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. Last Updated: 07/27/2016

Golden Telecom Acquires St. Pete's Nevalink

Extending its foothold in the Russian market, Golden Telecom has acquired St. Petersburg-based Nevalink Internet provider, company officials said Wednesday.

"We see our presence in St. Petersburg as being fundamental to our future growth in the Russian Internet market," said Clifford Gauntlet, director of Golden Telecom's Internet services division.

"Acquisition of Nevalink is part of the expansion strategy," said Konstantin Chernyshov, head of research with NIKoil brokerage.

Chernyshov added that international investors were grabbing shares in Internet providers on expectations of windfall profits at some future time.

"Internet providers are not profit-makers anywhere around the globe," he said.

Golden Telecom is a facilities-based provider of integrated telecommunications services in Moscow, Kiev, St. Petersburg and other cities in the CIS.

Its businesses include Sovintel, Sovam Teleport, TCM, TeleRoss and other subsidiaries.

Golden Telecom parent company Global Telesystems, or GTS, has no illusions about the current state of the Russian market.

"We began in Eastern and Central Europe, but our primary focus today is on exploiting the enormous opportunity created by the deregulation of the European Community's telecommunications market in January 1998 - worth more than $200 billion," GTS' web site reads.

Global Telesystems conducted a initial public offering of shares in its subsidiary Golden Telecom in early October through the U.S.-based Nasdaq.

While the company announced that proceeds would be used primarily for potential acquisitions and business development, some analysts said it also sought to reduce its exposure to Russia to lower its cost of capital.

GTS last week tapped international markets with private bond placement in two tranches together worth 500 million euros, bearing an interest of 10.5 percent and 11 percent.

Robert Capozzi, vice president for investor relations and corporate communications with GTS, played down these allegations.

"Interest rates would not necessarily be lower (if assets that belong to Golden Telecom were still part of GTS)," Capozzi said in a telephone interview from Washington.

Last week Golden Telecom also announced sales of shares worth $15 million to Capital International Global Emerging Markets Private Equity Fund.