Alexey Reznikovich: We are a minority investor.
We do not take active positions in any of our
We are not a Russian company any more, says Alexey
Reznikovich, CEO of Altimo. This seems as somewhat surprising
declaration by an executive with a Moscow phone number on this
"The majority of our assets are outside Russia, particularly
after the latest acquisition that we made in Turkey last
November. We acquired a stake in Turkcell. It was the largest
Russian acquisition ever made beyond the boundaries of Russia,
a $3.3 billion acquisition." The largest "in any sector ever",
he notes, not just in telecoms.
The reason for this international investment — and
more is planned — is that the mobile market is
reaching saturation in Russia. Altimo — "It stands for
'Alfa Telecom International Mobile'," he says — is
looking for new growth markets.
More recently Altimo has taken a further step in its
international development. In September 2006 it appointed an
international advisory board of leading people from the
business and political world.
The member of the new board best known to the
telecommunications industry is Julian Horn-Smith, the last of
the original Vodafone team to leave the company after 22 years.
He retired in August 2006 as deputy chief executive of the
There are three other members so far: Douglas Hurd, former
UK foreign minister; Roderic Lyne, a former British ambassador
to Russia; and Peter Watson, former chairman of the US
International Trade Commission. They will meet at Altimo's new
London offices three or four times a year. They will advise
Altimo "as we consider and develop the international business
strategy over the years ahead", says Reznikovich.
The advisory board was appointed as Altimo moved into the
London office as its joint group headquarters. "Altimo has now
become an international company, so the opening of the London
office is an expression of our commitment to the
internationalism," he says.
So, back to Turkey. Why Turkcell? "The market was
attractive. Our strategy is focussing on emerging markets, and
the name Altimo stands for 'Alfa Telecom International
Mobile'," he says. "International primarily means emerging
markets. We have experience primarily in the Ukraine and the
CIS and we want to use this experience in countries such as
Turkey, Indonesia, India and other markets."
They "are very similar to Russia, like Russia was a couple
of years ago", he says. "Turkey was on our radar screen. Also a
couple of million people travel from Russia and Ukraine to
Turkey every year on vacation. I think it is popular tourist
destination for Russians. So the roaming is huge. And the
Turkish market has been growing very well and will still grow
for a couple of years."
Given Turkey, why Turkcell? "Turkcell is the leader, with a
63-64% market share. It was very clear that if we are to invest
in Turkey, it has to be Turkcell." Altimo wants to invest in
number one or number two in any country. "Turkcell at number
one was always our target." An opportunity arose when an
existing shareholder, Çukurova, decided to sell part of
Turkcell was a successful company, so what has Altimo added
to its strategy? "Nothing," says Reznikovich. "We believe that
adding nothing is sometimes much better than adding anything at
Altimo's philosophy is not to get involved in operational
management. "We are a minority investor. We are a private
equity fund/holding company, so do not take active positions in
any of our investments. We'd rather try to hire professional
independent management, who have experience and expertise of
the industry and they usually lead the company."
Altimo does get involved in strategic decisions, he says,
"M&A decisions and some budget and financial decisions at
the level of the board of directors only. That's our investment
But he mentioned that among the justifications for investing
in Turkey were the roaming charges that Russian and Ukrainian
tourists were paying. Is that a strategic decision? "We know of
course that Turkcell has been in touch with Vimpelcom for some
time." And they are developing a strategy. "We as shareholders
in both companies would be supporting these initiatives, but we
will not be getting involved in operational decisions on the
tariffs and charges and so on."
What lessons from Russia and the CIS could Altimo apply to
Turkcell, if Turkey is something like Russia was a few years
ago in terms of mobile rollout? "I hope that there could be
some cross-fertilisation both ways," says Reznikovich, "because
in many dimensions Turkey is a more developed country than
In terms of experience, it is investment expertise rather
than operational expertise that he was thinking of. "We
consider ourselves experts in the investment business," he
"I think we know how to make an investment in countries like
Russia, Ukraine and Turkey, and hopefully Indonesia and some
other markets. So we are trying to replicate this specific
expertise — not so much the operational expertise of
our entities. It's up to operational managers, if they decide
so, to share expertise. It becomes easier if they have the same
shareholder, because we can facilitate this."
There is no formal structure, but it should happen in an
informal way, he hopes.
Reznikovich is one of the new Russians, cosmopolitan and
educated internationally. He was born in 1968, so was only 23
when the Soviet Union collapsed on December 31 1991. He
graduated from the economics faculty of Moscow State University
and then took an MBA from Georgetown University in the US and
Insead in France in 1993.
Early jobs were at Procter & Gamble in Italy and
Transworld in the US, before he became a partner at McKinsey.
He set up an internet café chain.
He has been a director of Alfa Group, Altimo's parent
company, since 2002, and has been Altimo's CEO since June 2005,
with overall responsibility for business development and
management supervision of the group's assets. He's also a
director of VimpelCom, one of the group's main
He's looking at a number of international investments
— Indonesia, India, Vietnam "and some other markets in
south and south-east Asia", he says. "It's premature to speak
of any deals, but we are definitely taking a very hard look at
Are there particular companies in mind? "All these companies
are on the radar screen," he says. "There are two or three
companies in each market. We're looking at all of them." Altimo
will be ready "if the opportunity arises, as happened in
Those three countries in particular "satisfy the criteria
that we use for making an investment — the criteria
being the GDP per capita, level and growth rate, the
penetration of mobile telephony in the market, the intensity of
competition, profitability of the industry, the industry
structure, the political environment and risks, and the size of
In 2005 Altimo conducted "a massive study of pretty much all
markets, in Africa, the Middle East, Latin America and Asia".
After analysing the results the company decided Indonesia,
India and Vietnam were the main targets.
Africa and the Middle East? "Not right now," says
Reznikovich. "If you go to Africa you really need to take a
cluster approach. You have to invest in many countries. It
doesn't make sense to have one or two investments on a
standalone basis — from a logistical standpoint, a
management standpoint, and so on. It's much better to have a
But if you invest in Indonesia, he notes, or Vietnam or
India, "each of these countries is so large in terms of
population that it could be sufficient in order to rationalise
the investment and the management time, and the travel time,
dedicated to that country." And those markets "are more stable
than many of the Africa markets".
What about European markets, west of Ukraine and Russia?
"Not interested," says Reznikovich. "The penetration of mobile
telephony is very high in those countries and therefore the
potential for growth is low. We invest only in the countries
with a reasonably high growth potential."
He's looking for 20-30% penetration, "but not 90%", he says.
"Even in eastern European countries like the Czech Republic and
Hungary it's high." In Russia the SIM card penetration is
around 80%, he says, "but many people have double or triple SIM
cards, and the real penetration is around 60%". In Russia he
expects another year and a half of growth, 2006 and 2007
— which is why he's looking for other growth
In Ukraine the SIM card penetration is around 60-65% "and
the real penetration is around 50%, so Ukraine has maybe two
years of growth to go".
Reznikovich's group has the same approach to all its
investments, including those in Russia and Ukraine, he says.
"We never hold majority control and we never get involved in
the operations. The only thing we do is participate in the
Sometimes he talks to vendors. A couple of years ago "we
helped VimpelCom management to push down the prices and our
people were involved in some negotiations". But he didn't want
to say any more about that on the record. Whatever it was, "it
doesn't happen on a regular basis".
Vodafone founder Julian Horn-Smith is a member of
Altimo's new international advisory board
Altimo's major investments
Altimo is a leading private equity group which is used by
Alfa Group as its exclusive vehicle for making investment into
telecommunications assets in Russia the CIS and other promising
Founded in 1992, VimpelCom is one of the largest wireless
telecommunications service companies in Russia. It operates
under the Beeline family of brand names, which are among the
most recognized names in Russia. VimpelCom's licence portfolio
covers 136 million people, approximately 94% of Russia's
population. VimpelCom is aggressively expanding to develop the
Russian regional cellular telecommunications market as well as
to other promising emerging markets. Shares traded on New York
MegaFon is the third largest provider of wireless
telecommunications services in Russia. Its licence portfolio
covers 145 million people, or 100% of the population. The
company is actively seeking to obtain 3G licenses to provide
third generation mobile services and currently builds and tests
pilot 3G networks in Moscow and St Petersburg.
Kyivstar is one of the leading providers of wireless
telecommunications services in Ukraine. The network covers more
than 1,200 Ukrainian cities and towns including all regional
centres, over 19,000 villages and all the main highways of
national and regional importance. The company is also licensed
to operate mobile, city, long-distance, and international phone
networks. Additionally, Kyivstar holds licences to build and
maintain its own fixed-line networks and to organise data
Founded in 1989, Golden Telecom is a leading
facilities-based provider of integrated telecommunications and
Internet services to businesses and other high-usage customers
and telecommunications operators in major population centres
throughout Russia and other countries of the CIS. Shares traded
Turkcell is the leading GSM operator in Turkey with over 27
million customers and a 65% market share. Turkcell is the first
Turkish company to be listed on the New York Stock Exchange and
also trades on the Istanbul exchange.