Rostelecom Names Kalugin Leader After Putin Pal Buys Stake

OAO Rostelecom named cable entrepreneur Sergey Kalugin to lead the company after a friend of Russian President Vladimir Putin bought a minority stake in the state-run telecommunications provider.

Kalugin will replace Alexander Provotorov as president, Rostelecom said today in a statement after the board approved the appointment. Arkady Rotenberg, Putin’s judo partner, bought a 10.7 percent stake last month from Marshall Capital, which had backed Provotorov.

“Kalugin has a good understanding of the fixed business and as he has worked at Rostelecom, some management continuity is ensured,” Ivan Kim, an analyst at VTB Capital, said in a note to clients today. “Rostelecom is unlikely to be aggressive in the mobile marketplace” because the new leader lacks experience in wireless communication, he said.

The 46-year-old Kalugin was co-founder and head of National Cable Networks, which billionaire Suleiman Kerimov acquired in 2005 and built into a larger pay TV and Internet operator, OAO National Telecommunications or NTK. Kerimov sold NTK to Putin’s friend Yury Kovalchuk in 2008, who sold it to Rostelecom in 2011. Kalugin worked under all three owners. He quit in 2012 to work in his own business, WebMediaGroup. The government recommended that he be appointed to run Rostelecom.

Provotorov Criticism

The Russian Communications Ministry had criticized Provotorov for inefficient spending at Rostelecom, including for expansion into mobile. Provotorov may receive compensation of 200 million rubles ($6.4 million), Kommersant reported today, without saying where it got the information.

Rostelecom has about 13 million mobile voice customers and more than 9 million fixed-line broadband subscribers. The number of pay-TV subscribers exceeds 6 million, and the company has about 28 million local fixed-line voice customers.

Rostelecom’s board also approved prices for buying out minority investors who vote against a merger with parent Svyazinvest. The buyout price will be 136.05 rubles per common share and 95.24 rubles per preferred share, the company said today.

Rostelecom shares rose 1.9 percent to 123.05 rubles, while the preferred stock added 0.5 percent to 89.71 rubles.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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