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. Last Updated: 07/27/2016

Investors Ply Svyazinvest Chief With Questions




Rumors of intrigues surrounding the management of Rostelecom and investors' suspicions of asset stripping thwarted Svyazinvest general director Valery Yashin's attempt Tuesday at an investment conference to paint a picture of an efficient, transparent national telecoms holding.


In his presentation, Yashin outlined the basics of an impending restructure of the holding and plans for a tariff system that would end cross-subsidies.


But he was forced again to deny rumors that Svyazinvest is considering a management ouster at its key holding, national long-distance operator Rostelecom, and dodged questions about a possible merger of the two companies.


And he appeared caught off guard by angry investors who said a valuable asset of Svyazinvest subsidiary Kubanelectrosvyaz, a stake in regional cellular operator Kuban GSM, had been stripped from under the holdings' nose and transferred to Kuban Telekom, an officially unaffiliated structure.


In response to one investor's demand for an explanation of the reasons for the transfer, Yashin said asset stripping was "not encouraged" at Svyazinvest.


"I won't give a more detailed answer here," he said. "You have asked a painful question."


In an interview after the question-and-answer session, a representative of one of the investors, Mark Cooke, chief investment officer at Brunswick Capital Management, said the general director of Kubanelectrosvyaz informed BCM a few months ago that the board of directors had voted to transfer the stake to Kuban Telekom.


The transfer was nominally legal, he said.


But the investors believe Kuban Telecom is linked to the general director of the Kuban region's telecom operator, and one of the investors told Yashin the director had bragged to him that he controlled Kuban GSM.


None of the Rostov-based companies could be contacted by Tuesday for comment.


Yashin, whose holding faces a restructure to streamline its unruly fold of 86 discrete regional telecoms operators, said consolidation had already begun in five regions: Moscow, St. Petersburg, Sverdlovsk, Novosibirsk and Rostov.


Speaking at an equity conference organized by Renaissance Capital investment bank, Yashin reiterated his expectation that Svyazvinvest's holdings would likely be reorganized into seven or eight regional telecoms, with key asset Rostelecom as the national long-distance operator. He said the reorganization could coincide with President Vladimir Putin's proposed "super regions."


Rostelecom's future, including its very existence, were cast sharply in doubt last week when Vedomosti newspaper printed a rumor the entire senior management of the national operator had resigned.


Vedomosti later printed a retraction, but the incident appeared to revive suspicions that Rostelecom might be absorbed into Svyazinvest.


On Tuesday, Yashin said Svyazinvest, which will retake control of the Rostelecom board at a shareholders meeting Saturday, was did not intend to fire Rostelecom managers and dodged questions about a possible merger.


"I said there would be one interregional long-distance operator" after the restructure, Yashin said. "That is what [Rostelecom] has done, and it will also do this in the future."


Speaking to reporters after the session with investors, however, he conceded that among the four possible blueprints for restructuring Svyazinvest, one called for Rostelecom and Svyazinvest to be unified, and another called for the transfer of some Rostelecom functions to regional operators.