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. Last Updated: 07/27/2016

Putin Allies to Run Top Telcos' Boards

The government tightened its grip on the nation's telecoms sector Monday as two former St. Petersburg telecoms executives and allies of President Vladimir Putin were elected to chair the boards of the state's two largest telecoms companies.

Communications Minister Leonid Reiman was elected as board chairman at Svyazinvest, the government-owned holding that owns stakes in most of the nation's regional communications infrastructure. Valery Yashin, general director of Svyazinvest and Reiman's former boss at St. Petersburg Telephone, has been made chairman of the board at Rostelecom, the national long distance operator, which is owned by Svyazinvest.

Yashin was re-elected Saturday to the board of Rostelecom at the firm's annual shareholders meeting.

Yashin told reporters of the appointments at a news conference Monday following Svyazinvest's annual general meeting, Prime-Tass reported.

As the Putin government has sought to build a strict chain of command between the federal and regional authorities, so it also appears to be seeking consolidation of federal control over the telecoms it owns.

A blueprint for restructuring Svyazinvest's interests in 86 regional telecoms operators is likely to prescribe consolidation into seven or eight regional consolidated telecoms operators, which Yashin has said will likely fall into line with the seven "super regions" created by Putin's government.

A preliminary restructuring plan, commissioned from Arthur Andersen consultancy, should be published by the end of July, Yashin said in an interview Saturday at Rostelecom's annual shareholders meeting.

Subregional consolidation has already begun, Yashin said.

The restructuring is a condition for the sale of a 25 percent minus two shares stake in the national holding, Yashin said Monday in remarks reported by Prime-Tass. Earlier this year, Putin ordered telecoms officials to prepare the stake for sale, but Yashin has said the sale will not happen this year.

On the fate of Svyazinvest's most valuable asset, a 38 percent economic interest in Rostelecom, Yashin has remained relatively circumspect, except to say that Rostelecom would still act as a long distance carrier.

At Saturday's shareholders meeting, neither Yashin nor Rostelecom director Nikolai Korolyov, whose grip on the company has been questioned by analysts since Reiman became communications minister, gave clues to the future of Rostelecom or its management.

Yashin hinted that changes may occur at Rostelecom within a few months, saying a shareholders meeting could be held in September.

Svyazinvest, which lost control over Rostelecom last year, saw its majority voting interest returned as shareholders approved cash dividends of 16.5 kopeks per ordinary share and 81 kopeks per preferred share after confirming a profit of 1.9 billion rubles ($68.2 million) for 1999.

The holding managed to elect five of its executives to the 11-member board of directors, even though its grip was nominally loosened after the 1998 financial crisis, when falling long distance traffic forced Rostelecom to take a $456 million loss in 1998. Instead of paying dividends, preferred shareholders were given a vote at the annual meeting.