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. Last Updated: 07/27/2016

Comstar Plan Calls For Large Job Cuts

Comstar United Telesystems is aiming to double its market capitalization to $10 billion within a year by curtailing waste and improving efficiency, CEO Sergei Pridantsev said Thursday.

He announced the plan, which includes the cutting of thousands of jobs, at a news conference.

"Although Comstar UTS is a commercial organization, the employees actually engaged in commercial activities are a mere 17 percent of the work force," Pridantsev said. "A company like Comstar should have more people working on sales than in auxiliary roles."

Although he said the broad restructuring would make the firm leaner and more competitive, analysts were divided over whether such an increase in the firm's value was realistic.

Most job cuts will come at Moscow City Telephone Service, or MGTS, the fixed-line provider that services about 80 percent of the city's homes. As many as 13,000 of its 16,000 employees could be axed over the next five years.

Pridantsev, credited with successfully turning around state-controlled fixed-line provider Center Telecom, also announced sweeping changes in both the structure and management of Comstar's parent company, Comstar Group.

"Comstar UTS has been losing market share while the management has simply been ineffective," Pridantsev said. "The company has failed to capitalize on the advantages it enjoys in Moscow and the Moscow region."

Under the new arrangement, Comstar Group will take over areas like accounting and finance currently handled individually at its three subsidiaries -- Comstar UTS, Comstar Direct and MGTS. MGTS will be responsible for network construction and maintenance for the entire group, while three separate call centers will be merged into one centralized unit to be moved away from Moscow to cut costs.

Alexander Shugol, an analyst with J'son and Partners, said most of the proposed reforms began under Pridantsev's predecessor, Eric Franke, who was ousted in May. "The overhaul started late last year because Western investors were no longer satisfied with Comstar's sluggish performance," Shugol he said.

He added that doubling market cap in just a year might be unrealistic.

"I doubt that cutting down the work force at MGTS will achieve much," Shugol said. "The vast majority of the 16,000 employees earn meager salaries."

Anna Kurbatova, an analyst with Aton Capital, agreed that the target would be difficult but that Pridantsev's track record as CEO at CenterTelecom suggested he might pull it off.

"Some of the restructuring efforts make good economic sense," Kurbatova said. "MGTS, for instance, is clearly overstaffed and it will be necessary to reduce the work force there drastically, sooner or later." Kurbatova put Comstar's current worth at about $4.7 billion.

Comstar, itself part of telecoms holding Sistema, operates as an alternative provider outside of the capital.

Pridantsev would not confirm reports that Comstar was in talks to buy Sochi Telecomservice, a business telecoms provider in the city.