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Articles & publications
08.04.2010
DIA assigns Rostelecom stake for management to VEB for 5 years, does not rule out possible saleRIA Novosti
The state corporation Deposit Insurance Agency (DIA) is set to transfer within the next seven days nearly a 30% stake in Rostelecom to an account of the Bank of Development (VEB) as part of a trust management agreement. This is a 5-year agreement during which VEB, among other things, will be eligible to vote at shareholders meetings and appoint its candidates to the board of directors, deputy general director of DIA Andrey Melnikov told RIA Novosti on Wednesday.
The agreement was signed on April 5.
”Five years is the longest possible term envisaged by the Civil Code of the Russian Federation for trust management agreements”, Melnikov pointed out. The assignment of shares for trust management to VEB, which already owns a 10% stake in Rostelecom, was done in accordance with a government instruction dated January 19, 2010.
Details of the trust management agreement
As Mr. Melnikov explained, the assignment of this stake to fiduciary agreement provides for all actions involving this equity position of the long-distance telecommunications operator, which include voting at shareholders meetings (the next meeting is scheduled for May 29). “This position was coordinated earlier as part of our joint activities with VEB. They will be entitled to appoint nominees to the board of directors”, the agency’s source said.
In addition, the signed trust management agreement does not allow the manager to independently adopt the decision to sell the stake. “Issues concerning the divestiture of the stake are subject to coordination with DIA as the founding party to the fiduciary agreement. This relates to the price, options and other substantial terms or sale options”, Mr. Melnikov pointed out.
Melnikov also noted that the amount of compensation that VEB would receive for its services would be nominal.
He went on to say that the signed agreement contains a provision on substantially increasing compensation to VEB in the event that the stake is sold at a price which exceeds the acquisition price of RUR 230 per share. “In this case VEB would receive compensation amounting to 12% of the difference”, according to a deputy general director of DIA. As a result, VEB is interested in obtaining the highest possible selling price, while DIA is interested in recovering the full amount spent on purchasing the shares”, he emphasized.
Long story
The fact that DIA would assign its block of shares in the long-distance operator for management to VEB was announced around the middle of January. The issue of assigning shares to the bank was under consideration from the time of their acquisition in the process of the financial rehabilitation of KIT Finance investment bank.
According to earlier reports, there was a chance that the above stake in the national LD operator could be assigned to the state telecommunications operator Svyazinvest, which owns a controlling interest in the operator.
DIA bought up a 29.999% stake in Rostelecom from KIT Finance last summer for RUR 50.28 bln. Another 10% was purchased by VEB.
Before 2006, Rostelecom was a monopoly provider on the long-distance telecom market, but as of January 1, 2006 the liberalization of this market began, and to date DLD and ILD licenses have been issued to over 30 companies. Some of them have begun to provide services, which is the reason why Rostelecom has seen its market positions eroded.
Last May the RF government committee on transportation and telecommunications approved the concept for the restructuring of Svyazinvest telecommunications holding, which calls for the merger of all its assets on the basis of Rostelecom.
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