Euroset

The company working at the market of cellular retail and the dealer of telecom operators. The main activities of the company are retail implementation by cell phones, digital cameras, the DECT phones, personal audio, accessories, connection to telecom operators and rendering information services to clients.

Assets

The network of the company includes more than 4.3 thousand shops located in 1373 cities of Russia, Ukraine, Kazakhstan, Belarus.

Performance Indicators

2018

Growth of online sales by 34%

The Svyaznoy Euroset consolidated company summed up on February 11, 2019 the results of online sales in 12 months 2018. From January to December, 2018 on svyaznoy.ru, euroset.ru and in the electronic directory of the company sales growth year-on-year in terms of money made 34%. To the fourth quarter 2018 the share rose up to 25% in terms of money. Read more here.

Euroset integrates with Svyaznoy

The MegaFon operator announced in April, 2018 achievement of the arrangement on merge of the retail network of Euroset belonging to it to the competitor - Svyaznoy network. The relevant agreement was signed by MegaFon with the owner of Svyaznoy - the Solvers (SLV) group of the entrepreneur Oleg Malis^[1].

Within the transaction "subsidiary" of MegaFon - the offshore Lebford Investment - will transfer 100% of stocks of the offshore Euroset owning operating companies of the Euroset group, the Cyprian DTSRetail. This structure is the owner of Svyaznoy now.

In the united company MegaFon through Lebfrod Invetsments will have 25.1% of stocks and two places in Board of Directors (total number of places in Board of Directors does not reveal). The Solvers group will have a control over the united company.

MegaFon claims that the united company will include 5 thousand salons that will allow this company to become the world's largest retail network in the field of high technologies.

Revenue of the united company at the end of 2017 makes 22 billion rubles. In the company 30 thousand employees work, daily its salons are visited by 2 million people.

History

2019: Completion of integration of retail networks "Svyaznoy" and "Euroset" and change of the CEO

On May 28, 2019 the Svyaznoy Group announced a successful completion of integration of retail networks "Svyaznoy" and "Euroset". As a result of merger of companies uniform IT infrastructure is created, transition to a single logistics system is performed, merge of legal entities of operating companies is made. Emergence in the Russian market of the large player with a huge potential of growth became a result of integration.

Oksana Guskova since June 1, 2019 is appointed the CEO of the Svyaznoy group. Alexander Malis who was earlier taking this position left a position.

2018

Salons of Euroset will be translated under a brand Svyaznoy

The united company of Euroset and Svyaznoy provided the strategy of the development in June, 2018. The company will develop under a brand Svyaznoy. The united company was headed by Alexander Malis who was the president of Euroset before. A brand Euroset within a year will stop the existence.

Salons of Euroset will be translated under a brand Svyaznoy or under a certain new brand, Alexander Malis explained CNews. The decision on creation of a new brand is not made^[2] yet^[3].

In the joint network there will be 5.5 thousand salons to 1.3 thousand Russian cities. In them 30 thousand people work. Daily 2 million buyers come into these shops.

100% PJSC MegaFon became the shareholder of the company

In February, 2018 the Euroset announced change of shareholders – now 100% of stocks of the company belong to PJSC MegaFon. PJSC MegaFon and PJSC VimpelCom compounded about the termination of joint activity within Euroset in 2017.

As a result of a number of perfect transactions MegaFon purchased at PJSC VimpelCom a share in the amount of 50% of stocks of Euroset and, thus, brought the share of ownership to 100%.

In turn, PJSC VimpelCom purchased a half of retail stores of Euroset that makes about 1800 outlets, and paid 1.25 billion rubles to MegaFon for a covering of the share of outstanding debt obligations of Euroset.

2017

Growth of revenue by 83%

Euroset summed up the results of the work in 2017. The number of orders from the website in 2017 grew by 68% in comparison with 2016, revenue increased by 83%. In particular, the number of orders only for November-December, 2017 increased by 97% in comparison with the same period of 2016, and revenue — for 174%.

According to the company, upgrade of the website, a possibility of reservation and fast (till 4 o'clock) deliveries of orders in shops of Euroset, expansion of the commodity offer, growth of marketing activity, the high processing speed of orders increased conversion of the website by 70% in 2017 in comparison with indicators of 2016. Moreover, the made technical improvements ensured smooth operation of the website in the most busy season — in December, 2017.

In 2017, in addition to work with the range, delivery and marketing activities, our specialists did a great job on optimization of the website and our infrastructure, increased speed and were well trained for heavy peak loads. Certainly, it has a positive impact on sales and helped Euroset to cope with growth of orders in December. For the last week of December we accepted, processed and delivered as much orders and for the same amount, as for all August, 2017 — Ilya Adamsky, the director of management of Internet commerce and corporate sales to Euroset company reported.

According to the statistics the companies, the number of orders with shipment at own expense continues to grow promptly. In 2017 buyers took away 60% of online orders in shops within 24 hours, and the total amount of the orders redeemed on outlets was 73% of total sales by the orders made on the website.

Besides, the updated mobile version of the website became the driver of growth, consider in Euroset. In 2017 conversion of mobile version grew by 163% by 2016, growth of revenue was 466%. The number of the buyers preferring to make purchases from mobile devices increases: so, in 2017 46% of orders are issued using mobile devices.

MegaFon and Veon separated Euroset

On July 12, 2017 PJSC MegaFon and Veon announced the termination of joint activity within business of Euroset.

On the basis of the agreement reached between the parties, MegaFon will purchase at VimpelCom the share belonging to the company in the amount of 50% of stocks of Euroset and will bring the share of ownership to 100%. At the same time Euroset will remain in the market as operating company. PJSC VimpelCom, in turn, will purchase a half of retail salons of Euroset.

The agreement should be approved by the regulator according to applicable rules and conditions. The deal will be closed only after observance of all precedent conditions and receiving approval of regulating authorities.

Discussion of separation of the company

It became known in the spring that MegaFon and VimpelCom (a trademark Beeline) intend to agree about the fate of the Euroset belonging to them in equal shares within one month. It was said by the CEO of MegaFon Sergey Soldatenkov.

"Negotiation process on possible separation of Euroset continues — he told. — I hope, it will last no more, than month, maybe, even quicker"^[4].

Rumors about possible separation of Euroset appeared even in the spring of 2016. It was meant that each of operators will take away to himself a half from retail network which contains about 4.2 thousand salons across all Russia now, and will attach new points to own network. At such succession of events very vital issue is preserving or total disappearance of the brand of Euroset.

2016: Loss of 1.66 billion rub

The loss of Euroset in 2016 made 1.66 billion rubles. In addition the loss from depreciation of corrections of MegaFon on distribution of purchase price of Euroset made 4.93 billion rubles.

2015: Loss of 1.18 billion rub

At the end of 2015 MegaFon reported that Euroset had a profit in the amount of 1.48 billion rubles, but all the same there was a depreciation loss in the amount of 2.6 billion rubles. Thereof the general loss of Euroset in 2015 made 1.18 billion rubles, a share of MegaFon in this loss - 590 million rubles.

2014: Reduction of a net debt from 5 billion rub to zero

The Euroset company brought value of a net debt of the company for January 1, 2015 to zero. A net debt of the company for January 1, 2014 Alexander Malis, the president of the company made about 5 billion rubles:

"That rate on bank interests which was established today completely excludes use of bank financing for fair business. Take the credits on those terms which are offered today by banks only people who have nothing to lose can".

2012: MegaFon and Usmanov buy 50% of Euroset for $1.3 billion

The Board of Directors of MegaFon approved parameters of the forthcoming transaction on purchase of shares of the largest cellular retailer "Euroset". According to the results of the transaction MegaFon and its controlling shareholder — the Garsdale Services holding — will be purchased at the offshore Alpazo belonging to Alexander Mamut on 25% of stocks of Euroset. The controlling shareholder of Gardsale is Alisher Usmanov, minority shares in holding also belong to Telconet Capital fund of Sergey Adonyev and Rostekhnologii state corporation.

It is announced that acquisition will be performed in several stages. At first MegaFon will redeem repayable preferred shares of the Cyprus offshore of Lebford for the amount to $590 million. Lebford Investments will allocate these funds for purchase of a quarter of stocks of Euroset. The offshore will redeem other quarter of shares for the benefit of Garsdale.

Thus, Lebfrod Investments will own 50% of stocks of Euroset, and the offshore will belong on a parity basis to MegaFon and Garsdale. In case of achievement by Euroset of a number of financial performance Mamut will get an additional award at the rate to $110 million which MegaFon and its controlling shareholder will be paid in half.

The source familiar with transaction parts reported to CNews that for settlings with Mamut stocks of SUP Media Internet holding will be used (integrates Livejournal, Gazeta.ru and other online projects). The stocks SUP Media were on a parity basis separated between Mamut and Usmanov, but within preparation of the transaction with Evrostyyu Usmanov gave the share in the Internet company in Garsdale.

Thus, the maximum assessment of Euroset within the transaction makes $2.36 billion — 2.44 billion Besides, MegaFon and Garsdale will sign option the agreement with which in compliance MegaFon will be obliged to redeem the share of the shareholder in Euroset, and Garsdale, in turn, to sell it to MegaFon. The cost of an option exercise will be up to $1.33 billion, it can be implemented during the period from one to three years from the moment of acquisition of Euroset.

Therefore, Usmanov's holding will be able to earn up to $740 million from purchase and sale of shares of Euroset, and by the time of option exercise assessment of Euroset will grow twice — to $5.32 billion. "Future owners of Euroset calculate that after purchase of the company its cost considerably will grow", - says a source of CNews. However, he notes, final price parameters of the transaction are not approved yet.

At this time Mamut has 50.1% of the stocks "Evrsoyeti", other 49.9% - at VimpelCom (a trademark Beeline). Having sold 50% of shares, Mamut will also sell the remained 0.1% of shares of the retailer to VimpelCom. Thus, VimpelCom and MegaFon will have a parity in Euroset, the parties will also have to sign the option agreement which still was absent between shareholders of retailer.

2011

Boom of sales of eReaders

For half a year from January to June, 2011 Euroset sold 14.8 times more readers, than for the same period of last year (+1379%). In seven months 2011 the retailer sold readers more, than for all 2010, she adds. In terms of money sales of these devices grew in the first half of the year 2011 besides to the period of 2010 by 5 times (+410%)^[5].

Does not open absolute digits of sales of readers in the Euroset shops, but shares market assessment in general: in the first half of 2011 to Russia 658,000 of these devices were delivered (438% more, than in the first half of the year 2010), and in terms of money the market grew approximately from 1.2 billion to 3 billion rubles. For comparison: tablet computers in the first half of the year 2010 in Russia it was sold, according to Smartmarketing, about 200,000.

Demand growth on readers was promoted by fast reduction of prices of them, Smolskaya considers. If in the I quarter 2009 (when readers only appeared in the Russian retail) such device cost an average of 13,500 rub, then now — 4500 rub, she says. Triple reduction in cost — the investigation of emergence of e-books with TFT screens (LCD displays on thinfilm transistors) and gains of the competition between producers, Smolskaya considers: in the I quarter 2009 all market products of two-three producers, and now their created not less than 20.

Mamut finally was calculated with founders of Euroset

The transaction on sale of the cellular retailer, largest in Russia, signed in September, 2008 came to the end only in February, 2011 Alexander Mamut finally was calculated with founders of Euroset. By this time the company can be 10 times more expensive^[6].

Shareholders of Euroset — ANN company of Alexander Mamut and VimpelCom — closed the deal on acquisition of the Euroset group at Timur Artemyev and Evgeny Chichvarkin's structures. Mamut, Chichvarkin and Artemyev reported about it on February 3, 2011. The agreement between ANN and founders of Euroset was signed in September, 2008, then Mamut became the full owner of 100% of stocks of retailer, the president of the company Alexander Malis reminds. Soon after that — in October, 2008 — Mamut resold 49.9% of Euroset to VimpelCom for $226 million. VimpelCom closed this deal then, in 2008, the press secretary Anna Aybasheva says it.

Mamut completed settlings with the former co-owners of Euroset only now, told Vedomosti the source close to its participants. Execution of the transaction lasted long so because it was slozhnostrukturirovanny, the buyer needed to check large volumes of information, Chichvarkin explained to Vedomosti. As a result "views of all parties [on the company and its cost] completely matched", all settlement is closed also all participants the deals "is absolutely happy", he says.

"Sold for three kopeks" – so Chichvarkin answered earlier questions of for what amount he sold the 50% of Euroset to Mamut. At the same time he added that he has no claims to Mamut. Mamut had some debt only to Artemyev, told to Vedomosti the source close to co-owners of Euroset earlier.

Artemyev told Vedomosti only that participants have the transaction of no mutual claims. Neither he, nor Chichvarkin disclose the cost of the transaction.

Upon termination of settlement Chichvarkin and Artemyev received approximately for $200 million everyone, approves the source close to new shareholders of Euroset. The similar amount was called earlier to Vedomosti by Chichvarkin's acquaintance. The bank debt of the retailer made in the fall of 2008 about $900 million — thus, all Euroset at that time could be estimated approximately at $1.3 billion.

Both founders of Euroset close the deal, being out of Russia. Artemyev spoke with Vedomosti yesterday, being on the way to Great Britain, and Chichvarkin with family lives in London since December, 2008.

Coincidence of these two events — closings of criminal case and the transaction on sale to Euroset — randomness, Chichvarkin claims.

"Doing the transaction on the London right, we could not deliver a condition end of court in Russia" — he explains.

It was expected that Euroset can receive one more assessment soon — during the IPO on the London Stock Exchange planned for spring of 2011. On the exchange about 30% of stocks of the company can be exposed, including a part of the packet belonging to Mamut was told to Vedomosti in the fall of 2010 by managers of several investment banks and Mamut's acquaintance confirmed. Then investment banks estimated previously 100% of Euroset at $2.5-3 billion (from which only $324 million were the share of a debt of the retailer). Now assessment makes not less than $4 billion for all company, approves the source close to her co-owners.

The jury trial acquitted all staff of Euroset

In January, 2011. The State Office of Public Prosecutor closed case after the jury trial completely justified former employees of Euroset and they were released after almost two years' arrest.

2010

Optimization of network of outlets

Among important success factors of 2010 the head of Euroset Alexander Malis called topographical optimization of retail outlets. According to him, for the last year from 3700 Russian shops of Euroset about 1000 were closed, and about 1000 openly in more successful places. Thus, the total number of outlets and the number of personnel in them did not change.

Advertizing expenses passed to suppliers

Till 2010 Euroset participated in advertizing financing, and sometimes completely paid it, the head of the company Alexander Malis (in the middle of the 2000th — in a proportion 50:50, and few years ago suppliers paid 3/4 advertizing expenses of Euroset, remembers its former employee) was recognized, but then proved to suppliers that benefits from advertizing which they place through Euroset pay back their expenses on it.

"To the supplier who brings new phone to the market it is important<...> that the market knew about it and that it was on sale everywhere — the president Alexander Malis explains. — We learned to do advertizing which gives to suppliers the chance to sell more both in Euroset, and beyond its limits".

According to the Aegis Media agency, last year Euroset paid advertizing on 340 million rubles (including VAT and discounts). Assessment of OMD MD I PHD Group — $7.1 million excluding VAT. In 2009 Euroset paid advertizing more than on 300 million rubles, and in 2010 expenses will increase approximately to 700 million rubles, tells a source, close to Euroset. In 2010 the advertizing budget of Euroset grew almost twice, but these expenses laid down entirely on suppliers of the retailer, its president Alexander Malis told Vedomosti:

"We do not pay for advertizing, it is not our money. Advertizing is paid by suppliers whose goods are on sale at us". Own advertizing budget of Euroset makes, according to him, "how many and that hundreds of thousands of rubles a year".

Nokia covers all expenses of Euroset on advertizing of its products, the manufacturer representative Victoria Eremina confirms. But if Nokia pays advertizing in pure form, then Euroset motivates sellers to sell more products of Nokia, places its promotional and information materials in shops and the Internet.

Dealer agreement with Tele2

On August 3, 2010 it became known that Tele2 and Euroset signed the new dealer agreement. Still between the companies local agreements with the conditions worked in each region. Now the agreement uniform, termless also concerns all 34 regions of presence of Tele2. The new sales plan, according to Smirnova, provides increase in monthly volume of connections to Tele2 by 40% in comparison with an indicator of 2009. If so, then for a year of Euroset it is necessary to sell not less than 420,000 Tele2 SIM cards.

Euroset sold for 2009 about 12 million SIM cards from which it was the share of Tele2, according to Malis, 2.5%, i.e. about 300,000.

Partners do not open commercial conditions of the new agreement, noticing only that amount of remuneration which Tele2 will begin to pay the retailer, will be not much smaller, than payments of MegaFon and VimpelCom (according to these operators, in 2009 each subscriber attracted through Euroset cost them $24.2 including VAT). The difference in the commissions of Tele2 and VimpelCom with MegaFon will be proportional to a difference in sizes of average accounts of their subscribers (ARPU), reported the source close to one of the parties of negotiations. At VimpelCom and MegaFon the sizes of the Russian ARPU were in the I quarter 2010 307.7 rub and 295 rub a month respectively, at Tele2 — 206 rub a month (30-33% less). Proceeding from these calculations of Tele2 should pay Euroset $16-17 for the subscriber. But in practice it is more than $20, the manager close to other party of negotiations claims: ARPU of new subscribers of Tele2 is higher, and the permanent part of remuneration (about $10 from each subscriber) at all operators is identical.

Tele2 actively takes subscribers herself also, the partner AC&M-Consulting Anton Pogrebinsky notes. But mobile communications market becomes more and more saturated and it is harder and harder to entice subscribers at other companies, he explains. In addition for the last year Tele2 began transactions in 20 new regions and Euroset can help the operator to occupy quicker a share in local markets, Pogrebinsky says.

The I half-year: Revenue of 27 billion rub

The I half-year 2010 according to IFRS:

Indicator	The I half-year 2010.	The I half-year 2009.
The net consolidated proceeds, thousand rubles.	27 601 344	24 425 758
EBITDA, thousand rubles.	3 479 018	86 644
EBITDA, %	12,6%	0,4%
Net profit / (loss), thousand rubles.	1 903 743	- 2 899 573

This result belongs to all company "Euroset" which integrates the legal entities forming retail and purchasing chain stores under the known brand.

Sales of mobile phones in kind in the I half-year 2010 grew by 1 million pieces (from 3.5 to 4.5 million).

Telling about the reasons of financial growth, the president of Euroset Alexander Malis mentioned "serious work with a commodity matrix" as a result of which the retailer increased a share of high-marginal goods, and about sharp cost reduction. So, according to Malis, costs for back-office were significantly reduced. At the beginning of 2010 about 4 thousand office employees of Euroset were announced reduction.

2009

Revenue of 55 billion rub, net profit - 1.1 billion

Financial performance (IFRS, 2009):

• revenue – 55.16 billion rubles,
• EBITDA – 4.83 billion rubles,
• net profit – 1.194 billion rubles.

The State Office of Public Prosecutor requires Chichvarkin's extradition from Great Britain

In 2009. The State Office of Public Prosecutor opened case and personally on the founder of Euroset Chichvarkin, having demanded his extradition from Great Britain.

Unsuccessful cooperation with Megafon

CNews was succeeded to study the audited reporting for 2009 of the Cyprus offshore of Morefront Holdings which is head structure for Euroset group. Earlier not disclosed details of rather marketing agreement which the retailer signed with MegaFon are given in the reporting. Let's remind, terms of agreement assume sale by Euroset of 7.2 million contracts of MegaFon from April 1, 2009 till September 30, 2010, dealer remuneration of the retailer is $172.8 million. It was paid in the advance payment, but for the end of 2009 the most part of remuneration remained "unfinished" - 3.17 billion rubles ($106 million at a rate of that time).

Under the contract 25.1% of the stocks of Euroset put by the controlling shareholder of the company – offshore from the British Virgin Islands are Rambert Holdings the key (belongs to Alexander Mamut). VimpelCom holds other shares of the retailer. Meanwhile, as stated in the report, for signing of the contract Euroset resorted to Rambert Holdings help. Mamut's structure received $25.6 million for the services, for the end of 2009 from this remuneration remained unfinished $4.9 million.

Now Rambert completely fulfilled the remuneration, reported CNews in Euroset. At the same time, it agrees information provided in the report, for payment with own shareholder the retailer resorted to the help of MegaFon - Euroset paid with five of its bills of exchange for total amount of $25 million consulting services of Rambert. "At that time we had no free money and we used bills of exchange with which MegaFon paid to us dealer remuneration", - the interlocutor of CNews explains. MegaFon said that are happy with results of the contract with Euroset, but refused to comment on its details.

Analysts point to non-market amount of remuneration of Mamut which made 14.8% of the contract amount of Euroset with MegaFon.

"Of course, Mamut locates pretty extensive communications and contacts in the Russian business community and its contribution to the conclusion of the partnership agreement, most likely, was powerful, - the analyst of UK "Finam Menezhment" Eldar Vagabov says. - Another thing is that the mediation commission obviously exceeds the market size which usually is from 2 to 10%". The analyst reminds that after purchase of Euroset in 2008 Mamut some time headed the company. "Therefore this so-called commission can reflect reality not absolutely adequately: under this article there could pass both bonuses, and compensating payments and in general anything", - Vagabov assumes.

Let's note that $25 million received by Mamut are 62% of the net profit of the Euroset for 2009 which made 1.192 billion rub ($40 million). Euroset at the same time is not going to pay dividends to shareholders, the president of the company Alexander Malis said today. But the transaction with Rambert was not dividend payout in the latent form, he assured CNews, and for value assessment of the services rendered by this company the Board of Directors selected the independent appraiser. The president of Euroset could not explain what services since at the time of its conclusion did not work in the company consisted in.

2008: The founder of the company Evgeny Chichvarkin leaves Russia

In December, 2008 the founder of Euroset Evgeny Chichvarkin went to Great Britain shortly after the Investigative Committee at the State Office of Public Prosecutor brought criminal case concerning several former employees of Euroset to which then charges of stealing and illegal imprisonment of the forwarding agent Andrey Vlaskin, robbery, racketing, torture and obviously false denunciation were brought. All these events, according to investigators, took place in 2003, but Vlaskin wrote the complaint only in September, 2008 — just when Chichvarkin and Artemyev sold Euroset.

According to the results of work for 2008 Euroset was included into Forbes rating of 200 non-public Russian companies (21 places).

2002-2007: The most dynamically developing retailer in the world

According to the report of Deloitte company (January, 2009), during 2002-2007 Euroset became the most dynamically developing retailer in the world.