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Russian state set for 10-year contract worth $4.2 billion with Rostelecom

February 20, 2014, 18:52 UTC+3 20
These investments should both provide for the new task, namely the construction of fiber-optic lines in localities, minister Nikolai Nikiforov said
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© ITAR-TASS/Alexandra Krasnova

MOSCOW, February 20. /ITAR-TASS/. The Russian state will sign a 10-year state contract with Rostelecom provider worth 150 billion rubles ($4.2 billion) by April 1, Russia's Minister of Communications and Mass Media Nikolai Nikiforov told journalists on Thursday following a government meeting that adopted the state-controlled company’s investment program.

“This seems to be a large amount, but these investments should both provide for the new task, namely the construction of fiber-optic lines in localities, and maintain the work of payphones,” Nikiforov added.

According to Nikiforov, under the new model, increased efficiency and the amount of money saved will help allocate from third to half of the fund for finance construction of fiber-optic lines in small localities.

“This is a serious investment bolster as average companies would not dare venture into this market without support,” the communications minister said describing the deal as one of the best examples of effective public-private partnership in Russia. No additional amount of budget money will be invested thanks to increased efficiency that “helped work out such an impressive program for 10 years”.

A great deal of work will precede signing by April 1, namely compiling a list of localities, working out routes to drive fiber-optic lines and forming the legal framework.

“We are now on the threshold of the most large-scale reform of communications in Russia’s contemporary history,” he commented on the recent amendments to the law on communication. “While universal communication service previously included only payphones available in small localities and public access points, this will now provide broadband Internet access.” In the following years all localities with 250-500 residents will be connected to overland fiber-optic lines with a speed of no less than 10 Mbit a second, and this task was in the focus of Rostelecom’s investment program, while investments in mobile business will be reduced from 2014 on, the minister added.

Meanwhile, Rostelecom’s President Sergey Kalugin said the company had three ambitious goals — to eliminate digital divide, that is, unequal access to information and communication, to drive fiber-optic cables to 33 million homes and to malls and business centers.

Kalugin declined to disclose the investment program’s amount saying “CAPEX to revenue ratio of 20%, according to the adopted strategy, should drop to 17% over several years and continue falling”, while developed companies have this ratio at 10%. The main part of Rostelecom’s CAРЕХ is going to be made in the following three years and will then decline.

Rostelecom is state-controlled by 51% and has a 43% share of broad-band Internet access market.

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