State Hoping for $4Bln in Svyaz Sale

VedomostiDeputy Economic Development and Trade Minister Andrei Sharonov
The government expects to get $2.5 billion to $4 billion from the privatization of telecoms holding company Svyazinvest, which would be the country's biggest sale to date, Deputy Economic Development and Trade Minister Andrei Sharonov said.

A draft decree to sell the national holding company is currently being prepared by the Kremlin, but it was unclear when the decree would be signed and the sale would take place.

The decree would allow the sale of up to 75 percent minus one share in the firm, which controls long-distance monopoly Rostelecom; Moscow's dominant fixed-line firm, MGTS; and seven regional telecoms.

The government will decide on the size of the stake to be sold.

"It is most profitable for the government to sell the whole stake," Sharonov told Reuters. "The planned size of the deal is $2.5 billion to $4.0 billion."

The current Svyazinvest capitalization is $4.4 billion, of which a $3.5 billion stake belongs to the state.

Two of Russia's biggest conglomerates, Sistema and Alfa Group, have said they want to buy the company. Telecominvest, which many investors believe to be close to IT and Communications Minister Leonid Reiman, has also expressed interest. Reiman denies any ties to Telecominvest.

Sharonov said that if the privatization decree were to be signed soon, the sale could happen at the start of 2006. Last week, a Kremlin official said there were no obstacles to the draft being signed.

Russia sold 25 percent plus one share in Svyazinvest in 1997 to international financier George Soros for $1.87 billion. Soros last year sold the stake to Len Blavatnik, a U.S. businessman of Russian origin, for $625 million.

Blavatnik has complained that the current Svyazinvest charter does not give him the same shareholder rights that he enjoyed when he bought the stake. The government was split as to whether changes proposed by Blavatnik, who wants more of a role in major decisions, would increase or cut the Svyazinvest privatization price tag.

Sharonov said the Economic Development and Trade Ministry had hired Deutsche Bank and Standard & Poor's to estimate how Blavatnik's proposals concerning the charter would affect the price.

"Deutsche Bank and S&P concluded that the measures would improve corporate governance and would potentially make the company more valuable," he said.