Medvedev Orders Svyazinvest, Rostelecom Merger

Russian President Dmitry Medvedev ordered a merger on Monday between national telecoms holding Svyazinvest and the country’s long-distance operator Rostelecom within 12 months.

The order, published at state legal website, also stipulates that the Russian government and the country’s national development bank Vnesheconombank (VEB) will maintain a holding of over 50 percent to keep control of the new company, which will work under the Rostelecom brand name.

The merger of the two telecom firms is the second phase of Rostelecom’s reorganization. The first phase, completed in April 2011, comprised Rostelecom’s merger with regional fixed-income telecoms firms.

Investcafe analyst Iliya Rachenkov said the order was an attempt to restart the merger process which had been on hold since 2009.

“The problems were in cross ownership between Rostelecom and Svyazinvest. The merger scheme was being discussed for a long time [to prevent a situation where] one of the companies might lose money which it spent to buy another one,” Rachenkov said.

Svyazinvest currently owns 43.37 percent of Rostelecom, while VEB has 2.45 percent and the country’s Federal Property Management Agency holds 7.43 percent.

The merger was also impeded by Svyazinvest’s low earnings, Rachenkov said.

The deal could be complete within 12 months after which the new company will be ready for privatization, he added.


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