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. Last Updated: 07/27/2016

Legislators Pass Changes to Allow Svyazinvest Sale

The State Duma on Friday approved amendments to the communications law that will speed up the sale of the government's controlling stake in national fixed-line operator Svyazinvest.

The Duma cleared the amendments to the law in the second and third readings, Marina Novikova, an aide to Vladimir Gorbachev, deputy chairman of the Duma's Energy, Transportation and Communications committee, said in a telephone interview.

The changes will guarantee that law enforcement agencies are granted unlimited access to the networks of Svyazinvest's seven regional fixed-line subsidiaries and long-distance operator Rostelecom, no matter who the new owner of the stake is, Dow Jones reported.

The government is gradually divesting its stakes in domestic companies that are not considered strategic to national security -- strategic areas include oil and gas and machine-building -- to ensure they are efficiently managed.

The government, however, has so far failed to sell its remaining 75 percent holding in Svyazinvest, which it has promised to do almost every year since 1997, when it auctioned 25 percent to a group of investors including U.S. billionaire George Soros for $1.88 billion. Soros later called the investment the worst he ever made.

IT and Communications Minister Leonid Reiman said earlier Friday that it would take between eight and 10 months to prepare for the sale of the government's stake.

The sale of state assets may be further delayed after the presidential elections in 2008, as many federal agencies have to come to an agreement on what appears to be a sensitive issue, Reiman said.

President Vladimir Putin still has to strike Svyazinvest from the list of strategic companies that cannot be sold.

"It considerably increases the chance of Svyazinvest privatization,'' Stanislav Yudin, a telecommunications analyst at UralSib in Moscow, said about the amendments.

"The window of opportunity is limited to the first half of 2007," he said, referring to parliamentary elections due in 2007 and the presidential elections to follow.

n JPMorgan Chase recommended buying Russian telecommunications companies because they offered better returns and less risk than peers in Central and Eastern Europe, the Middle East, Africa and Latin America.

"The Russian wireline sector outshines most of its peers in our universe,'' JPMorgan said in a report published Friday that initiated coverage of the Russian companies alongside 39 companies it tracks in those regions.

"We expect solid growth for all stocks except Rostelecom, as the long-distance market appears less promising and market-share dynamics look challenging,'' the bank said.