UPDATE 2-Russia's Megafon eyeing stake in Internet group Mail.ru

  • Reuters
  • Stock Market News
UPDATE 2-Russia's Megafon eyeing stake in Internet group Mail.ru
Credit: © Reuters.

(Adds context, Mail.ru and analyst comment, share price)

MOSCOW, Nov 16 (Reuters) - Megafon MFON.MM , Russia's second-biggest mobile phone network operator, said on Wednesday it was in talks with the shareholders of Mail.ru MAILRq.L that could lead to it taking a stake in the Internet group.

Russian mobile operators have seen their sales growth fall close to zero on the saturated market and are looking at Internet-based partnerships as they seek to move away from a traditional telecoms business structure. and Mail.ru, both majority owned by Russian billionaire technology investor Alisher Usmanov, aim to jointly develop new products and services for mobile and Internet users in Russia, their home market, Megafon said in a statement.

It also said potential commercial collaboration could see Megafon get a stake in Mail.ru, owner of the three largest Russian-language social networks and an online games business, although there was no certainty as to whether this would happen.

"While the company acknowledges past and ongoing dialogue between Megafon and some of the shareholders of Mail.ru, currently there is no certainty that Megafon will become a shareholder of Mail.ru," it said.

"If any agreement leading to Megafon becoming a Mail.ru shareholder were to be reached, Megafon and Mail would continue operating as separate entities," Megafon added.

Mail.ru confirmed there were talks about commercial cooperation but said it was not involved in any discussions about a potential merger with Megafon and that it could not comment on any shareholder transactions. spokeswoman for Usmanov's holding company USM declined to comment. Sweden's Telia TELIA.ST , which owns just over 25 percent of Megafon's shares, also declined to comment.

Ivan Kim, equities analyst at Russian investment bank VTB Capital, said a partnership which would not require Megafon to commit capital could be positive for the firm but that the benefits of an equity deal were less certain.

"Were the transaction to go ahead, with Megafon buying Mail.ru, we note that ... the synergies in such deals are not proven," Kim said.

Megafon Chief Executive Sergei Soldatenkov said last week the company would present a new strategy in early 2017, as it cut its profit forecast for 2016 due to tough competition. has South Africa's Naspers NPNJn.J and China's Tencent Holdings Ltd 0700.HK among its shareholders. Its shares closed 2.7 percent higher on Wednesday.

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