. Last Updated: 07/27/2016

Telecom Share Offering Sparks Foreign Interest

The Russian government is planning a new round of share offerings in the country's regional telecoms companies, a sector that has attracted strong foreign interest and investment, Russia's communications minister said Friday.

The government is currently drafting a model of how to offer shares in the regional companies, but it still plans to hold onto controlling stakes, resting with the state-owned Svyazinvest holding, Communications Minister Vladimir Bulgak told a press conference.

"After they were turned into joint-stock companies, the assets of the [regional] companies have risen steeply by some 15 to 16 percent," Bulgak said. "That allows us to carry out a second share offering and attract money," he added.

While analysts welcomed the prospect of a new share offering, they said it could be difficult for the government to do so without coming into conflict with Svyazinvest.

"Svyazinvest had earlier tried to block offerings because they would dilute its holding," said Gregory Van Beek, an analyst with the Rinaco-Plus brokerage.

Bulgak on Friday declined to comment on details of a second tender for a stake in Svyazinvest, after a $1.4 billion deal for 25 percent of the shares in the holding collapsed last December.

Sale of the stake is expected in the coming months to provide a large chunk of Russia's privatization revenue for 1996.

Investors have shown growing interest in regional operators over the last months, but often shares are hard to come by, the analysts said.

"Free float is extremely thin in many of these companies," Van Beek said.

A Moscow-based analyst, who asked not to be named, said investors are becoming increasingly interested in "second-tier operators" in the Russian provinces.

"They are undervalued, partly because until recently there was little information available on them," the analyst said.

The ministry for its part hopes to resolve several infrastructural problems that have held back investments in the sector, Bulgak said. "We must organize good auditing and an internationally recognized registrar," he said.

He added that all Russia's publicly owned telecommunications companies must put their accounting into line with international accounting standards within two years.

The Communications Ministry has forecast foreign investments in the sector at above $750 million this year.A statement released by the ministry Friday said investments from abroad amounted to 41.5 percent of all investments in the industry this year.