By Mark Dovich
The Armenian government has taken a minority stake in the country’s main mobile network operator after the firm’s longtime Russian owner sold it off.
What happened?
Russia’s largest telecommunications company sold off its Armenian subsidiary this week, just over a week after the Armenian government blocked the firm from completing an internal restructuring.
In a press release Wednesday, MTS confirmed that it had finalized a deal selling 100% of its shares in Viva-MTS to Fedilco Group, a Cyprus-based company ultimately controlled by Zhe Zhang and Konstantin Sokolov.
For its part, Viva-MTS said in a separate press release the next day that Fedilco plans to cede a 20% stake in the mobile network operator to the Armenian government, citing its “strategic importance” for the country. No timeline or additional details were immediately given.
As of Friday, the Armenian government had not commented publicly on the developments.
Who are Viva-MTS’s new owners?
A 2021 filing with the U.S. Securities and Exchange Commission describes Zhang as an asset management specialist who previously served more than a dozen years as a diplomat with China’s Commerce Ministry. The filing lists Sokolov as a private equity specialist.
Neither Zhang nor Sokolov appears to have telecoms experience, according to the filing.
What’s the background?
The sale — and surprise handover of shares — came just over a week after Armenia’s regulatory agency blocked MTS from dissolving an intermediate entity, which would have left the company as Viva-MTS’s direct shareholder. The Public Services Regulatory Commission cited opposition to the restructuring in Armenia’s High-Tech Industry Ministry over “national security” concerns.
It marks the end to a lengthy back-and-forth between MTS and the PSRC, which stopped the telecoms provider from selling off its Armenian subsidiary last year before backtracking months later and allowing the sale to proceed.
In its initial decision last April, the PSRC said Armenia’s intelligence service had determined that selling off Viva-MTS could “threaten Armenia’s national security or state interests.” The regulatory agency gave no indication as to what had changed when it then greenlit the sale last November.
Viva-MTS made just over $9 million in net profit in 2022, according to figures reviewed last year by the Russian business newspaper Vedomosti. It is by far the largest of Armenia’s three mobile network operators.
What’s the context?
Under Prime Minister Nikol Pashinyan, a number of Armenia’s largest and most strategically important enterprises have ceded minority stakes to the government in opaque circumstances, including two key mines.
In 2021, a Russian company ultimately controlled by the oligarch Roman Trotsenko took control of Armenia’s largest mine and then immediately ceded part of its newly gained shares to the Armenian government in still-unclear circumstances. At present, the government holds a nearly 22% stake in the Zangezur Copper-Molybdenum Combine, one of the world’s top molybdenum producers.
In a surprise move two years later, the government signed a $250-million memorandum of understanding with a mining company ultimately owned by equity firms in the United States and Canada to revive a long-stalled gold mining project embroiled in environmental controversy. In return, Lydian Armenia agreed to cede shares in the Amulsar mine to the government. The government formally took its 12.5% stake last week.