Kismet of ex-CEO of Russian mobile major MegaFon and tech investor Ivan Tavrin has put in a bid for the tower infrastructure assets of another mobile operator Veon (former VimpelCom), Vedomosti daily reported citing unnamed sources in the industry.

A merger of other tower infrastructure assets of Tavrin could create Europe's second-largest tower operator, possibly poised for an IPO.

Most recent reports claimed that the Veon mobile major could be looking for cash in a long-delayed sale of tower infrastructure. In the meantime, Kismet Acquisition Two (Kismet II) and Kismet Acquisition Three (Kismet III) of Tavrin raised $450mn in an IPO on NASDAQ. Both Kismet II and Kismet III are SPACs (special purpose acquisition companies) that were created for re-investment in other non-public companies.

Reportedly, Kismet is now bidding for over 15,000 towers held by Veon, valued at an estimated $900mn or RUB60bn-RUB70bn, according to Vedomosti's sources. Previously, in 2015 Tavrin's Italian asset, Wind Telecomunicazioni, sold 90% in Galata, controlling 7,377 towers, to Spanish Cellnex Telecom for €693mn, Vedomosti reminds.

Tavrin also holds a majority 75% stake in Vertical cellular tower operator, and previously Forbes reported that Vertical could merge with First Tower Company (controls all the towers of MegaFon operator) for a subsequent IPO through Kismet Acquisition Two.

First Tower Company is valued at about RUB90bn, sources told Vedomosti. It controls 18,000 towers. The merged assets of Tavrin could thus control about 38,000 cellular towers, or almost 45% of the estimated 85,000-tower market.

Analysts estimated for Vedomosti that merging all the assets would create the second-largest tower operator in Europe after Cellnex Telecom with 128,000 towers in 12 countries.

As for the potential benefits for Veon, Sova Capital commented on August 23 that the potential value crystallisation of tower infrastructure could be a positive catalyst for the stock, assuming the valuation is right. The sale of its infrastructure should also potentially pass the infrastructure maintenance opex and capex on to the prospective buyer. 

"The main side-effects include potential limits on the company’s ability to differentiate from its competitors in terms of network quality," Sova warns. The analysts at Sova Capital maintain a Buy call on Veon shares, which trade at an estimated 2022 Enterprise Value/EBITDA of 3.4x.  

Among the key reasons why Sova Capital has "recently become more optimistic on the name" are its solid execution on the core Russian market, robust performance beyond Russia (Ukraine, Pakistan and Kazakhstan) and in areas beyond connectivity (e.g. JazzCash fintech deal), as well as the company’s efforts to streamline and crystallise the value of its portfolio.