MegaFon Forms JV with Ucell to Foray into Uzbek Market

USM Telecom and MegaFon, in cooperation with partners from Uzbekistan, are creating Digital Holding, a joint venture designed to become the technological enabler of the largest telecommunications market in Central Asia.

The joint venture will comprise the country's telecommunications market leader Ucell and USM’s Uzbek assets CRPT Turon and ICS Holding Uzbekistan.

The Government of Uzbekistan, through the Agency for State Assets Management (ASAM), will transfer 100% of the authorized capital of the telecom operator Ucell into the joint venture. The Russian side will contribute $100 million investments into Digital Holding, as well USM Uzbek subsidiaries CRPT Turon and ICS Holding Uzbekistan.

To enter the joint venture USM Telecom and MegaFon created the company “Digital Invest”, with each holding an equal share in it. Digital Invest’s stake in the new joint venture will be 51%, ASAM’s stake - 49%.

The transaction will be finalised during 2021. Digital Holding will focus on developing telecommunications infrastructure in accordance with international standards to expand access to communication services in the Republic of Uzbekistan and improve their quality. It will also focus on the introduction of advanced technologies and systems in the areas of information security and data storage, labeling and control of the movement of certain types of goods.

Ivan Streshinsky, CEO of USM Telecom, commented: “The creation of a leading player in the digital services market in Uzbekistan is in line with both MegaFon’s and USM Telecom’s strategy, which is to build a technology leader in the CIS and Eastern Europe. We are confident that the long-term expertise in implementing digital projects, which MegaFon, CRPT and ICS Holding have, will help develop the largest market player in Uzbekistan."

Gevork Vermishyan, CEO of MegaFon, said: “In terms of consumption of digital services, Uzbekistan is one of the most promising markets in the CIS, having shown a more than threefold increase in mobile subscribers over the past 10 years, yet still remaining far from saturation. We are not planning major structural changes within Ucell in 2021; we will rather focus on finding synergies and implementing best practices in Ucell to grow its business.”

Olimjon Umarov, Advisor to the Prime Minister of the Republic of Uzbekistan, added: “I am confident that the creation of joint venture will give a new impetus to the rapidly developing market of digital services in Uzbekistan in coming years and will open up new opportunities for Ucell and its subscribers.”

USM Telecom is the digital division of the USM holding company, controlling 100% of telecom operator MegaFon and the ICS Holding IT group. The key shareholders of USM Telecom are USM (80%), Ivan Streshinsky (10%) and Anton Cherepennikov (10%).

MegaFon is a national Russian operator of digital opportunities with a leading position in the telecommunications market. MegaFon operates in all segments of the telecoms market in Russia, as well as in the republics of Abkhazia, South Ossetia and Tajikistan, traditionally paying particular attention to the quality of its services and providing its subscribers with the fastest Internet speeds.

ICS Holding is a Russian diversified IT group, which includes 30 companies united in five subholdings - YADRO, Nexign, Citadel, Kryptonite and Forpost. The priority areas of ICS Holding's operations are digital transformation of large enterprises, information security, data storage systems, cryptography and quantum computing, machine learning and neural networks, blockchain technologies and artificial intelligence. The holding is the largest IT provider for telecom operators and is among the top 3 largest IT developers in Russia.

The Center for Research in Perspective Technologies (CRPT) was created to implement large-scale projects in the digital economy. CRPT is a joint project of USM (50%), Rostec Group (25%) and Elvis-Plus Group (25%). CRPT develops a unified national digital track and trace system for goods in Russia. CRPT Turon, based on the results of a tender, was determined as the operator of the marking system in the Republic of Uzbekistan, which was created in the format of a public-private partnership.

Ucell is an Uzbek mobile operator of GSM, UMTS, LTE and 5G standards. Since 5 December 2018, "COSCOM" LLC (trademark "Ucell") is a 100% state-owned company. Over the past two years, Ucell, with 8 million subscribers, has become a leader in the cellular communication market of Uzbekistan. As of February 2020, the coverage in settlements is 97.6% (GSM); 72.9% (UMTS); 60.8% (LTE). Ucell is the pioneer of the 5G standard in Uzbekistan.