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. Last Updated: 07/27/2016

Government Approves 10-year Telecoms Plan

The Russian government approved Thursday a $33-billion plan to build up the telecoms industry, aiming to attract investment but proposing limiting foreign stakes in local firms.

The 10-year blueprint outlines the ministry's plans to reduce loss-making services, win investment and connect more Russians - six million of whom are waiting to have phones installed - to the network.

Communications Minister Leonid Reiman said that half or more of the funds he expected the sector to attract would come from reinvestment by more profitable, streamlined state operators themselves.

"In regard to foreign investors, we are planning several measures: effective tariff policy, and transparency to allow investors to see what is happening in the companies, and transparent government regulation," Reiman said at a press conference.

Among investor-friendly measures, Reiman said the ministry would start conducting tenders for licences, including next generation UMTS licences.

The government would forgo cash auctions for the licences, instead holding "beauty contests" for the broadband wireless system, which will allow users faster Internet access.

Reiman said state tariff regulation had left Svyazinvest, the state telecoms holding that owns 78 regional telecoms and the national long-distance carrier, with a lower market capitalisation than Russia's three U.S.-listed private operators.



STATE SECTOR TO BE CONSOLIDATED

The ministry said that under its restructuring of the state telecoms sector, which dominates the market outside Moscow, Svyazinvest's regional operators will be consolidated into seven firms and tariffs brought in line with cost and investment needs.

The ministry expects the restructure to at least quadruple Svyazinvest's market capitalization.

Reiman said Svyazinvest would aim to list the companies on a Western exchange if their value could be raised.

But analysts said some of the ministry's proposed measures -- namely a possible cap on foreign stakes -- were not what investors were looking for.

The programme says a key task is to "consider limiting foreigners direct access to the communications market as well as direct and indirect foreign majority participation in the charter capital of communications organizations."

"The (Communications) Ministry has reaffirmed its reputation as 'investor unfriendly' by producing another controversial document," Yevgeny Golosnoi of Troika Dialog brokerage wrote in a research note.

Russia has several foreign-owned telecoms, such as alternative carrier Golden Telecom, 63 percent owed by U.S.-based Global TeleSystems, and St. Petersburg holding Telekominvest, 85 percent owned by a consortium of Commerzbank and Telia of Sweden.

"We will support domestic investors, but only by the means used througout the whole world, that are supported by the World Trade Organization, Reiman said.

"No one is going to seize anything from anyone," he added