Fitch Ratings said that MegaFon’s planned $1.2 billion acquisition of Scartel will “put it at the top of a three-tier market in the provision of next-generation mobile services in Russia”.

The agency said that other than a sale of Tele2 Russia, it does not expect further M&A activity in the country.

While Scartel intended to build up a wholesale LTE network that could be used by other operators, it failed in this and ended up with MegaFon as its sole customer – making an acquisition a “likely option”.

Scartel’s acquisition of LTE spectrum ahead of its rivals gave it a head-start in deploying infrastructure, while MegaFon controls more spectrum than any other operator – positioning the joint company as “the leading operator in Russian LTE telecoms”.

While rivals MTS and VimpelCom have less spectrum, they “still have enough to successfully compete in Russia”.

However, fixed-line incumbent Rostelcom “will face the biggest hurdles to launching a successful LTE network”, Fitch said. If it were to gain control of Tele2 Russia, which is currently controlled by VTB Bank, “it would have to significantly increase capex in order to compete effectively with the other three operators”.

The agency said that it does not expect further consolidation in the near to medium term, as strong margins due to the absence of handset subsidies and the size of the market suggest Russia can support four players.