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Articles & publications
06.07.2010
Svyazinvest targets Central TelegraphRBC Daily
Elena Zlenko
The State Federal Property Management Agency (Roscomimushestvo) has called off tenders to sell a 21.78% stake in Central Telegraph on the back of a decision to turn over the state’s stake in the company to Svyazinvest holding. The agency appraised the minimal value of CT’s assets at RUR 902 mln, a figure not including the building owned by the operator, which could be sold for more than $380 mln once its refurbishing is complete.
The reason for canceling the tenders is a governmental directive dated June 3, 2010, as noted in Roscomimushestvo’s official bulletin. The agency was supposed to hold tenders to sell of the above-mentioned stake in Central Telegraph on July 13, with the starting price set at RUR 902 mln. After the date and terms of the tenders were announced, Svyazinvest said it intended to participate in the tenders in order to consolidate the controlling stake, although at a later time head of the Telecommunications Ministry Igor Schegolev sent a letter to Prime Minister Vladimir Putin proposing that the state’s equity stake in Central Telegraph be assigned to Svyazinvest bypassing the tender procedure.
The telecom minister also proposed assigned to the holding the state’s stakes in Chukotkasvyazinform (in which the State Federal Property Management Agency holds 28.24% of charter capital, 29.31% of common shares) and MMTS-9 telecommunications center (38% of charter capital).
As stated by Svyazinvest’s general director Evgeny Yurchenko in June, 21.78% of the charter capital of Central Telegraph will be assigned to the charter capital of Svyazinvest in exchange for an additional share issue. The equity stake is to remain on the balance sheet of Svyazinvest, since Central Telegraph is not slated to participate in the reorganization of the holding, according to a source close to Svyazinvest, which went on to say that after the decision in principle is adopted to turn over the stake to Svyazinvest, the deadline for closing the deal would be a mere “technicality”.
The state’s stake in Central Telegraph was put up for sale in 2003, but the tender failed to take place due to the lack of a clear position on the issue of the privatization of Svyazinvest. At a later time, the holding explored the option of folding Central Telegraph into CenterTelecom, but this plan never materialized, since the appraisal of Central Telegraph includes the value of its corporate headquarters on Tverskaya Street, whereas the real estate held by the holding’s other subsidiaries has not necessarily been taken into account.
Svyazinvest is in the process of restructuring as a result of which all of the holding’s regional telecommunications operators (RTOs) are to be folded into Rostelecom, while Central Telegraph will remain a subsidiary of Svyazinvest and will not take part in the merger.
Central Telegraph’s most valuable asset is its real estate. The company’s head office has an estimated value of $380 mln, given that it owns over 38,000 square meters, based on approximate valuations. The selling price per meter of floor space at Central Telegraph’s headquarters would be worth as much as $6,000 today, while rent for this unit costs $300-600 per year not including VAT, service and maintenance costs, notes the head of the commercial real estate department of Penny Lane Realty, Alexey Mogila. Mr. Mogila pointed out that street retail (first floor) lease rates for this historical building fluctuate in the range of $1,000-3,000 per one square meter. In the event of successful redevelopment of the premises of Central Telegraph, which involves turning this space into offices and housing, the selling price could be $10,000 per a square meter, head of the strategic consulting and corporate appraisal department of CB Richard Ellis, Yana Kuzina, pointed out.
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