White & Case Assists Sonera in Establishing Russia's First National GSM Operator

Moscow, August 20, 2001 ... White & Case advised Sonera on structuring a deal to create the first nationwide GSM mobile phone operator in Russia. The complex transaction included share issuances, exchanges, and sales.

The new, single brand, set to be unveiled later this year, will encompass operations covering 400,000 subscribers and 122 million potential customers, representing 80 percent of Russia.

The Quote
“This deal signals renewed investor confidence in the Russian telecoms market,” White & Case lawyer Eric Michailov said. “An emphasis on corporate governance standards and improvements to the Russian legal system is encouraging for foreign investment. A complex merger like this would have taken much longer to complete just five years ago.”

“Consolidation has become a key means to create value, new areas of growth, efficiencies, and consumer benefits in telecommunications. We are excited about participating in the creation of a leader in such a large market with so much untapped potential,” said Martti Huttunen, Vice President of Sonera Wireless Ventures. “The new entity will be one of only two mobile operators covering both of Russia’s largest markets, Moscow and St. Petersburg.”

The Details
The core of the new operator is formed by St. Petersburg’s leading GSM operator ZAO North-West GSM (Sonera 23.5%), Moscow’s third mobile phone operator Sonic Duo (Sonera 35%) and Telecominvest’s five local GSM 900/1800 operators (Northern Caucasus, Ural, Volga, Siberia and the Far East). ZAO North-West GSM began operations in 1994 and MCC Polvolzhje currently operates in the Volga area. The other five operators will launch service during 2001 and 2002.

The new Russia-wide mobile phone operator is owned by Telecominvest (31%), Sonera Corporation (26%) Central Telegraph Mobile (26%, owns also 65% of Sonic Duo), Telia Group (8%, owns also 30% of First National Holding, which further owns 85% of Telecominvest), IPO Growth Fund (6%), ZAO WestLink (1.5%), and ZAO Kontakt S (1.5%).

Legal confirmation of the merger is expected no later than at the end of the first quarter of 2002. The company’s management will be appointed during the third quarter of this year.

The new operator plans to participate in the future 3G mobile communications market and is weighing a public listing based on market conditions.

The Lawyers
Eric Michailov, senior associate in the Moscow office of White & Case, worked closely with Sonera’s in-house counsel to review and negotiate merger documentation and shareholders’ agreements, and provided Russian regulatory advice. With White & Case in Moscow since 1992, Eric regularly represents investment funds and private companies in their activities in Russia, particularly in M&A transactions.

Background
Sonera
Sonera is the leading mobile communications operator in Finland. Sonera had more than 2.3 million mobile subscriptions at the end of the year, and its market share of GSM subscriptions was over 60%. Sonera has associated companies that provide GSM services in five countries: Turkey, Estonia, Latvia, Lithuania and Russia.


White & Case in Moscow
White & Case was one of the first foreign law firms to open an office in Moscow in 1991. Now it is one of the largest international law firms in Moscow, with 34 lawyers, including three resident partners. The Moscow office is consistently rated among the top law firms in Moscow, and has particularly strong practices in finance, corporate, capital markets, projects and disputes. It was recently described as “one of the strongest firms around” with “one of the premier U.S. offices in Moscow” by Chambers Global (2001-2002).

White & Case
Founded in New York in 1901, White & Case is a global law firm with more than 1,400 lawyers in 27 countries. The firm experienced significant growth around the world last year, and with its recent merger with German firm Feddersen Laule it has become one of the largest U.S. law firms in Europe. For this and other achievements, the firm was recently named Global Law Firm of the Year by The Lawyer magazine.