UPDATE 1-MegaFon says to launch London IPO

(Adds details on selling shareholders, banks, background)

MOSCOW, Oct 9 (Reuters) - Russia's second-largest mobilephone operator MegaFon , in which Russia's richest manAlisher Usmanov took control in April, said on Tuesday it plansto launch an initial public offering on the London StockExchange.

The IPO, to be completed in the fourth quarter, will giveinvestors the chance to buy into a player that is outpacing itspeers in a growing home market, but unlike rivals is shieldedfrom tricky overseas operations and complex corporate disputes.

MegaFon received regulatory approval in September to list123.38 million shares, or 19.9 percent of the total, in London,and analysts estimated at the time that the share sale couldraise around $3 billion.

The company did not disclose the size of the offering.Russian newspaper Kommersant reported on Tuesday that MegaFonmay reduce the size of the IPO to around 15 percent of itsshares from 20 percent expected earlier.

A source familiar with the deal told Reuters on Monday thatproceeds may total $2 billion, down from earlier estimates.

Shares will be sold by Nordic co-owner TeliaSoneraand MegaFon itself. TeliaSonera had been expected to offer a10.5 percent stake and MegaFon had been expected to sell 9.4percent of treasury shares. MegaFon said it plans to use theproceeds of the offering of its treasury stock to repay debts.

MegaFon said that Morgan Stanley and Sberbank had beenappointed joint coordinators for the IPO. Sources previouslytold Reuters that Goldman Sachs was one of the lead banks forthe IPO. The bank was not listed by MegaFon as working on thedeal.

(Reporting by Megan Davies and Maria Kiselyova; Editing byDouglas Busvine)

((megan.davies@thomsonreuters.com)(+7 916 391 8262))