Digital Ministry opposes giving state's stake in Rostelecom to Rostec, sees risks as too high - source

MOSCOW. April 15 (Interfax) - Russia's Digital Development Ministry will not support a proposal to hand the government's stake in national provider Rostelecom to state corporation Rostec, as it believes the benefits of such a move are questionable while the risks are considerable, a source at the ministry told Interfax.

"The Digital Development Ministry does not support this initiative because the pluses of the proposed arrangement are not quite clear, while the risks that arise in connection with the change in the management model are seen as very significant, particularly in the current conditions," the source said.

Sources at two government agencies told Interfax earlier that Rostec proposed to the Russian president in March to transfer the state stake in Rostelecom to Rostec, as well as put the Rostelecom stakes currently held by VTB and VEB under the state corporation's trust management.

The president issued orders to consider Rostec's proposal and report back, and the initiative is now being reviewed by relevant agencies, including the Finance Ministry, Federal Property Agency, Digital Development Ministry, Industry and Trade Ministry and Economic Development Ministry, the source said.

Rostec argued that it and Rostelecom work in related fields and that "tight coordination and concentration of resources on the part of the state and domestic industry" are necessary in the face of sanctions.

A source at one agency, citing the "mild" wording of the president's instructions, told Interfax that the proposal probably does not have much of a future.

Rostelecom and VTB refrained from comment. The Digital Development Ministry has not yet responded to questions.

Rostelecom, Russia's largest telecom provider, has charter capital of 8.73 million rubles, split into about 3.293 billion common and 209.565 million preferred shares with par value of 0.0025 rubles.

The Federal Property Agency owns 38.2% of Rostelecom common shares (35.91% of equity), state bank VTB holds 8.44% (7.92%), JSC Telecom Investments (43.91% of which is owned by VTB and the rest by VTB's partners on investments in Tele2) owns 20.98% (19.72%), and state development corporation VEB holds 3.36% (3.16%).