Back in December 2006, when the investment group Russian Funds agreed to invest $20 million for a 50 percent stake in Telephone.ru (Телефон.Ру), the consumer retail market was booming in Russia. Less than two years later the market outlook was not that bright anymore due to a credit crunch. In September 2008, the Russian mobile phone retail market leader, Euroset was sold out to A&NN Capital Management Fund for some $400 million in equity, who then sold 49.9 percent for $226 million to Russia’s second largest mobile phone operator VimpelCom (Beeline). The other mobile phone retailers in Russia started looking for strategic partners.
The leading Russian mobile phone operator Mobile TeleSystems (MTS) has agreed to acquire Telephone.ru for $60 million, including a payment of $22.4 million for inventory reserves. In addition, the deal has a provision for a performance-based payment of $25 million in 12 to 18 months.
Founded in 1995 as a mobile phone retailer, Telephone.ru (Telefon.ru) launched an online store in 2001 and started developing a retail chain in 2003. Telephone.ru has 512 stores in 180 cities in Russia. The chain sells mobile phones, accessories and other handheld electronics as well as mobile calling plans. Its revenues reached 13.3 billion rubles (ca. $540 million) in 2008, up 31 percent from 2007. In terms of a revenue per store, Telephone.ru is ranked 3rd in Russia after the Euroset and Svyaznoy chains.
The acquisition of the Telephone.ru retail chain, which holds about 5 percent of mobile phone sales in Russia, will increase a number of MTS own 1,700 retail stores by 30 percent and better serve existing and new customers.