Megafon Joins with Gazprombank and Others in New Fintech Merger

Megafon, Gazprombank and USM Holdings are joining forces to create a new company.

Megafon, the second largest mobile-phone operator in Russia, is creating a new company called MF Technology which will develop and release digital projects, according to a company press release.

The venture is being initiated with state-owned Gazprombank, the third largest bank in Russia, Rostekh, a state-owned defense conglomerate, and USM Holdings, a “diversified international holding company with significant interests across the metals and mining, telecoms and internet sectors.”

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USM Holdings is Megafon’s largest shareholder. Gazprombank bought a 19 percent stake in Megafon for around $1 billion in October 2017.

MF Technology will combine these companies’ expertise in telecommunications, IT, financial services and high-tech to enter new markets with innovative products.

Megafon said in a statement: “Jointly with its partners, Megafon plans to implement a number of digital projects, including creating software products to digitalize the operations of major companies and enterprises, and developing blockchain-based solutions.”

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Megafon will invest 11,500,100 Mail.Ru Group Class A shares. Mail.ru Group is the largest internet group in Russia. It reaches about 85 percent of internet users in Russia.

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Megafon bought a 12.5 percent stake in Mail.ru from USM in February 2017 and will retain a 10 percent stake.

MF Technology is currently owned by Megafon through its subsidiary Lefbord Investment Limited. According to the partnership agreement, MegaFon will sell 35 percent to Gazprombank, 11 percent to Rostekh and 9 percent to USM Holdings. These sales will raise $247.5 million and leave Megafon with a 45 percent stake in MF Technology.

Gevork Vermishya, executive director of Megafon, said that the company would use the money to pay off debt and make investments.

Sergey Soldatenkov, CEO of Megafon, said: “Megafon aspires to play a leading role in the digital economy of Russia. Today, the efforts of the leaders of telecommunication, high-tech and financial markets to create new digital products and services are seen all over the world. In this regard, we join forces with the leading Russian players in these markets to build a digital bank and more active work in the corporate segment. I am confident that by attracting strong partners we will be able to participate in more projects and ensure the successful entry of MegaFon into the new growing digital economy markets.”

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