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Articles & publications
06.05.2010
Sistema gets closer to Svyazinvest: draft resolution on asset swap submitted to the governmentKommersant, Irina Erokhina
The Telecommunications Ministry has submitted to the RF government a draft resolution on the exchange of assets between the state and AFK Sistema. During the course of the transaction the corporation will hand over to state holding Svayzinvest 100% of Sky Link cellular operator in exchange for a 23.3% stake in Moscow City Telephone Network (MGTS). The resolution is required to complete the transaction, which involves delisting the holding’s stake in MGTS from state ownership and turning it over to Sistema’s subsidiary – Comstar-UTS.
The draft resolution “On the coordination of an asset exchange between Svyazinvest (which owns 75% - one share of the state’s property – Kommersant) and the subsidiaries of AFK Sistema has been submitted by the Telecommunications Ministry to the RF government, Kommersant learned from a source at the ministry. The press service of the Telecommunications Ministry explained that the draft resolution calls for swapping a 23.3% stake in MGTS, which is owned by Svyazinvest, for a 100% stake in Sky Link cellular operator with the price difference in market value certified by an independent appraiser to be paid to Svyazinvest. A source at the Telecommunications Ministry went on to say that the project was approved between the Ministry of Finance and the Ministry of Economic Development.
According to the restructuring of Svyazinvest on the basis of Rostelecom (51% owned by the state holding), approved by Russia’s Prime Minister Vladimir Putin, the plan is to set up a merged company by folding seven regional telecommunications operators into Rostelecom. Alongside of this process, Sistema and the state are to swap assets: AFK will assign its 100% stake in Sky Link to Svyazinvest, and 25% + one share in the state holding (owned through subsidiary Comstar-UTS) to Vnesheconombank (VEB). In exchange, Comstar will have its RUR 26 bln debt to Sberbank written off (the obligations will be transferred to VEB) and will receive Svyazinvest’s 23.33% stake in MGTS. The relevant government agencies had insisted that the exchange take place without using any budget funds.
But now the most likely scenario is that Comstar’s debt to Sberbank will be taken over by Rostelecom, for which the operator will likely issue long-term bonds worth RUR 30 bln (see Kommersant article dated March 17).
An appraisal of the assets owned by Svyazinvest in line with the asset exchange was made by Ernst & Young. According to the results of the appraisal, Sistema may have to pay an additional amount to Svyazinvest, as the corporation recently cautioned investors in its 2009 financial statement. The point is that Ernst & Young appraised MGTS’s 23.33% stake at RUR 9.7 bln, and 100% of Sky Link at RUR 9.4 bln. Sistema recently raised its stake in Sky Link from 50% to 100% as a result of several transactions. Half of the operator was bought up by Sky Link’s subsidiary MC Direct (see Kommersant article dated April 27) from RTDC (which was earlier owned by Danish lawyer Jeffery Galmond). Whether Sistema pays Svyazinvest the difference in price between MGTS and Sky Link (RUR 300 mln) or another amount is not mentioned in the report.
In addition, in order to close the asset swap deal it will be necessary to have the 23.3% stake in MGTS delisted from state ownership, and since the resolution has been submitted to the government this move could occur in the very near future.
Kommersant’s source, which is aware of the details of the transaction, points out that if the resolution on divesting the state’s stake in MGTS and the directive for members of the board of directors of the state holding regarding the transaction are issued by the middle of May, the transaction could be placed on the agenda of Svyazinvest’s annual general shareholders meeting at the end of June.
The press secretary of Prime Minister Vladimir Putin, Dmitry Peskov declined to elaborate, referring to the fact that he can comment only on the government resolution, and not draft resolutions. Last week, first Vice President of Sistema Anton Abugov announced that he believes the government resolution would be signed within the next month, after which all corporate procedures will be launched.
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