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. Last Updated: 07/27/2016

Telephone Stock Sale Hits Delay

Moscow authorities have indefinitely postponed the long-awaited auction of a 22 percent stake in the Moscow City Telephone Network, one of Russia's most sought-after investments, company and city officials said.


An official at the auction department of the Moscow Property Fund, which oversees privatization in the capital, said that the fund "so far has no plans to sell the MGTS shares" and that the auction "may happen some time next year." MGTS officials said earlier this year that a date for the auction would be set in August.


The reason for the delay was not immediately clear. One Russian telecommunications executive, who requested anonymity, said Moscow officials were trying to develop a plan that would help the city acquire the entire 22 percent stake.


But the property fund official, who also asked not to be named, would neither confirm nor deny the charge. "I can't tell you why the auction was postponed," said the official.


MGTS went private in June, selling off 10 percent in voting stock to employees and 5 percent to management. The state holds a controlling 38 percent share of stock.


As a monopoly provider in an undersupplied market, MGTS has attracted interest from foreign investors looking for bargain infrastructure stocks. Over the past few months, the company's stock price has boomed to about $130 per share, giving it a market capitalization of some $170 million, or about $38 for each one of its 4.5 million lines. By contrast, telecommunications companies in Europe and North America tend to be valued at about $1,000 per line.


But Boris Lastovich, securities director at MGTS, said the rise in the company's shares was largely artificial, since few shares were yet available for trade. "There is not any serious trade in our shares at the moment," he said.