Metromedia International Group Agrees to Acquire 50% of a Major Moscow CLEC, Comstar, from Marconi
Comstar owns and operates an extensive digital overlay network in the City of Moscow
NEW YORK--(BUSINESS WIRE)--June 20, 2000--Metromedia International Group, Inc. (AMEX:MMG - news), which through Metromedia International Telecommunications, Inc. (MITI), is the owner of various interests in communications joint ventures in Eastern Europe, the former Soviet Union and other emerging markets, today announced that it has entered into an agreement with Marconi Communications Limited of the U.K. to acquire Marconi's 50% ownership position in Comstar, the third largest digital overlay operator in Moscow. MITI has agreed to pay $60 million for the 50% interest in Comstar. The parties expect the transaction to close in the fall of 2000.
Comstar is a 50/50 joint venture with the Moscow City Telephone Network (MGTS). It has a 756 mile optical fiber network throughout Moscow City. This network supports local, national and international data and telephony services and is interconnected into MGTS' public network of 4.5 million customers. Comstar has a well-established platform that facilitates all types of IP services through a Central Internet Service Node based on Marconi technology. This platform enables Comstar to develop VoIP services, point-to-point data communications, frame relay, ATM and a total package of ISP services.
Stuart Subotnick, the President and CEO of Metromedia International Group, said, ``The acquisition of the Comstar interest gives MITI a significant presence in the Moscow market, which remains the most important in Russia, and complements MITI's position in Russia's second largest city, St. Petersburg, through our ownership interests in PeterStar and Baltic Communications Limited. Customers with operations in both cities will benefit from economies of scale and the availability of a common platform for integrated voice, data and other value added services. These competitive advantages will be used to enhance our respective customer bases.''
James Hatt, the President and Chief Executive Officer of MITI, added, ``The Comstar acquisition also gives us an opportunity to build a relationship with AFK Sistema, the main shareholder of MGTS and a major player in the Russian telecommunications market. We intend, in particular, to focus on developing a plan for enhancing the delivery of data services and content by both Comstar and, where appropriate, the other communication interests we each hold.''
Lord Simpson, the CEO of Marconi plc, said ``Comstar has been a successful telecom operator in Russia with more than a decade of continuous growth. The company's Marconi technology based network is one of the most advanced in Moscow ensuring its future ability to maintain its premier position in the market. We believe that the new owners will be well placed to continue and build upon the success to date and we look forward to remaining Comstar's equipment and services supplier.''
Completion of the transaction is conditioned upon a number of matters, including the receipt of customary Russian regulatory approvals and MITI's obtaining financing for the transaction. In addition, the transfer of the Comstar shares by Marconi to MITI requires the waiver of pre-emption rights by MGTS, the other 50% shareholder in Comstar. The agreement with Marconi requires MITI to place $3 million in escrow, pending closing of the transaction. In the event that the acquisition is not completed by November 30, 2000, Marconi has the right to terminate the Purchase Agreement and, in certain circumstances, retain the deposit. In addition, if the transaction has not been completed by August 31, 2000, the purchase price is subject to escalation, with the additional amount not exceeding approximately $1.2 million.
Metromedia International Group, Inc. is a global communications and media company. Through its wholly owned subsidiaries, the Company owns and operates communications and media businesses in Eastern Europe, the republics of the former Soviet Union and other emerging markets. These include a variety of telephony businesses including cellular operators; providers of local, long distance and international services over fiber-optic and satellite-based networks, international toll calling, fixed wireless local loop; wireless and wired cable television networks and broadband networks; and FM radio stations.
MGTS owns and operates Moscow City's public switched network and has roughly 4.5 million customers. AFK Sistema is the main shareholder of MGTS. AFK Sistema's other key telecommunications interests include a partnership with Deutsche Telecom Mobile in Mobile TeleSystems (MTS), the leading GSM company in Moscow.
Marconi plc is a global communications and IT company, with 45,000 employees worldwide and sales in over 100 countries. It supplies advanced communications solutions and the key technologies and services for the Internet.
MITI was advised by Schroder Salomon Smith Barney and Marconi was advised by ABN AMRO Corporate Finance in connection with this transaction. |
