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. Last Updated: 07/27/2016

Urals Operator Eyes 6 Smaller Firms

YEKATERINBURG, Ural Mountains -- Regional telecoms firm Uralsvyazinform said Monday it would take over six smaller firms via share swaps in the first quarter of 2002 and then would sell American Depositary Receipts.

The swaps are part of a merger plan mandated by Svyazinvest, Russia's state telecoms holding, which wants to consolidate dozens of small regional firms into seven large operators to improve the sector's efficiency and attract investment.

Uralsvyazinform, based in Perm, would become the sole operator in its region after swapping shares for those of six firms -- Chelyabinsksvyazinform, Uraltelekom, Tyumentelekom, Khantymansiiskokrtelekom, Yamalelectrosvyaz and Kurgan Region Electrosvyaz.

They would serve as local branches of the combined company.

The swap is planned for the first quarter of 2002, said Vladimir Rybakin, general director of Uralsvyazinform, at a news conference.

"A Level Three ADRs issue is planned after the process of reorganization is over and also taking into account the market situation. Tentatively it is going to be the end of 2002 or 2003," he said.

ADRs allow a broad range of Western investors to trade in Russian shares and give Russian firms access to capital markets.

State holding company Svyazinvest, which currenctly holds 53.2 percent in Uralsvyazinform and controlling stakes in the other six companies, would hold 41.35 percent of the combined company before the ADR sale.

The State Property Fund, which holds stakes in some of the smaller telecoms firms, would own another 5.03 percent.

Rybakin also said he expected international rating agency Standard & Poor's to assign the company a rating.

Uralsvyazinform, which has speculative "B" long-term and short-term credit ratings from Fitch IBCA, has already issued Level One ADRs covering 9.3 percent of its charter capital.

Level One ADRs are issued on existing stock and do not entail capital increases.

Level Two and Three ADRs can be used to raise funds, but the U.S. Securities and Exchange Commission applies stricter reporting requirements to these securities than to Level One ADRs.

Uralsvyazinform shareholders have approved the issue of billions of new ordinary shares and preferred shares to swap for shares in the other six firms.

The swap ratios must be approved by shareholders of the regional companies at shareholder meetings later in September and in early October.