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. Last Updated: 07/27/2016

Svyazinvest Tender Terms Redrafted

Russia is considering changing the terms of its failed tender of Svyazinvest to permit several foreign investors to take stakes in the telecommunications holding company, but is not planning a second sell off before April at the earliest, a minister said Thursday.

STET, the Italian company whose $630 million bid for 25 percent of Svyazinvest last December collapsed over conditions of the sale, will be permitted to bid again, Naum Marder, Russia's deputy minister of communications, said in a telephone interview.

"The first tender showed that Svyazinvest's price was right," Marder said. "However, this time we may be selling the same amount of shares not to one strategic investor but to several investors."

Government officials said earlier this month that STET would be excluded from the new tender, but Marder said, "I don't see any legal obstacle for their participation. They are as good as any other company."

However, Yelena Shalneva, a spokeswoman from the Russian Privatization Center, said the government is still considering taking STET to court to claim $60 million that the company failed to pay as a nonreturnable security deposit.

"Our position remains unchanged on this matter," Shalneva said. Earlier this month government officials said they had "all the legal basis" for taking the company to court.

STET and Svyazinvest could not be reached for comment Thursday.

The Italian state firm had not made the down payment because of questions over ownership structure, tariffs and licensing of Svyazinvest, created by presidential decree in 1994 to consolidate government shares in 85 regional operators including those in Moscow and St. Petersburg.

In an apparent response to STET's objections, some, and perhaps all, of the Svyazinvest local subsidiaries will be audited in accordance with international standards before a second tender, Marder said.

"The audit is a part of our preparation plan," he said.

After the initial deal's collapse last Dec. 23 -- which dealt a massive blow to expected privatization revenues for 1995 -- the government said it would announce plans for a second tender in late January or early February.

Marder said the tender will not be held until at least April, when the company's local subsidiaries hold shareholders meetings and are audited. Experts said that meant the sell off was unlikely before the June presidential elections to which foreign investors are looking anxiously for political reassurances.

"We are talking about a major investment project in which political risk runs very high," said Konstantin Chernyshev, a telecommunications expert from Rinaco-Plus brokerage. "If the government fails to sell the company again, then it won't ever sell it in its existing form."

STET won the Dec. 2 tender competing against a consortium of France Telecom, Deutsche Telekom and a Russian unit of US West Inc. The Italian company offered $200 million more than the international consortium.

Under the terms of the tender, STET had to invest $770 million in Svyazinvest over two years in addition to the share purchase price.

Marder said he did not see anything unusual in the STET deal's collapse.

"The buyer and the seller have not agreed on certain conditions of the deal," he said. "So what? It's a normal practice in the market economy."