Information found through Factiva search. CAPEX info for 2011 and 2012 obtained from respective MTS ARs.

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