Telecoms Ministry suggests Provotorov step down as Rostelecom chief - paper
MOSCOW. Oct 1 (Interfax) - The Russian Telecoms Ministry proposal that Alexander Provotorov resign as president of OJSC Rostelecom could reach the same fate as the ministry's plans to replace the board chairman of OJSC Svyazinvest: it is likely the presidential administration will not approve this decision.
The Telecoms Ministry sent the government draft instructions on the early termination of Provotorov's term as president and CEO of government owned telecoms company Rostelecom. It suggested replacing him with Svyazinvest CEO Vadim Semenov, Kommersant newspaper reported Monday, citing its sources.
A source familiar with Telecom Ministry plans told Interfax that the draft instructions were sent to the government. The document now needs to be approved by the presidential administration. "I do not think that will happen," the source said.
"Such a reshuffle [appointing Semenov to replace Provotorov] is not justified in economic or governing terms. There is no chance," another source familiar with the presidential administration's position told Interfax.
This situation arose before when the ministry suggested appointing VEB Capital CEO Yuri Kudimov as board chairman of Svyazinvest (owns 41.84% of Rostelecom) instead of Prince Alexander Trubetskoy. The government has not yet received approval for this from the presidential administration, where Igor Schegolev, the former Telecoms Minister, works as advisor to the president. It was Schegolev that put Trubetskoy forward for the post initially.
Sources told Kommersant that the Telecoms Ministry wrote to the Russian Federal Property Management Agency Rosimuschestvo (owns 7.43% of Rostelecom common shares) to agree the issue with the Economic Development Ministry before drafting the instruction.
Semenov has since October 2010 headed Svyazinvest and before that, from 2009-2010, he worked at Rostelecom as vice president for legal issues and corporate development. "The instruction puts forward Semenov [as a candidate for the post of Rostelecom CEO]," an industry source told Kommersant. The paper notes that Semenov studied with Russian Prime Minister Dmitry Medvedev and Leningrad State University.
Sources said that if Semenov is appointed president of Rostelecom there will be no need to appoint a new general director of Svyazinvest. "He can well manage management of both companies. Svyazinvest will anyway be merged with Rostelecom," a source said.
Svyazinvest is getting ready to merge with Rostelecom - when Dmitry Medvedev was president he gave instructions for the merger to be completed by March 2013. Participants in the merger process, including Semenov, have said more than once that the merger is dragging out. A manager close to Svyazinvest told Kommersant that it would be completed in December 2013.
Provotorov has headed Rostelecom since 2010. In July his contract expired, but the board extended it for three more years to July 13 2015. The bonus system was reviewed at the same time and his salary increased.
Before joining Rostelecom, 37-year-old Provotorov was first deputy general director of Svyazinvest (from 2009 to 2010) and before that, from 2005 to 2009, general director at MarshallCapital. Konstantin Malofeev's MarshallCapital is the second largest shareholder of Rostelecom, after the government, with 9.66% (Gazprombank is the holder).
Through OJSC Svyazinvest, Rosimuschestvo and Vnesheconombank, the Russian government controls 53.2% of Rostelecom common shares. Rostelecom subsidiary LLC Mobitel owns 4.64% of the company.
Telecoms Minister Nikolai Nikiforov, who was appointed in May, also criticized Rostelecom. Literally on the day of his appointment, May 21, he made critical comments on Twitter about Rostelecom plans to acquire software company KM Media. Nikiforov did not like that the state company was buying a private company, although the Federal Antimonopoly Service had given its go-ahead to the deal.
In June the minister said he was disappointed that Rostelecom capitalization had fallen and blamed problems with management efficiency: "Rostelecom shares should not fall that much below the market." After a few days, Nikiforov said he was looking at the progress of the company's investment program and suspected that it was not effective enough.
Russian Deputy Prime Minister Arkady Dvorkovich, who is in charge of the telecoms sector, has also criticized the current state of affairs at Rostelecom. "We have questions about the strategy at Rostelecom, about the investment program and about the results that we achieve with the resources the company has," Dvorkovich has told Vedomosti newspaper in an interview. "We have questions about the efficiency of the investment carried out. With such resources we think you could move faster," he added.
"There are a lot of good projects at Rostelecom. For example, pilot projects on separate frequency zones, which could grow into larger scale projects. But on the whole, we think Rostelecom could do more and can become a more efficient company, including in terms of infrastructure," the deputy prime minister said.
"As to corporate governance, we are now discussing this with the presidential administration and I hope we will come to a joint decision," Dvorkovich said.
"For all industries, including for Rostelecom, we have a clear position. Determining who should be on the boards, of course with the agreement of the presidential administration - is the prerogative of the ministries. The Telecoms Ministry's position is decisive. So the minister will develop the position, report it to the prime minister and then we will agree it with the presidential administration," the deputy prime minister.
