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Decision on Rostelecom privatisation unlikely before middle of spring

January 15, 2014, 22:35 UTC+3 MOSCOW
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MOSCOW, January 15, 21:28 /ITAR-TASS/. The decision on how to privatise Russia’s leading telecom operator Rostelecom may be made no earlier than the middle of spring, Head of the Agency for the Management of Federal Property (Rosimushchestvo) Olga Dergunova said.

“At the end of December we just opened the envelopes [with bids]. So the first news should not be expected before financial statements are released, which is April,” Dergunova said at the Gaidar Forum on Wednesday, January 15.

Technical issues will be worked on and data gathered from January to April, she added.

Dergunova told ITAR-TASS earlier that the privatisation of Rostelecom was scheduled for 2014. “The plan for 2014 includes the privatisation of Rostelecom - the sale of the 50 percent stake and full withdrawal of the State,” she said.

The shortlist of candidates for organising the sale of state-owned shares in Rostelecom includes Deutsche Bank, the Russian branch of Goldman Sachs, and Sberbank KIB.

Minister of Economic Development Alexei Ulyukayev did not rule out possible participation of foreign investors in the Rostelecom privatisation process.

Minister of Mass Communications Nikolai Nikiforov said that Rostelecom was mentioned in the privatisation programme but no concrete date was fixed for selling it. “We think that privatisation is the right strategic path to follow, but there should be no hasty decisions,” he said.

Asked about the participation of foreign investors in Rostelecom privatisation, Nikiforov said that “a part of the company’s shares is already trading on the exchange” and “as a result of a just-concluded transaction, the Russian Direct Investment Fund and Deutsche Bank bought into the company’s equity capital.”

“This is a very good example of strategic investment,” the minister concluded.

In August of this year, Rostelecom asked the government to postpone the privatisation of the company from 2014 until 2016.

The company’s management believes that “conditions for successful privatisation will be created by 2015-2016” and this “will maximise budget revenues from the privatisation of the company and ensure the interests of the state in terms of both special communication services and implementation of state programmes.”

By that time the company hopes to increase capitalisation and make its operations more effective by developing mobile and new services.

“The company has a considerable potential for boosting its value, which can realistically be tapped in the medium term. The company is correcting its strategy and investment plan, it is planning to cut costs and has overhauled its procurement system. We are seeking to raise Rostelecom’s market value,” the company said.

The Russian Ministry of Mass Communications said, however, that there was no reason to change the Rostelecom reorganisation schedule.

“We think that there is no reason to change the schedule,” Nikiforov said. “Technical procedures are underway. The necessary shareholder decisions have already been made, and we see no risk of schedule changes,” he said.

As to the government’s interest in the company and its preservation, Nikiforov said there is no reason “for this not to be done.”

Speaking of the company's privatisation, the minister said Rostelecom was a key market player and has certain missions to carry out, including mobilisation ones. “These missions have to be considered with the relevant interested authorities and if we resolve these issues completely, privatisation may proceed in this respect,” he said.

Rostelecom is to be privatised, but only after the end of the second stage of its reorganistion when it absorbs Svyazinvest.

Currently, the government controls about 53 percent of Rostelecom shares through Svyazinvest, the Federal Property Fund and Vnesheconombank.

One of the conditions for privatisation is that the government will retain a stake in a united company.

Rostelecom may be privatised in 2015, Nikiforov said.

“This is a market player that is no different from any other and it will be privatised some time too. This may happen, for example, in 2015. This will happen anyway and it will become a private company,” he said.

He noted that Rostelecom’s merger with Svyazinvest should be completed in 2014.

According to the minister, it is necessary to focus on strategic decisions now in order to prepare the company for privatisation. He spoke specifically of Rostelecom’s investment programme for 2013.

“We have to determine points of growth for earnings and priorities for 2013,” he added.

Rostelecom directors met with Deputy Prime Minister Arkady Dvorkovich in late 2013 to discuss the reorganisation of Rostelecom and Svyazinvest. Dvorkovich noted the need to ensure the interests of all shareholders and use transparent procedures. He also urged the members of the board of directors and the authorities to cooperate more closely.

Rostelecom is Russia’s largest national telecommunications operator with presence in all Russian regions. The Group is a universal operator and undisputable leader of broadband and pay-TV markets in Russia with over 9 million fixed-line broadband subscribers and over 6 million pay-TV subscribers. As Rostelecom develops its mobile data networks, its position as a major mobile operator is growing with over 13 million currently subscribed to Rostelecom’s mobile voice services. The Company currently has approximately 28 million local fixed-line voice subscribers and it is the leader in the corporate and government services segment. The Group is also an important innovator that provides solutions in the field of medicine, E-Government, cloud computing and education.

Rostelecom was assigned a ‘BBB-‘ and ‘BB+’ international credit ratings by Fitch Ratings and Standard&Poor's respectively, both with a ‘Stable’ outlook. The Group generated 238.7 billion roubles of consolidated revenues, 94.0 billion roubles of OIBDA (39.4 percent of revenues) and 30.6 billion roubles of net income for the nine months ended September 30, 2012.

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