Russia’s Rostelecom Stake May Fetch $5 Billion in 2013 Sale

Russia may sell a controlling stake in telecommunications operator OAO Rostelecom for at least $5 billion as early as this year, said First Deputy Prime Minister Igor Shuvalov.

“I think it would be right for the government to sell its entire stake this year, to sell it as a whole,” Shuvalov, who oversees Russia’s privatization program, said in an interview in Moscow this week. “The company has a lot of accumulated problems, but we think a controlling stake could be sold for a minimum of $5 billion.”

A decision will be made “by or during autumn,” he said. Rostelecom gained 2.1 percent to 113.74 rubles as of 5:12 p.m. in Moscow, giving it a market value of 334.8 billion rubles ($10.7 billion).

The government plans to raise 427 billion rubles through state asset sales this year to reduce its role in the economy. Most of the proceeds will go to the companies for investment. Stakes in diamond miner OAO Alrosa, airline OAO Aeroflot and VTB Group, Russia’s second-biggest bank, may be among the year’s biggest sales.

Rostelecom’s addition to the 2013 privatization plan was proposed by the Federal Property Management Agency this month, as state-run VTB acquired Russian wireless assets from Tele2 AB.

VTB may resell Tele2 Russia to Rostelecom in six to eight months once the state-run operator completes a merger with its parent, OAO Svyazinvest, according to a note from Renaissance Capital, a Moscow-based investment bank, at the time of the deal. Their networks combined would form Russia’s fourth-biggest nationwide mobile operator.

Antitrust Views

The antitrust watchdog would welcome Rostelecom’s acquisition of Tele2 Russia to create a new national mobile operator, Interfax reported yesterday, citing Igor Artemyev, the head of the Federal Anti-Monopoly Service. The government holds about 55 percent of Rostelecom and will hold about the same amount after the Svyazinvest merger.

Rostelecom may be of interest to strategic investors in the telecommunications industry -- Alfa Group, Sistema and Alisher Usmanov -- as well as to established businessmen who don’t yet have a presence in the sector, such as Gennady Timchenko and Yuri Kovalchuk, said Anna Kurbatova, an analyst at BCS Financial Group.

Billionaire Mikhail Fridman’s Altimo, which controls cell-phone operator VimpelCom Ltd, may consider bidding for Rostelecom after the sale terms are published, the company’s vice president Evgeny Dumalkin said by phone.

Fridman Interest

“It will depends on the terms,” Ivan Streshinskiy, who heads Usmanov’s USM Holdings and is a board member on his mobile operator OAO MegaFon, said in e-mailed comments. Vsevolod Sementsov, spokesman for billionaire Vladimir Evtushenkov’s AFK Sistema, which controls cellular operator MTS, said the same.

Alexander Karmaev, a St. Petersburg-based spokesman for Kovalchuk, couldn’t immediately comment when Bloomberg News called. Timchenko isn’t interested in Rostelecom, his spokesman Anton Kurevin said by phone.

Rostelecom privatization may be problematic as the company provides services to defense-related customers, Kurbatova of BCS said.

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