Northwest Telecoms Merging Into PTS

ST. PETERSBURG -- The St. Petersburg Telephone Network, or PTS, is working to incorporate all operators in the Northwest Federal District into one telecoms company -- part of state telecoms holding Svyazinvest's plan to revamp the industry nationwide.

In the northwest district, local providers in eight regions will merge into PTS under the brand North-West Telecom. The resulting company will own 3.5 million telephone lines serving a population of more than 14 million.

Svyazinvest plans to merge more than 80 regional telephone firms into seven larger companies over the next three years to provide services in areas corresponding to the seven federal districts created by President Vladimir Putin in May 2000. Svyazinvest owns majority stakes in all of the companies.

The boards of companies involved in the northwest plan -- from the republic of Karelia and the Arkhangelsk, Pskov, Cherepovets, Vologda, Murmansk, Novgorod and Kaliningrad regions -- held meetings in Moscow in late September to discuss details of the merger. The PTS board agreed to hold a general shareholders meeting Nov. 28 to ratify all aspects of the deal, Commnews reported.

The first phase of the plan was completed last year, when St. Petersburg Intercity and International Telephone, or SPMMT, and St. Petersburg Telegraph were folded into PTS.

The merger will follow the same basic scheme as that used during the earlier amalgamation, with the shares in the regional telephone-service providers converted into North-West Telecom shares.

Under the plan, PTS shareholders will receive a 63.8 percent stake in the resulting company, with Arkhangelsk's Artelecom holding 7.5 percent, Karelia Elektrosvyaz 4.8 percent, Pskovelektrosvyaz 2.2 percent, Cherepovetselektrosvyaz 2.1 percent, Vologda region Elektrosvyaz 2.3 percent, Murmanskelektrosvyaz 8.6 percent, Novgorodtelecom 3.3 percent and Kaliningrad region Elektrosvyaz 5.4 percent.

The only telecoms company in the northwest not taking part in the merger is Lensvyaz, the telephone-service provider for Leningrad region. Twenty percent of Lensvyaz shares were frozen in 1998 due to a dispute between the Leningrad region's property fund and the Romeks-Invest financial company over questions of the stake's true owner. It has yet to be resolved by the courts.

The $450 million merger of the three telecoms companies was announced in March 2000 but put on hold until Nov. 3 before the Kuibyshevsky region federal court threw out a case filed by the owner of 1,000 SPMMT shares.

To avoid such incidents during this phase, the company will "follow the law strictly" and ensure that the merger process exhibits "maximum transparency," said Kirill Voloshin, PTS press secretary.

Renaissance Capital, financial consultant to the deal, determined the ratio for the share conversion based on the business costs of the companies. Costs were calculated using a formula uniting the value of each company's shares in equities markets, a comparison with similar companies and an analysis of cash flows and the determination of their net assets.