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MegaFon buys Russian social networking firm Mail.ru

Russian operator group MegaFon is acquiring a controlling interest in the internet firm Mail.ru in a deal which bolsters its content offering as mobile growth drops off.

For an initial fee of $640 million, MegaFon is obtaining 33.4 million shares which will avail it voting rights of almost 64% in Mail.ru. A further $100 million will be paid a year after the deal closes.

Mail.ru operates Russia’s two largest social networks along with platforms for online gaming and messaging. Between them, these platforms are used by 93% of Russia’s internet users.

MegaFon has stated that the acquisition was prompted by the lack of growth faced by the mobile market in Russia, which has become saturated. This has led to falling ARPUs and fiercer competition for high value customers.

The operator stated that: “Mail.ru Group is a natural fit to MegaFon to reinforce its strategy focused on digital trend, mobile data monetisation and new product offerings,” adding that the deal is “intended to create a unique digital player in Russia with the largest audience”.

Russian billionaire Alisher Usmanov co-owns MegaFon along with Swedish group Telia; as he also controls Mail.ru, this deal is essentially a strategic consolidation of his technology interests. The deal is expected to close in Q1 2017.

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