FOCUS: Svyaznoy seeks to offer high-tech solutions after merging with Euroset

By Yekaterina Yezhova

MOSCOW, Jun 13 (PRIME) -- A merger of Russia’s largest mobile electronics retailers Svyaznoy and Euroset has created the world’s biggest chain by the number of own stores and will bring a strong synergy effect. Svyaznoy will fully digest Euroset, whose brand will disappear soon, and will mutate into an innovative seller equipped with artificial intelligence.

“I’m sure that mobile connection stores as they used to be will go into the past, while in the future we’ll see stores of solutions, which is a completely different thing. This is why we understood that competition inside the segment of stores is pointless, it will not exist in the future, where there will be an absolutely different format,” the combined company’s CEO Alexander Malis said at the presentation of a new Svyaznoy.

“We merged the companies to spare efforts on pointless competition, but to build and enter the future. Not everyone will enter the future. It is artificial intelligence that is essential for individual offers. It’s development of such solutions. It will happen all the same, and only those who will create it, will be relevant for the future.”

Big local mobile operator MegaFon, a 100% owner of group Euroset, and SLV Group, a controlling shareholder of group Svyaznoy, completed the merger of the retailers in late May.

Under the agreement, Lefbord Investment Ltd., which is fully owned by MegaFon, contributed 100% of shares of Euroset N.V., a holding company of group Euroset, to the capital of DTSRetail Ltd., a unit of SLV Group, and obtained a 25% plus one share in the merged company with the remainder held by SLV Group.

Euroset will exist for some time, but later its stores will be incorporated into Svyaznoy. “A rebranding process is set to begin. We have stores that stand next to each other and it makes no sense, probably, to rebrand both into Svyaznoy. The latter will be dominant,” SLV Group founder Oleg Malis said at the presentation.

The combined company runs over 5,500 stores in 1,300 cities of the country and employs 30,000 people, Svyaznoy Commercial Director Dagmara Ivanova said. Alexander Malis said earlier that 400–500 new stores will appear in 2018–2019 with one opening costing 1.5–2 million rubles.

Natalya Milchakova, deputy director of the analytical department at investment company Alpari, said the Svyaznoy–Euroset deal is good, first, because it will ensure a synergy effect.

“Second, it will strengthen positions of MegaFon on the mobile retail market in comparison to other mobile operators. We do not think the deal will hike prices of mobile phones or other gadgets, since both companies had been working in a discount, inexpensive segment of the market before the merger and are interested in retaining loyalty of their clients. Competition from other connection operators with own stores could also play its part and prices will not rise,” she told PRIME.

The merged firm could compete with Chinese Internet portal AliExpress and even enter the segment of more expensive gadgets, Milchakova said.

Dmitry Bedenkov, head of the analytical department at investment company Russ-Invest, said that in conditions of strengthening competition on the market of electronics and mobile devices, consolidation of players raises sustainability, optimizes their structure and produces a synergy effect in a number of directions. Consolidation takes place in the segment of big electronics sellers, like Eldorado and M.Video, he said.

Svyaznoy’s commercial head Ivanova said that the seller has revised everything. The company is interested in servicing clients with the help of artificial intelligence that guesses client requirements.

The company has already proved its intentions to offer high-tech products when Svyaznoy added an option to its online store to order a Tesla electric car. Clients can choose a Tesla car online and pick it up in any city of Svyaznoy’s presence.

“The virtual world is borderless and timeless. What happens in the virtual world happens simultaneously and everyone has access to it. The material world has borders and you cannot get something instantly or carry across the border. Our task is to enable every person to get any technology they need. It makes no difference whether it’s a Tesla electric car or any new gadget…We’ll actively expand the range of services we offer, assortment of good,” the combined company’s CEO Malis said at the presentation.

(62.3431 rubles – U.S. $1)

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