FOCUS: Russia’s Rostelecom to sell, lease out vacated offices to grocery chain

By Yekaterina Yezhova

MOSCOW, Mar 30 (PRIME) -- Russians may soon buy food from offices of telecom giant Rostelecom, vacated after an equipment upgrade and rented out or sold to X5 Retail Group’s grocery chain Pyaterochka, adding a couple of billion rubles to the operator’s revenue. If the rare practice for a telecom company proves efficient, the operator may invite other retailers to its premises.

“Rostelecom has switched to advanced connection technologies and does not need technological sites in such quantities. That is why there is a program of real estate portfolio optimization, including, among others, sale or lease of premises,” a Rostelecom spokesperson told Russian Connection.

“We do not exclude that apart from X5 Retail Group similar agreements could be signed with other market participants. Õ5 Retail Group intends to invest in the project some 4 billion rubles. As of the moment, investments from Rostelecom are not stipulated.”

In 2015–2017, the operator will offer Pyaterochka to buy or take under lease premises that can host about 300 stores with an area of an outlet starting from 350 square meters. Rostelecom said that real estate redevelopment to improve its efficiency covers most regions of the operator’s presence, or 57 out of the country’s 85 regions.

“The modernization of networks, as a rule, allows traditional landline operators, like Rostelecom and MGTS, to free large areas, which used to accommodate telecommunications equipment of previous generations, for sale or lease. Partnership with Pyaterochka could bring Rostelecom some 2.0–2.5 billion rubles of extra revenue,” UralSib Capital’s analysts said.

Rostelecom’s revenue from continuing operations grew 3% in 2014 to 298.9 billion rubles.

Property partnerships between telecom operators and other companies, where a telecom firm leases out premises to another firm, are rare. The more usual are cases of collaboration of mobile operators with retail chains, airlines or IT equipment makers, Vladimir Kapustyansky, a specialist at KIT Finance Broker’s trust management department, said.

“Rostelecom’s premises are located almost in every big city or regional center, almost in every region of the country. The operator will offer the group all vacated sites in all regions of its presence. After an audit, Pyaterochka will identify premises of its interest,” the spokesperson for Rostelecom said.

Analysts said that the project looks economically reasonable. “It goes without saying that X5 will want to buy some of the 300 premises and rent some others depending on the level of profitability,” Kapustyansky said.

The operator’s property is scattered across the whole country and is mostly located in industrial buildings in towns and cities with well-developed infrastructure.

Kapustyansky said that collaboration with other companies, like retail chain Magnit, could be interesting.

The first Pyaterochka store on Rostelecom’s floor was opened on March 6 in the city of Novocheboksarsk on the Volga. The second store will open in April in the town of Semyonov, also on the Volga.

“Pyaterochka is interested in new space to open stores. It will enable us to create new jobs and supply citizens in various regions with high quality products at affordable prices,” Olga Naumova, general director of the Pyaterochka chain, said.

Õ5 Retail Group, whose activities are mostly concentrated in the European part of the country, ran 4,789 Pyaterochka stores as of the end of 2014.

(57.7279 rubles – U.S. $1)

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