Marshall to Become Major Shareholder in New Rostelecom

RBC Daily reports that Marshall Capital Partners has reached a deal with Gazprombank to acquire a fund holding a combined 7% stake in Svyazinvest subsidiaries. The US$700-million acquisition will mean Marshall will be the largest minority shareholder in the new Rostelecom, with a 7% stake. Svyazinvest's regional subsidiaries are in the process of buying back shares from minority investors ahead of the conversion of the subsidiaries shares into common shares of Rostelecom. Although there are concerns within government that this may dilute the state's stake in the new Rostelecom to below 50% (see Russia: 15 July 2010: Fears Voiced That Russian Government May Lose Out in Rostelecom Restructuring), the process is going as smoothly as can be expected.

The table below breaks down the revenues of Svyazinvest's main units for 2009. Rostelecom, the long-distance carrier, is the largest source of revenues, followed by Uralsvyazinform and CenterTelecom. Svyazinvest is noticeably weak in the Moscow region, having lost control of the Moscow incumbent MGTS during the process of privatisation some years ago.

Outlook and Implications

• New Structure Falling Into Place: Recently, Svyazinvest reached two deals to iron out its structure further. Firstly, it agreed with Comstar and its units to acquire (via Rostelecom) the latter's 25% plus one share in Svyazinvest (see Russia: 28 June 2010: Comstar Agrees Sale of 25% Stake in Svyazinvest to Rostelecom). Secondly, it agreed with Comstar's majority owner Sistema to swap the latter's 50% stake in the CDMA/GSM operator SkyLink for Svyazinvest's 28% stake in MGTS (see Russia: 13 July 2010: Svyazinvest Shareholders Approve SkyLink-MGTS Asset Swap with Sistema). The approval of these deals will represent major landmarks in the reorganisation of Svyazinvest.
• Filling the Moscow Gap: Svyazinvest's diposal of its final stake in MGTS means that its position in Moscow is weak. Central Telegraph is a small player in the fixed and internet market, while its 50% stake in SkyLink does not give a significant place in the capital's mobile segment. There have been reports that CenterTelecom will acquire Akado, the cable TV operator, but this is unlikely to enable it to build market share in the business segment quickly. The new Rostelecom will need to look for opportunities in the alternative fixed segment to fill this gap.