Rostelecom Wins $4.7 Billion Internet Job, Buys Crimea Operators

OAO Rostelecom, Russia’s state-run communications operator, won a government contract to bring broadband service to thousands of small communities across the country and acquired three fiber-optic network owners in Crimea.

The company will provide fixed-line broadband Internet in more than 13,600 small towns across Russia after signing a deal with the Communications Ministry, it said today in a statement. It will spend about 163 billion rubles ($4.7 billion) of state money over a decade to lay 200,000 kilometers (124,000 miles) of fiber-optic cables.

“Millions of Russians will be thrust into the digital age and receive equal access to the information society,” Chief Executive Officer Sergey Kalugin said in the statement. The agreement, along with legislative changes, means the company is the sole provider of universal communications services in the country, it said.

Rostelecom also acquired three small operators in Crimea for about $30 million to develop business on the peninsula Russia annexed in March, Kalugin told reporters today. Prime Minister Dmitry Medvedev ordered Rostelecom on March 24 to enter Crimea as soon as possible to establish secure communications.

“Being controlled by the state, Rostelecom is implementing social projects important for the government,” said Sergey Vasin, an analyst at Gazprombank in Moscow. The company laid an underwater cable connecting Russia to Crimea “in record-short time,” Communications Minister Nikolay Nikiforov said today.

Rostelecom operates in Crimea via the Miranda-Media unit, CEO Kalugin told reporters today. The company has studied other deals in Crimea, while it may now expand organically based on the acquisitions already made, Kalugin said. The three companies it bought in Crimea operate about 2,000 kilometers of networks.

Kalugin declined to comment on possible dividends when speaking to reporters today. The management is proposing to boost the 2013 payout by 18 percent from a year earlier, the Vedomosti daily reported today, citing unidentified people.

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

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net David Risser, Robert Valpuesta

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