Euroset is going to merge with Svyaznoy

The merged company may become the second largest in the number of stores.
Svyaznoy is preparing to merge with Euroset. Such a statement at a meeting with the managers of Svyaznoy was made by the owner of Solvers (the controlling shareholder of this retailer) Oleg Malis. This conversation was reported to Vedomosti by one of the participants in the meeting and a person who heard about it from several participants. Malis confirmed to Vedomosti the fact of meeting with the staff, but he did not comment on the details.

Earlier, two interlocutors of Vedomosti and sources of Kommersant told about the possible merger of retailers. Vedomosti's interlocutor knows from the management of Euroset that the merger with Svyaznoy is a matter resolved in 2016. The business processes of the companies, their price policies and back office will unite, so that the unified company works solely with suppliers , He says.

The merger with Svyazniy will be preceded by the division of Euroset. Now it equally belongs to VimpelCom and Megafon, but in mid-July, the operators reported that the largest Russian multibrand network would go under the sole control of Megafon. At the same time it will remain an autonomous operating company and will retain its brand. Vimpelcom will receive half of the 4200 Euroset salons, paying 1.25 billion rubles for them. The transaction should be closed in the IV quarter of 2017, the operators are waiting.

One of Vedomosti's interlocutors says that Megafon can add its own single-brand retail network to the new unified company. Megafon is going to get a minority stake in the joint venture with Svyaznoy, one source said.

Why did mobile operators unravel Euroset Subscribers to operators now benefit from their own salons
Cellular retail in Russia is excessive and the costs for its development eventually pressurize business margins, the operators have repeatedly acknowledged. According to analysts at UBS, Russian operators spend 8-9% (2 pp more than two years ago) of their revenues for sales and marketing. In the case of the merger of Svyaznoy stores with Euroset retailers that have transferred to Megafon, their number will approach 5000. MTS alone had 5725 communication salons by April. Separation of Euroset analysts Citi and VTB Capital called the beginning of further rationalization of this retail market, and the merger of the asset with Svyaznym is a logical continuation of it.

Against this background, a change in the head of Svyaznoy should occur. The current president of the company Evgeny Davydovich will occupy the chair of the Binbank presidency, the bank said earlier. Vice President of Euroset Viktor Lukanin can become a new president. A person familiar with the top managers of "Svyaznoy" and "Evroset", confirms that Lukanin's candidacy is being considered. But there are other options, he says.

A representative of Megafon said that the company is considering various options for the development of Euroset, subject to the completion of the deal to divide it.