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. Last Updated: 07/27/2016

Paper: Putin Mulling Secret Telecoms Net

The government may spend up to $500 million to set up an entirely new telecoms network to appease security services opposing the privatization of state holding company Svyazinvest, business daily Kommersant said Wednesday.

Svyazinvest controls seven regional telecoms companies, long-distance monopoly Rostelekom and Moscow fixed-line provider MGTS.

But Russia's defense and intelligence services have criticized the plan to sell a 75 percent stake in the company, saying there are no guarantees it would continue to work closely with the government.

Kommersant quoted a note to a draft presidential decree on Svyazinvest's privatization as saying the Kremlin considered spending 13.6 billion rubles ($480 million) to set up a new secure digital network for the Defense Ministry, the Federal Security Service and other powerful state institutions.

The note said the two-step project would lead to the creation of a new pan-Russia network by 2010.

Kommersant said construction would be carried out by both state and private telecoms operators, but added that non-government companies were critical of the plan.

"There is no need for such a thing in the 21st century," Alexander Malis, vice-president of privately held Korbina Telecom, told Kommersant.

"Everything can be coded perfectly well using common telecoms networks so no one is able to decode it. I think that the creators of this project know perfectly well that everyone involved in building [the network] have already agreed on how to divide that money among themselves."

The long-awaited sell-off needs a signature from President Vladimir Putin to come into force. No date has been set for the privatization, which is not expected to take place this year.

A sale would be Russia's largest privatization to date as IT and Communications Minister Leonid Reiman has put its value at $3 billion.

Potential bidders include Alfa Group, the investment holding owned by billionaire Mikhail Fridman; AFK Sistema, which raised $1.6 billion when it floated in London this year; and Telekominvest, run by former associates of Reiman.

Russia sold 25 percent plus one share of Svyazinvest in 1997 to international financier George Soros. Soros later called it his worst-ever investment and last year sold it for $625 million to a U.S. businessman of Russian origin, Len Blavatnik.