Svyazinvest to bid for 22% of Central Telegraph
MOSCOW. June 4 (Interfax) - Svyazinvest will bid for the 22% of OJSC Central Telegraph due to be auctioned on July 13, the telecom holding's external communications chief, Igor Pshenichnikov, told Interfax.
Svyazinvest, which is the controlling shareholder in Central Telegraph, "intends to buy this block of shares," he said.
The Russian Federal Property Agency (Rosimuschestvo) said on Friday that it would hold an auction on July 13 for 21.78% of the shares in Central Telegraph. The starting price is 902 million rubles and the bidding increment is 10%. Bid applications will be accepted until July 6 inclusive.
The starting price is somewhat higher than the market price of this shareholding. Central Telegraph closed trading on the MICEX Stock Exchange at 17.8 rubles a share on June 3, pricing the 22% at 859 million rubles. But Central Telegraph's market cap of 3.3 billion rubles or $110 million does not fully reflect the value of the real estate, namely the building on Tverskaya, some of which is occupied by the Russian Communications Ministry.
The sale is part of the indicative state privatization program for 2010. The shares have been included in several programs, dating back to 2003, but they have never been sold due to on-going debates about the strategy for telecom sector assets.
Svyazinvest owns 38.25% issued shares or 51% voting shares and LLC Northwest Financial Company owns 10.6% in Central Telegraph, which provides fixed-line, broadband Internet and television services as well as traditional services. Its prime asset is the headquarters at the bottom of Tverskaya Street, just a few hundred yards from the Kremlin.
Central Telegraph thought about selling its section of the building on Tversyaka in 2008, before Svyazinvest changed management. Vladimir Zhelonkin, the then board chairman of Central Telegraph, and a former Svyazinvest deputy CEO, gave one square meter of the building a preliminary value of $6,000, or at least $222 million for the whole area occupied by Central Telegraph. The Communications Ministry opposed plans to sell the building.
The difficulty in putting a true value on the company was one of the reasons why Svyazinvest had decided not to merge Central Telegraph with Rostelecom during the reorganization that is being set in motion this year. Central Telegraph will remain a standalone company, controlled by Svyazinvest.
Sources familiar with the situation at Svyazinvest say it or Rostelecom are most likely to land the 22% of Central Telegraph at the auction, but they are not ruling out genuine competition from elsewhere.
Central Telegraph's sales revenue to International Financial Reporting Standards (IFRS) was 3.5 billion rubles in 2008.