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. Last Updated: 07/27/2016

Chubais Moves UES Into Telecom Sector

Undaunted by the massive task of restructuring the world's largest utility, Unified Energy Systems CEO Anatoly Chubais is moving to move his company into telecommunications — and plans to be a leading player in the industry within two years.

"As a rule, we try to avoid non-core activity, but telecommunications is the exception to that rule," Chubais told members of the American Chamber of Commerce at a breakfast meeting last week. "We are seriously involved in that business," he said.

UES established three decades ago its own telecom company, Moskovsky Uzel Svyazi Energetiki, or MUSE, which provided services to UES and its many daughter companies, including regional energos. That company will serve as the platform for the so far nameless new holding.

"Never before was telecoms seen as a strategic part of UES busines," said Irina Grishanova, deputy general director of the new company. "Nobody ever thought about strategic development and providing services to anybody else outside UES, which now is the case."

The company will be headed up by Sergei Chizhov, a former deputy energy and fuel minister and deputy head at Svyazinvest. And top management will come from another UES subsidiary, Enifcom, which was established 3 years ago and is 51 percent owned by UES. The new company will essentially take on the "strategic role" previsously held by Enifcom, said Grishanova.

"Potential investors have already [expressed interest]", Grishanova said. In the first year of its development the new company has already attracted some investments, but she said refused to specify from where and added that it is to early to talk about expenses.

The business plan calls for construction to begin in the third quarter of this year, and within 1 1/2 to 2 years it will install digital switches in 250 points throughout the country.

"Following the Western countries example we want to create one of the largest networks in Russia," Grishanova said.

UES's expansion into telecommunications follows similar moves by other Russian natural monopolies that already have created their own extensive networks. The Railways Ministry owns Transtelecom, Gasprom has Gaztelecom, the Moscow Metro has Metrocom and the state controls the country's largest provider, Rostelecom.

Grishanova said that UES would "definitely" collaborate with some of these companies. "In some areas we are competitors — in some we are partners," she added.

"The commercial use of the telecommunications network is very small," said Andrei Braginsky, an analyst at Renaissance Capital, referring to Russia's failure to exploit the potential for transit traffic from European and Asian operators, as well as domestic voice and data traffic. Currently half of all voice and data traffic originates from only two cities — Moscow and St. Petersburg.

"Soon there will be many players on a market that currently barely exists"

Rostelecom has invested over $2 billion into its network and is now only operating at 30 percent to 40 percent of capacity, said Yevgeny Golosnoy at Troika Dialog.

"I don't see how, if Rostelecom couldn't manage to maximize its capacity in five years, all those other companies think they can manage it all of a sudden," Braginsky said.