Ilya Klebanov Trades on Connections
// The presidential representative promises Svyazinvest a Norwegian future
Telecommunications Presidential representative in the Northwest Federal District Ilya Klebanov made an unexpected announcement yesterday at a briefing on his recent trip to Norway. Norwegian telecom giant Telenor may become a stockholder in the Svyazinvest holding. Telenor is not confirming its interest in the Russian company. Analysts are talking about its shrinking attractiveness for investors.
Presidential representative in the Northwest Federal District Ilya Klebanov stated yesterday at a briefing on his recent trip to Norway that “I think that they [Telenor] are extremely interested in taking part in the Svyazinvest privatization auction.”
Telenor is the first foreign company known to be interested in the state stock package in Svyazinvest. The large Russian telecommunications groups, Sistema, Alfa Group and Telekominvest, had been considered the main contenders until now. None of those companies cared to comment on the news that the Norwegian company would also be represented at the sale of the state share in Svyazinvest. Telenor also refused to confirm those intentions officially. Dag Melgard, head of the Telenor press service confirmed for Kommersant yesterday that company representatives had had meetings and discussions about Svyazinvest, but participation in the privatization auction was not on the agenda. “The purchase of Svyazinvest is not part of the strategy by which we obtain mainly cellular companies abroad,” he said.
Analysts say that Melgard's words may not reflect the final position the company takes. “Telenor may take part in the privatization auction. The purchase of a share in Svyazinvest is possible from the financial point of view and fits into the company's concept for worldwide expansion. Telenor is already active on markets similar to Russia's in Ukraine and Turkey,” said Tatyana Tolmacheva of iKs Consulting. “However, privatization conditions yet to be revealed my influence Telenor's decision. It is possible that foreigner shareholders will be excluded from Svyazinvest.”
The conditions for Svyazinvest's privatization as they are now known on the market are preliminary. The documents on that privatization were only turned in by the Ministry of Economic Development and Trade to the Russian administration last week. According to unofficial information, there are a number of provisos in those documents that cloud the investment prospects of the holding. It is known that security officials were able to insert norms in the privatization documents requiring the company to provide communications services to security agencies regardless of whether they paid for them or not. That is allegedly to be passed into law just before the auction, at the insistence of the Defense Ministry. If Svyazinvest is unable to shut off the security agencies, it is sure to have an impressive pool of debtors in the coming years. Those agencies are already heavily in debt to it. Of the 1.12 billion rubles in outstanding bills the company held as of April 1, 2005, the Defense Ministry owed 230 million rubles, the Ministry of the Interior 214 million rubles, and the FSB 16 million rubles.
The latest initiative of the Federal Tariffs Service might complicate business for Svyazinvest as well. It was announced last week that the Tariffs Service has recommended that the Communications Ministry and Svyazinvest discuss proposed rate hikes with the subjects of the federation. The practice of reaching an agreement with local authorities on rate increases existed in Russia until 1999. It was stopped because local officials often placed political considerations over economic ones. Communications rates could not be raised or late payers disconnected in election years. If the Tariff Service officials have their way, it will be a heavy blow to the financial condition of communications companies.
“If the Tariff Service proposal is adopted, the mechanism for establishing tariffs will become less transparent and less understandable,” Anton Inshutin, director of the department of corporate finances at UFG, said, “Which will lower the attractiveness of Svyazinvest for investors. As for the mandatory servicing of security agencies, the specific norms set by the law have to be examined. It will cause problems for Svyazinvest in any case and not have a positive impact on the price of the state's stock holding in it.”
