The purchaser of Megafon from Alisher Usmanov will not inherit the debts of Svyaznoy

The mobile electronics network has declared that it will go to court to declare itself bankrupt. At the same time, Megafon, a previous shareholder of Svyaznoy, might be sold to Rostelecom. It seems that all this was initiated in advance, in early or mid-2022. The telecommunications market is under the control of the state and clearly does not require a “living bankrupt”.

In 2022 alone, 79 claims were made against Svyaznoy for over 14 billion rubles. Vimpelcom demanded 839 million rubles, Merlion demanded 5.6 billion, and Alfa-Bank demanded 6 billion, including overdue debt. Sovcombank threatened the network with bankruptcy, and in January 2023, Aviapark made a similar statement. In December 2022 and January 2023, the Moscow Arbitration Court supported the claims of VimpelCom and Merlion, respectively.

On February 14, a statement about the debtor’s intention to independently initiate bankruptcy proceedings was published on the Federal Resource.

One of the investors of Svyaznoy, Megafon, which controlled 25% of the network, sold its stake in 2022 to an undisclosed buyer. It should be noted that Svyaznoy, once a leading retail chain of mobile electronics, did not reach its current state in one year. Additionally, this is not the first bankruptcy of the network.

In 1995, Russian billionaire Maxim Nogotkov established the Maxus electronics retail chain, which he later renamed “The Messenger”. In 2014, Nogotkov found himself in a situation similar to the current situation of Svyaznoy, owing 6 billion rubles to the ONEXIM group of Mikhail Prokhorov and 3 billion to the Blagosostoyanie NPF. Svyaznoy is now 90% owned by new owners, and subsequently, Maxim Nogotkov lost the remaining 10% of the share following a similar scenario.

Prokhorov required Svyaznoy only to repay a six-billion-dollar debt. In 2014, he sold the asset to Solvers Oleg Malis, who became the holder of a controlling stake. In 2017, MegaFon examined Svyaznoy closely, and Oleg Malis and Alisher Usmanov agreed to merge Svyaznoy with Euroset.

MegaFon’s subsidiary, the Cypriot offshore Lefbord Investment Limited, acquired a 25% stake from this deal. As a result of this merger, the world’s largest retail chain in terms of its own stores emerged in the high-tech segment. Over 30,000 sales assistants worked in 5,000 points of sale, and the number of daily visitors exceeded 2 million. Revenue from online sales of the combined company reached RUB 22 billion in 2017.

In 2021, the total revenue reached 105 billion with a net profit of 15 million rubles. At the same time, the number of outlets in 1.1 thousand Russian cities decreased to 2.6 thousand.

According to Aleksey Kornev, an expert from the ACRA corporate ratings group, Svyaznoy has been struggling to become profitable for a long time, which led to an increase in debt. The company managed to make a profit for a while by closing unprofitable outlets. It's possible that the network could slowly start to recover.

In 2022, sanctions were imposed, causing electronics retailers to switch from deferred payments to prepaid goods. This change required additional working capital, which Svyaznoy already lacked due to its high debt load. Additionally, the number of clients gradually but steadily decreased.

Analyst Sergey Vilyanov from FintechLab pointed out another reason for Svyaznoy's failure. He believes that the company failed to notice changes in sales technology. Selling smartphones and accessories alone does not bring significant profit, as realized by major players in cellular communications. They focused on developing their own retail chains, which took a considerable portion of the advertising budgets from independent mobile retailers like Svyaznoy.

Despite filing for bankruptcy, Svyaznoy continues to purchase goods and its outlets are still functioning. This is understandable as long as the debts are not claimed and the bankruptcy procedure takes time.

According to Daniil Naimushin, an arbitration manager and managing partner of One to One, bankruptcy cases like this can sometimes last more than a decade. In the financial statements for 2021, the company's assets amount to about 53 billion rubles, with over 32 billion in receivables. With such amounts, the bankruptcy proceedings cannot be completed quickly.

In the corporate bankruptcies sector, it's very rare for a recovery or external management procedure to be introduced, offering the company an opportunity to regain solvency. There's also a possibility of the brand being transferred to a new owner, which is the initial hope of the Svyaznoy leadership, as mentioned earlier.

MegaFon, fully owned by Alisher Usmanov's USM holding, may be sold to Rostelecom. If this deal goes through, the state holding of mobile communications will become the undisputed leader in the telecommunications services market. Previously, the cellular operator Tele2 came under state control. Veon Holding intends to sell VimpelCom (Beeline) to top management, while structures associated with the state may also become the ultimate owner of the operator, according to Kommersant.