SMARTS

SMARTS was registered in May 1991. Until 2015, it was a cellular operator in 16 regions of the Russian Federation.

Activities

As of June 2021, JSC SMARTS is implementing the following projects:

• Construction of telecommunication infrastructure using VOLS-based technology. The project "Creation of road telecommunication networks" was initiated in 2007, in 2014 it was approved by the Nabsovet of the Agency for Strategic Initiatives under the chairmanship of V.V. Putin (minutes of the meeting dated 08.04.2014 No. 1 );
• Creation of a system for managing geographically distributed data centers, including the virtualization of resources and the use of quantum technologies to protect communication lines (joint project of SMARTS JSC and ITMO University with the support of the Ministry of Education and Science of the Russian Federation, agreement 03.G25.31.0229 of 03.03.17);
• Backbone quantum network between cities of agglomeration of Samara region
• Road monitoring system based on distributed acoustic sensor.

History

2015: Megafon bought SMARTS

Megafon announced in August 2015 the purchase of four subsidiaries of the Volga SMARTS group: mobile operators SMARTS-Samara, SM ARTS-Cheboksary (Republic of Chuvashia), Astrakhan-GSM and Yaroslavl-GSM. The amount of the transaction was not disclosed.

The purchase of these assets is interesting to Megafon due to SMARTS's frequencies in the 900/1800 MHz bands, which can be used for both the GSM and LTE standards, explains Dmitry Kononov, director of operator acquisitions^[1].

Megafon has LTE frequencies in the 2.5 GHz and 800 MHz bands, but the operator intends to add frequencies in the 1800 MHz band to them. In addition, thanks to the deal, Megafon will be able to strengthen its leading position in Samara.

2014

SMARTS applies for LTE license

SMARTS logo in 2014

SMARTS OJSC submitted an application to the Federal Service for Supervision in the Field of Communications, Information Technologies and Mass Communications of the Russian Federation to add to the current license additions on the use of the LTE standard network in the Samara Region.

The package of documents was prepared in accordance with the company's plans to deploy the LTE network in the Samara region in the III-IV quarter of 2014 and the decision of the State Radio Frequency Commission (GKRCH) on the possibility of mobile radio telephone operators (PRTS) using the existing radio frequency bands 1710-1785 MHz and 1805-1880 MHz to create LTE networks.

SMARTS OJSC already has experience in deploying the LTE network. In 2012, SMARTS OJSC and FSUE Radio Research Institute (NIIR) successfully tested the LTE network in the 1800 MHz range in UF. During the tests, the LTE network showed steady operation in the 1800 MHz band even at a distance of several kilometers from the cells, and the quality of communication in the GSM network did not change. In practice, this means that subscribers will receive a stable high data rate.

Assets

According to 2014 data, the company's structure included branches that provide cellular services in the Samara, Saratov, Ulyanovsk regions, Kalmykia, Mari El, and Mordovia. Together with its subsidiaries, SMARTS operates in 12 regions of the Volga, Southern and Central Federal Districts of Russia. SMARTS group of companies includes: SMARTS OJSC, Astrakhan GSM CJSC, Penza-GSM CJSC, SMARTS-Cheboksary CJSC, Yaroslavl-GSM CJSC, SMARTS-Ivanovo CJSC and SMARTS-Ufa CCCCJSC.

2013: Company Services

As of 2013, almost all SMARTS clients connected to the Internet via broadband are legal entities. The rate for each customer is calculated based on the business case and depends on its needs and SMARTS inclusion costs. Tariffs for end users are more affected by the operator's operating costs of maintaining the "last mile" to the customer. The construction of affordable and high-tech infrastructure for the construction of VOLS in sections from main access nodes to the end user will contribute to the reduction of BD tariffs.^[2]"

In the structure of revenue from the corporate segment, income from BD is 10%. At the moment, SMARTS has built an extensive reference data transmission network in large cities of the Volga region, as well as backbone fiber-optic communication lines (VOLS) connecting Samara with Saratov, Ulyanovsk, Ufa and Cheboksary, with a total length of more than 1000 km.

2012: Rostelecom withdraws from SMARTS capital

At the general meeting of SMARTS shareholders held on June 29, 2012, it was decided to reorganize it in the form of the allocation of four closed joint-stock companies. OJSC Rostelecom"" did not participate in the annual general meeting of shareholders of OJSC "SMARTS" and according to paragraph 1 of Art. 75 of the Federal Law "On Joint Stock Companies" received the right to demand the redemption of all or part of its shares. The share repurchase price is set at 40,895,000 rubles for 1% of ordinary registered shares of SMARTS OJSC. Thus, in the event of the redemption of the entire package of 2.95% of ordinary shares [2] owned by Rostelecom, their value will be 120.6 million rubles.

According to Anton Khostinov, senior vice president of Rostelecom OJSC, "management has invited the board of directors to withdraw from the capital of SMARTSA, since according to the approved strategy we focus on investments in companies where we get the opportunity to take part in business management."

2011: Shareholder quarrel prevented SMARTS from being sold to Swedes

• In the spring of 2011, Tele2 offered $390 million to SMARTS shareholders for a 97% stake (including $100 million in debt). Upon learning of this, Mayevsky wrote to Tele2 Russia President Dmitry Strashnov, in which he urged him to take into account the interests of all SMARTS co-owners, including Sigma, in the negotiations. Back in 2005, Sigma bought from VEB the rights to claim a loan for $56.3 million, which was taken and not returned by the Angelro Trading & Investments established by Kiryushin. Initially, the loan was secured by a 19.975% stake in SMARTS (now this stake is under arrest), but subsequently Sigma demanded a recovery for another 12% owned personally by Kiryushin.

Kiryushin acknowledges the fact of the debt, but it is not clear who has the right to claim it - Sigma or AFK Sistema (presented monetary claims secured by SMARTS shares. - "Vedomosti"), he notes. This must be decided by the court, Kiryushin is sure. At the same time, the lender must compensate SMARTS shareholders for the losses caused by the raider attack, and they are more than the amount of debt, he emphasizes. Just now, Kiryushin is demanding 2.5 billion rubles in court from Sigma. - Such damage was suffered, in his opinion, by SMARTS shareholders due to the prolonged seizure of company shares.

• In July 2011, it became known that the offer for the purchase of 97% of SMARTS shares sent by Tele2 to shareholders of the Volga group in the spring of 2011 had expired and would not be renewed. SMARTS co-owners were notified about this by VTB Capital, representing the interests of Tele2, sources on both sides told Vedomosti^[3]. A manager close to SMARTS confirmed this. The Tele2 offer was valid for a limited period, explains the manager close to the buyers, and the key condition of the transaction was a truce between the co-owners of SMARTS - its founder Gennady Kiryushin and LLC Sigma Capital Partners Leonid Mayevsky, claiming 32% SMARTS. This condition has not been fulfilled to this day.

For Tele2, operating in 37 regions of Russia, SMARTS is an attractive asset: the operator works in those constituent entities of the Federation where Tele2 does not have licenses. With the purchase of SMARTS, the Tele2 license area would instantly expand by almost 1.5 times. Interest in this asset remains, but while SMARTS shareholders and applicants for this company will not settle mutual disputes, there can be no question of its purchase, explains a source close to Tele2.

In addition, Kiryushin is not satisfied with the price offered by the Swedes, according to a source close to SMARTS shareholders, and confirms the manager from the buyers. The last of the estimates discussed is $433 million for 97%, the first interlocutor knows. SMARTS shareholders asked Tele2 to include $10-15 million in the company's 2010 capex valuation, Kiryushin explains. But the price issue in the negotiations was not the main one, adds another source close to SMARTS.

Mayevsky says that he did not believe in the deal with Tele2 from the very beginning. To agree with Kiryushin, in his opinion, is unrealistic. "We signed an agreement with Sigma on the settlement of the conflict and fulfilled all its points, and Mayevsky did not have a single one," Kiryushin replies.

Nevertheless, SMARTS is still negotiating with investors, says its general director Andrei Girev.

• In September 2011, it became known that the founder of SMARTS, Gennady Kiryushin, managed to get a review of the case for recovery of losses in the amount of 2.5 billion rubles from Sigma, which Kiryushin accuses of a raider attack. Sigma's activities were financed by Sistema AFC^[3].

The Presidium of the Supreme Arbitration Court (EAC) sent a new lawsuit to the founder and chairman of the board of directors of the Volga mobile operator SMARTS Gennady Kiryushin to Sigma Capital Partners (UPC). In the lawsuit, ATI accuses the UPC of conducting a raider attack against SMARTS in 2005-07 and on behalf of the main shareholders of SMARTS demands to pay compensation in the amount of 2.48 billion rubles.

The lawsuit of offshore Kiryushin was filed as a counterclaim against the UPC in the Arbitration Court of St. Petersburg and the Leningrad Region. In 2010, he was rejected, the appeal and cassation court confirmed this. But in May 2011, the EAC board did not agree with the conclusions of the lower instances and referred the case for consideration to the presidium, which agreed on the need to review the case.

UPC has been suing Kiryushin since 2005. Before the conflict, the founder of SMARTS, along with his children, owned 60% of the shares of the mobile operator, another 20% were bought by ATI from the remaining shareholders. However, SMARTS is a closed shareholder of the company, and UPC, which at that time owned a minority stake in the operator, tried for two years to get the buyer's rights 20% itself in the courts. In parallel with this, UPC bought from VEB the rights to claim a loan of $56 million issued to Kiryushin on security of 32% of SMARTS shares (20% were pledged from the Angentro package, 12% from shares directly owned by Kiryushin).

Subsequently, from the report of the tax inspectorate on the inspection of the UPC, it turned out that the funds for the purchase of the VEB loan were provided by the structures of AFK Sistema. In 2010, AFK Sistema admitted that UPC transferred to it the rights to claim a 32% stake in SMARTS, and began to sue for this package.

In 2009, the court confirmed the rights of the UPC claim for the loan in the amount of $66.5 million (including interest, penalties and fines). But ATI filed a counterclaim. Kiryushin believes that the UPC, by order of AFK Sistema, organized a raider attack against SMARTS: at its request, an ATI-owned stake in SMARTS was arrested, in parallel with which courts in various Russian regions imposed arrests on all the operator's shares in lawsuits of unrelated people. All this led to a slowdown in the growth rate of SMARTS business, a fall from 5th to 7th place among Russian mobile operators in terms of the number of subscribers and an increase in interest rates on bank loans. In addition, due to interim measures in UPC claims in 2007, transactions to sell SMARTS to VimpelCom and Tele2 broke down. The total amount was calculated by the Lair consulting group as the difference between the growth of the RTS-Telecommunications exchange index and the value of SMARTS shares.

The court of first instance rejected the claims for damages, finding the amount of damage unproven, and also drawing attention to the fact that the arrests on the SMARTS shares were imposed, including on the claims of Kiryushin himself. Why the Presidium of the EAC reversed this decision is not yet known due to the lack of motivation. But the decision of the EAC board on the transfer of the case to the Presidium spoke of the need to take preventive measures against the organizers of raider attacks, since otherwise they could harm the country's macroeconomics. The arrests on SMARTS shares, which were superimposed on Kiryushin's claims, the EAC board considered reasonable measures to protect the business.

SMARTS is pleased with the verdict of YOU. According to the general director of the operator Andrei Gireev, if the claim is satisfied, the amount of compensation that the UPC will have to pay will be the subject of negotiations on the repayment of the loan to this company. Leonid Mayevsky, who in 2009 became the owner of the UPC, on the contrary, believes that delaying the trials is not beneficial to Kiryushin. He recalled that in 2008 MTS and Megafon were ready to pay more than $1 billion for SMARTS, while now Tele2 offers about $400 million for the company. "The more the courts last, the cheaper SMARTS will become," Mayevsky warns.

2010: 9.93% decrease in net debt

As of January 1, 2011, the subscriber base of SMARTS OJSC amounted to 1,165,505 subscribers. In Q4 2010, the number of commercial subscribers decreased by 2.3%, or 27,902 subscribers.

This situation has developed due to the "cleaning" of the subscriber base due to the ongoing policy of tightening control over the accounting of subscribers. As a result, the subscriber base has decreased mainly by the number of so-called "sweaters," i.e. subscribers prone to frequent change of operator in order to obtain more profitable tariffs, even for a short period

As a positive point, the number of connections for the 4th quarter of 2010 was higher than for the 3rd quarter of 2010 (by 5.8%), and in general for the 2nd half of 2010, 11.6% more new subscribers were attracted than in the 1st half of 2010.

Still, most of the new connections in SMARTS OJSC fall on pre-price tariff plans (84.8% in 2010).

The consolidated subscriber base of SMARTS Group of Companies as of January 1, 2011 amounted to 2,503,739 ab. In Q4 2010, the number of commercial subscribers decreased by 0.2%, or by 4,575 subscribers. The decrease in the number of subscribers as a whole in the SMARTS Group of Companies for the 4th quarter and 2010 is mainly due to the "purges" of the subscriber base for SMARTS OJSC carried out during the reporting period.

The number of SMARTS GC connections for the second half of 2010 increased by 3.5% compared to the first half of 2010, mainly due to the involvement of subscribers for pre-price tariff plans.

It should be noted that in 2010, the Russian mobile market (according to ACM-Consulting) noted a decrease in subscriber bases among individual participants: for example, in January, March, June-August and October 2010, the number of MTS subscribers in the Russian Federation decreased; VimpelCom showed negative dynamics in the number of subscribers in the Russian Federation in January, April, June and September-November, and in March, May and August-November 2010, Svyazinvest operators [1] in total also showed negative increases.

Main analytical indicators of SMARTS OJSC and SMARTS Group of Companies (consolidated) for 2010

1. The average monthly revenue per subscriber (ARPU) of SMARTS OJSC in 2010 (117.1 rubles) almost corresponds to the level of 2009 (a decrease of only 0.5%), and relative to the average monthly values ​ ​ of the previous reporting period (9 months of 2010), the ARPU value increased by 0.5%.

According to GK SMARTS for 2010, the average monthly value of ARPU amounted to 132.9 rubles, which indicates an increase in this indicator compared to 2009 (130.1 rubles) by 2.1%.

2. According to the results of 2010, SMARTS OJSC's average monthly traffic per subscriber (MOU) was at the level of 114 min/ab., relative to the results of 2010, there is a decrease in the volume of traffic consumed per subscriber (by 6.7%), which is associated with a decrease in voice traffic in favor of the consumption of non-voice services. Relative to the monthly averages of the previous reporting period (9 months of 2010), the IOU has not changed.

According to GK SMARTS for 2010, the value of the MOU indicator was 151.6 minutes per subscriber, which is 2.9% higher than the final indicators of 2009.

Debt analysis of SMARTS OJSC and SMARTS Group of Companies

The net debt of SMARTS OJSC (debt on short-term and long-term loans and loans minus cash and short-term financial investments) as of 31.12.2010 decreased by 9.93%, or by 286.7 million rubles, compared with the same period of the previous year and amounted to 2,600,6 million rubles. Compared to the previous quarter, the value of the indicator decreased by 2.87% (by 76.7 million rubles).

The net debt of SMARTS Group of Companies [2] as of 31.12.2010 decreased by 3.33%, or by 105.6 million rubles, compared with last year and amounted to 3,066,0 million rubles. Compared to the previous quarter, the value of the indicator also decreased slightly (by 1.0%).

2008

The founders of SMARTS have been looking for buyers since the early 2000s. At different times, MTS, VimpelCom, Megafon, and Svyazinvesta were interested in the transaction, but no one managed to agree on a price with the seller. In 2008, MTS and Kiryushin almost hit their hands, but at the last moment the price offered by MTS - $1 billion, taking into account debt (estimated at $200-250 million) did not suit Kiryushin. Rostelecom has not yet shown interest in buying SMARTS, its representative said.

1991: Foundation of the company

SMARTS OJSC (Middle Volga Interregional Association of Radio and Telecommunications Systems) was founded in May 1991 in Samara.

Notes