Russia’s USM, Mail.ru Group, RDIF and Megafon to create a digital finance and payments JV with Jack Ma’s Ant Group

Russia’s diversified holding USM, telecom and tech giants Mail.ru and Megafon, together with the Russian Direct Investment Fund (RDIF) will create a digital payments joint venture with Ant Group, Russian Forbes reported on February 12.

USM group, which owns MegaFon and partly Mail.ru Group, is controlled by Russian tycoon Alisher Usmanov, who has a long history of successful tech investments. The Ant Group is a fintech company that belongs to Chinese tech investors Jack Ma, who is more famous as the founder of the Alibaba e-commerce concern.

Another participant is Russia’s sovereign wealth fund, the RDIF, which has also been making equity investments in a number of sectors, including the tech sector, and runs joint investment funds targeting Russian assets together with the Chinese sovereign wealth funds.

The Russian partners signed off on the creation of the JV that will consist of two joint ventures with the Ant Group, reports Forbes: a finance company and payment company.

“The JV will jointly provide digital payment solutions and financial services designed to help people save money when paying for services and goods in the booming Russian e-commerce segment,” a statement said, as cited by Forbes.

USM’s contribution into the JV will include a 100% stake in ASK Renessans, a 100% stake in Round Bank, a 100% stake in InPlat, other assets and cash.

Mail.ru Group will contribute assets worth RUB4.5bn ($608mn), including 100% of its existing payment services, Money.Mail.Ru and the VK Pay payment system, which is part of its social media site VKontakte. At the same time, these assets will remain the financial and payment instruments of the Mail.ru Group ecosystem. Mail.ru Group will lead the joint venture and is the largest shareholder in the joint venture with a 40% stake.

Mail.ru Group will also contribute RUB870mn rubles to the financial joint venture in which it will hold a 5.95% stake.

The other shareholders, "will contribute cash, assets, or both, to the finance and payment JV," the statement says. After the deal is closed sometime later this year after, "a number of conditions are met, including third-party approval," at which point the Russian partners will collectively control more than 50% of the joint venture.

Talks on forming the joint venture started in October 2019 at the same time as it as decided to launch AliExpress Russia, an offshoot of Ma’s e-commerce business that targets Russia.

Initially, the AliExpress Russia JV included Mail.ru Group, Megafon, RDIF and Alibaba Group. However, when creating a joint business, RDIF secured the right to buy out the share of the Chinese company. On January 29, the fund announced the acquisition of a 7.85% stake in AliExpress Russia from Alibaba Group.

Ant Group is a subsidiary of Alibaba, which owns China's largest digital payment platform, Alipay. Alipay appeared in Russia in April 2017. In December 2018, the company announced that the number of Russian users of the service is about 100,000 people. In January 2019, Tinkoff Bank agreed to partner with Alipay: it was supposed to provide the Chinese system with accepting payments at 30,000 points, doubling the number of shops and cafes where you can pay using the service.