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The battle for Svyazinvest

Asset privatized: Svyazinvest

Percent sold: 25% of shares plus one

Amount paid: $1.9 billion

Date: July 25

Successful bidders: Uneximbank, Soros Quantum Fund, Deutsche Morgan Grenfell, Morgan Stanley Asset Management

In the last minutes before five o'clock one Friday this past summer, the biggest privatization deal in Russia came down to two envelopes. The atmosphere that day was electric.

At 20 minutes to five Moscow time, Leonid Rozhetskin arrived at Russia's privatization committee offices with an envelope in his hand. The head of investment banking for Renaissance Capital in Moscow was carrying a top-secret billion-dollar bid for 25% of Svyazinvest, the country's telecommunications network and the most eagerly awaited privatization deal to date.

Svyazinvest's privatization had been dogged by controversy since 1995 when Italian operator Stet scrapped a strategic purchase at the eleventh hour after financing squabbles. And, following Russia's well-publicized loans-for-shares scandals, cynicism was high that this latest round of privatization would be no less corrupt.

But now, in 1997, the Russian government was strapped for cash and determined to raise more funds with an open, competitive auction for the state's reorganized sale of 25% of Svyazinvest. A mega-holding company for stakes in more than 85 regional telephone operators, Svyazinvest also includes a 38% chunk

of long-distance provider Rostelekom and shares in the ageing Central Telegraph and Giprosvyaz research institute.

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