Rostelecom not ruling out selling some treasury stock
MOSCOW. May 20 (Interfax) - OJSC Rostelecom may sell some of its treasury shares and has already begun preliminary negotiations on this with direct investment funds, the telecommunications operator's President Sergei Kalugin said during a meeting with reporters.
"We are now attempting to understand market conditions. From the standpoint of management, of course, it's better to sell. That is money for building the network," Kalugin said.
Sale of the treasury stock would not interfere with the company's reorganization, which will see Svyazinvest and 20 subsidiaries merged into Rostelecom, Kalugin said. "This [sale of the stock] could be done now. It's an issue of the price," he said.
"Right now probably the share price is not so good. A higher price would be desirable. Either we have to make positive changes, or investors need to believe they are being made. If someone with strong faith in us arrives, this [sale of the treasury stock] could be carried out quickly," he said.
Company subsidiary Mobitel holds 4.64% of Rostelecom's stock, representing 5.24% of its capital. A portion of the stake will be temporarily transferred to Svyazinvest, which will buy 12,644,374 ordinary shares (0.43% of ordinary shares or 0.397% of charter capital). After the reorganization the shares will become treasury stock.
The current market value of the Rostelecom treasury stake is 15.65 billion rubles, or around $500 million. Rostelecom shares closed at 113.97 rubles each in trading on the Moscow Exchange on Friday.
"We have a large amount of treasury stock and that is not so good for us," Kalugin said, recalling that the company borrowed money to buy the shares. "Accordingly, we would be better off selling at a least of a portion of the shares to pay off those loans," he said.
Mobitel, a 100% subsidiary, paid 19 billion rubles for the purchase of 3.86% of shares in the parent company in February 2012 from VTB , which had acquired the shares from billionaire Suleiman Kerimov. The purchase was financed with two loans: 10.7 billion rubles from Gazprombank and 8.3 billion rubles from VTB.
The amount of treasury stock will increase when the company purchases shares from shareholders who vote against the reorganization or abstain from voting at a June 26 meeting. They will be offered 136.05 rubles per ordinary and 95.24 rubles per preferred share (113.97 rubles and 79.73 rubles respectively at the close of trading in Moscow on Friday). Under Russian law, Rostelecom can spend no more than 10% of net assets on the purchases, or about 29 billion rubles.
As for a listing on the London Stock Exchange, which Rostelecom has sought previously, Kalugin said: "We certainly have not dropped the technical listing issue. The question is when we will be ready for it. In order for investors to trust us and begin buying our stock in London, they need to see action at the company. There is some movement, but we need for it to be more tabgible." A listing will only be possible once the reorganization is completed, he added.
A conversion of preferred shares to ordinary shares, an idea that has been discussed at the company for some time, may also be examined once the reorganization is completed, he said.
Asked to comment on the government's privatization plans for Rostelecom, Kalugin said management's job is to "effect fundamental improvement at the company." The goal is to make Rostelecom more efficient, so that its value increases. First Deputy Prime Minister Igor Shuvalov previously called for selling the state's entire stake in Rostelecom this year. The Economic Development Ministry has proposed including sale of state-owned shares representing at least 50% of voting shares in the 2013 privatization plan after the reorganization is completed.
Rostelecom is a national telecommunications company with a trunk communications network of around 500,000 kilometers in all, and its infrastructure is accessible by 43 million residential buildings across Russia.
Its main shareholder, the state holding Svyazinvest, holds 41.84% of Rostelecom charter capital and 45.29% of its ordinary stock. Federal state property fund Rosimuschestvo has 7.43% of ordinary shares (6.86% of capital), Vnesheconombank has 2.26% of capital and 2.45% of voting shares, and Konstantin Malofeyev's Marshall Capital has around 10% of charter capital (the nominal holder being Gazprombank ).
Rostelecom's charter capital consists of 2,943,258,269 ordinary and 242,831,469 preferred shares.
