Russia’s Rostelecom minor owner wants to stop M&A, boost mkt cap

MOSCOW, Jun 21 (PRIME) -- Russian businessman Yevgeny Yurchenko, a minority shareholder of state-controlled telecom operator Rostelecom, has suggested adopting a strategy aimed at increasing capitalization and freeze mergers and acquisitions, PRIME reported Tuesday.

“The (operator’s) management and the board of directors are offered to ratify a strategy of raising Rostelecom’s capitalization with involvement of leading investment banks and investment companies as consultants. It is proposed to get shareholders and investors acquainted with the plan on higher capitalization and eliminate reasons for its decrease,” Yurchenko said at an annual general meeting of Rostelecom’s shareholders.

The company’s capitalization plunged to U.S. $3.648 billion from $20.280 billion over the past four years and 10 months, he said.

Rostelecom was expected to pay off its treasury shares in 2015, which could have raised the company’s value. “It did not happen, and capitalization is still declining,” Yurchenko, who owns 1.5% of voting shares and 10% of preferred shares of Rostelecom, said.

The reasons behind the decrease are lower revenue and higher expenses, including on acquisitions. “The company’s expenses do not create added value, but only blow its debt,” the businessman said.

“(It’s necessary) to mothball M&A projects, which, unfortunately, do not bring any sizeable income, and revise the company’s investment program.”

Rostelecom’s President Sergei Kalugin explained shrinking capitalization by the general economic situation. “We exist in an economic environment we live in, and if markets fall, and local currency devalues, then, probably, the value of shares in U.S. dollars also go down,” he said.

The company’s acquisitions of businesses are vital for diversification. Traditionally, Rostelecom’s bread-and-butter revenue came from fixed line services, but in Russia, as well as worldwide, people have recently started rejecting this type of connection and its revenue is on decline, Kalugin said.

“We are trying to offset the fall through development of new products and services, in particular, M&A. There are many science-based firms, which we should buy to enter new markets, or middle-sized firms with huge potential, which we should buy to stay competitive. That is what we do,” Rostelecom’s head said.

(64.1509 rubles – U.S. $1)

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