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Russian Vendor Plans $500M IPO

Sitronics aims to raise more than $500 million from an IPO in London and Moscow to fund growth

January 9, 2007

3 Min Read
Russian Vendor Plans $500M IPO

Russian vendor Sitronics JSC is planning an IPO in Russia and London that will raise more than $500 million and value the company at about $2.5 billion. (See Sitronics Plans IPO.)

Sitronics makes a wide range of consumer and business IT products, integrated circuits, and software, as well as telecom gear, and generated $1.05 billion in revenues and $37 million in net income in the first nine months of 2006.

The company, majority owned (77 percent) by Russian giant Sistema JSFC (London: SSA), aims to list its ordinary shares on the Russian Stock Exchange (RTS) and the Moscow Stock Exchange. It also plans to list GDRs (global depository receipts), which represent a number of shares, on the London Stock Exchange .

The value of the floated stock, which will include existing and new shares, is intended to be $500 million to $550 million, according to a company spokesman, and represents about 20 percent of the company's total shareholding. That would value Sitronics at $2.5 billion to $2.75 billion.

No date or share price range has been set while the company waits for regulatory approvals from the Russian Federal Financial Markets Service and the U.K. Financial Services Authority.

Sitronics' Telecommunications Solutions business, which comprises Strom telecom and Intracom Telecom , accounted for 48 percent of its revenues, or $504 million, in the first nine months of 2006. Its customers include leading Russian carriers like Mobile TeleSystems OJSC (MTS) (NYSE: MBT) and Comstar United Telesystems JSC (London: CMST) -- both also Sistema companies -- and Greek incumbent OTE S.A.

Strom, which has its base in the Czech Republic, sells VOIP gear (softswitch, media gateway), voice switches, IN (intelligent network) systems for fixed and mobile networks, and OSS software. (See MGTS Picks STROM, Eutex Picks Strom, Strom Showcases NGN Products, and Who Makes What: OSS .)

It has about 1,200 on staff and claims to have its products deployed in more than 50 networks in 14 countries in Europe, the Middle East, and Africa (EMEA), with Vodafone Group plc (NYSE: VOD)'s Czech business its most recently announced customer. (See Sitronics Wins Vodafone Deal and Strom Opens in Dubai.)

Intracom Telecom, based in Greece, has a wide range of fixed and wireless hardware and software, including broadband access gear (MSAN), point-to-point wireless, and OSS products, and has developed a content delivery platform called fs|cdn. (See Intracom Intros Triple-Play Platform.)

It has about 2,600 employees and claims 40 carrier customers in EMEA, mostly in South and Eastern Europe. Those customers include Polish mobile operator Polkomtel SA , Portugal Telecom SGPS SA (NYSE: PT), Romtelecom S.A. , Greek carrier Cosmote , and numerous Russian carriers.

It also owns U.S.-based subsidiary Conklin Corp. (a.k.a. Conklin-Intracom), which markets its content delivery platform to IPTV service providers. (See BitBand, Conklin-Intracom Win and Keymile, Conklin Demo IPTV.)

That Sitronics believes it can raise a half billion dollars or more is testament to the growth in EMEA's emerging markets, particularly Russia, where, according to iKS-Consulting , the telecom services market was worth $29.55 billion in 2006.

And it's an opportunity that Cisco Systems Inc. (Nasdaq: CSCO) has identified. Recognizing the importance of having local partners in the region, Cisco teamed up with Sitronics in November 2006 to "address the rapidly expanding telecommunications market in Russia and CIS countries (RCIS) and other emerging markets, such as Central and Eastern Europe (CEE); and Middle East and Africa (MEA)." (See Cisco, Sitronics Team.)

Sitronics plans to use some of the proceeds to expand further and sees Asia/Pacific, where it already has some facilities in Malaysia, as another region where it can win new business.

— Ray Le Maistre, International News Editor, Light Reading

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