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. Last Updated: 07/27/2016

The Business Of Privatizing Television

Last Friday the Duma considered the issue of television broadcasting and decided to suspend the privatization process. The important thing in all this is not so much the Duma's decision as what it was that provoked the legislature's anxious consideration of the matter in the first place: the transformation of Ostankino into Russian Public Television (RPT).

There is no doubt that the urgent consideration of this question by the Duma was dictated by a desire on the part of many deputies to halt or at least redirect these changes. As the Duma's deputy speaker, Gennady Seleznev told me, Russian television gives considerably less air time to the parliament than it does to President Boris Yeltsin and his administration. Seleznev himself does not support complete nationalization. He believes that shares of Ostankino should be sold, but that complete privatization would result in the company being handed over to Russia's Choice and to commercial structures close to Yeltsin.

It is curious, though, that the majority of workers at Ostankino have no idea of what is going on with their company. This is especially strange since, according to the existing privatization models, employees have the first right to any shares offered. Moreover, it is up to the employees to choose the firm's privatization plan.

Ostankino is a unique state enterprise. Television is, in a sense, charged with manufacturing political influence and generating votes. Naturally, the authorities find it difficult to privatize such an enterprise, especially during an election season.

And, judging from the available documents, Ostankino is not really being privatized. The focus of the discussion so far has been Ostankino's transformation into RPT. According to the plans for RPT that I have seen, the company will be a joint stock company of the closed type. That is a clear violation of existing laws which say that a state enterprise cannot be converted into a closed joint stock company.

Even more startling is the makeup of RPT's start-up capital, which is set at 10 billion rubles or just more than $2 million. Of this, Ostankino makes up just 9 percent, or about $200,000. In addition, 36 percent will remain in the hands of the State Property Committee. However, even if the state's total share of RPT equals 51 percent of the capital (that is, 5.1 billion rubles), that amount cannot possibly equal even 1 percent of the real value of Ostankino.

However, it is also possible that this strange new company may simply fall apart. In recent months, the list of leading shareholders has changed markedly. Originally, there was AvtoVAZ, Aeroflot, Inkombank, Stolichny Bank and other major commercial structures. Now, though, the first three have left the project, which has been joined by LogoVAZ, Gazprom and Mikrodin. It is likely that the changes were motivated by events in Chechnya, which heated up just after the first steps to create RPT were taken.

Moreover, in the opinion of Sergei Lisovsky, a leading figure in Russian television advertising, most of the founders of RPT believed that the new company would be very profitable. Now, though, it seems unlikely that Channel 1 will bring any noticeable profits for at least the next few years. On the contrary, the company will demand enormous investment. As soon as that becomes clear to the shareholders, Lisovsky says, many may abandon the project. No matter how things turn out, Ostankino is in for some troubled times.