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. Last Updated: 07/27/2016

Melamed Set to Take Over at Sistema

VedomostiMelamed's move to Sistema could be part of a strategy to prepare for the privatization of Svyazinvest, analysts said.
Sistema, billionaire Vladimir Yevtushenkov's holding company, is expected to tap Leonid Melamed as its new chief executive Thursday in a likely change in strategy that could involve preparations to take part in the privatization of Svyazinvest.

The company's board of directors will meet Thursday to replace president and CEO Alexander Goncharuk with Melamed, who currently heads Sistema subsidiary Mobile TeleSystems, a company source said Wednesday, adding that it was "the only thing on the agenda."

A decision will be announced Thursday, said the source, who wished to remain anonymous because he was not authorized to discuss the issue.

Analysts said the move could be connected with a push to merge MTS, the country's largest mobile provider, and telecoms unit Comstar, as well as possible interest in participating in the long-delayed privatization of state telecoms holding Svyazinvest.

Phillip Townsend, a senior analyst at Metropol, said choosing Melamed to head Sistema would allow the conglomerate to pull together the resources of its biggest subsidiaries -- MTS and Comstar -- to achieve its expansion strategy.

"If they could merge Comstar and MTS, in theory, Comstar would be able to make use of MTS's cash flow to help it develop in the regions," he said.

Such a strategy, he added, would only be impossible if the head of MTS acquiesced to it. "If [Melamed] is the head of Sistema, it becomes even easier," Townsend said.

The move might also be connected to speculation that Svyazinvest will be privatized in the next 18 months, he said. A merger of Sistema's two main subsidiaries would make it easier to take part in the privatization, Townsend said.

"Probably they are getting ready for that as well," he said.

Shares of Sistema rose 5 percent Wednesday on news of the impending reshuffle. MTS ended the day down 1.2 percent.

Melamed, 40, is widely credited with initiating a successful turnaround at MTS to strengthen its position as market leader across the CIS. Analysts described Melamed, who joined MTS in 2006, as a talented manager with solid experience in mobile telecoms.

His two-year stint at the company saw its capitalization grow from $13 billion to $20 billion, with revenues climbing 60 percent, Vedomosti reported. MTS is 52.8 percent-owned by Sistema.

Mikhail Shamolin, 37, a vice president at MTS Russia, is expected to replace Melamed, the paper said.

Analysts said Melamed would have his job cut out for him as he tries to raise the value of the company's nonpublicly traded assets, in sectors varying from retail stores and media to banking, tourism and pharmaceuticals.

Yekaterina Generalova, an analyst with MDM Bank, said the choice of Melamed was good news for Sistema, which has been pushing for a strong foothold in Asia through its Indian subsidiary, Shyam Telelink.

"Sistema's main project at the moment is to provide mobile phone services throughout India," Generalova said.

"The ideal thing is to spearhead such moves with someone like Melamed, who is well-informed about the mobile telecoms market."