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. Last Updated: 07/27/2016

Svyazinvest Sets Up Stock Registrar




Telecom holding company Svyazinvest is attempting to clean up Russia's notoriously complex trading process by setting up a centralized registrar for telecom stocks, which analysts called a shrewd money-making venture that would boost the sector's liquidity.


Svyazinvest, which owns a majority stake in most of Russia's 88 regional telecom companies, set up Registrator Svyaz last year in an effort to ease market trades in the sector. Already, 48 regional telecom firms have transferred their share registers to Registrator Svyaz, which will keep track of stock ownership. All telecom firms are required to follow suit by the end of the year.


"This will help the companies better reach investors. They won't have to go way out to Chelyabinsk if they want to buy shares in that regional company," said Sergei Tolstokhlebov, general director of Registrator Svyaz.


Russia's young equity market has been held back by a cumbersome trading system. Trades can often take days to clear due to the multitude of registrars, which record any change in the ownership of shares.


While Registrator Svyaz will help improve share liquidity, analysts said it would be a highly profitable venture for Svyazinvest, which currently makes most of its money off minuscule share dividends from regional telecom firms.


"Svyazinvest needs to make cash, and so to bring all their holdings to one place and collect on their trade, they formed Registrator Svyaz," said Andrei Bogdanov, a telecom analyst at investment bank ING Barings. "The only other main source of income for Svyazinvest is company dividends, but until companies modernize, those dividends will be limited."


Tolstokhlebov would not say how much money Registrator Svyaz makes in processing trades and holding registers, but said the business was "increasingly profitable."


The agency that holds a company's share register makes 0.024 percent off every trade it processes, the rate set by Russia's Federal Securities Commission. Based on this rate, Registrator Svyaz made $69,000 just on Rostelekom trades Tuesday, when volume reached nearly $2.9 million.


Registrator Svyaz usually processes about 200 trades a day, half of which involve Rostelekom. It also charges individual telecom companies according to specific holding agreements, the details of which they would not reveal.


Analysts said, however, that Registrator Svyaz's fees are higher than other registrars and estimated that it could make $50 million in profits annually.


In another move to consolidate its control over regional telecoms, Svyazinvest has ordered its subsidiaries to transfer their bank accounts to Uneximbank, one of the members of the Mustcom consortium which bought 25 percent of Svyazinvest last year.


Mustcom is widely expected to bid in a second auction for another 24 percent of Svyazinvest later this year.