Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Regional Telecoms Stock Rises After Putin Decree

Shares in regional telecoms firms rose across the board Thursday after President Vladimir Putin signed a decree removing a key obstacle to the privatization of national telecoms holding Svyazinvest.

Of the Svyazinvest units up on the news, Uralsvyazinform, operating in Russia's Urals industrial belt, was the standout performer, up 10.03 percent by the close of trading. Far Eastern Dalsvyaz followed, with gains of 10.71 percent.

Regional fixed-line firms, often lacking strong management, are seen as potential beneficiaries of industry restructuring that might follow the sale of the state's stake in Svyazinvest.

"Vladimir Vladimirovich [Putin] has signed the decree and there are no more obstacles to privatization," said Alfa Bank trader Konstantin Shapsharov, explaining the rally.

Also ahead were North-West Telecom, up by 5.82 percent, Sibirtelecom by 5.33 percent and Center Telecom by 4.79 percent.

Long-distance carrier Rostelekom, also part of Svyazinvest, edged up but ended up closing at the same price as on Wednesday, $5.

In 1997, Russia sold 25 percent plus one share of Svyazinvest to international financier George Soros for $1.87 billion. Telecoms Minister Leonid Reiman has said the rest could be sold for up to $3 billion.

Soros later called it his worst-ever investment and sold it for $625 million to a U.S. businessman of Russian origin, Len Blavatnik, who has said he will also participate in the sale.

Telecoms firm Telekominvest, which many analysts believe is close to Reiman, has also expressed interest. Reiman denies any link to the firm. Conglomerate Alfa Group is also tipped as a likely bidder.

Putin on Wednesday signed a decree giving Russia's military preferential access to national telecoms services, removing an obstacle that has held up the Svyazinvest selloff. But, for the sale to happen, Putin would have to sign another decree.

"The signing by President Vladimir Putin ... raises chances privatization will take place before the start of the election campaign," Uralsib investment bank said in a research note.

Russia holds parliamentary elections in late 2007 and a presidential poll in 2008.

"We understand that the market is a bit tired of bureaucrats' promises to start privatization of Svyazinvest over the last two years," Uralsib said. "Nevertheless, it looks that chances for privatization are really high now."

Many analysts believe a backroom deal has already been struck between Sistema and Telekominvest to carve up Svyazinvest. Sistema would buy Central Telecom, Volga Telecom and, probably, Yuzhtelecom, they believe. St Petersburg-based Telekominvest would get North-West Telecom and Uralsvyazinform.

Alfa, the investment vehicle of billionaire Mikhail Fridman, was seen as an outsider and may now have lost interest, helping remove the concerns of Russia's military about the sale.

"Everything seems to be leading to state-controlled capitalism," said Raiffeisen analyst Alexander Balakhnin.