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Capital Markets

Russia: It’s now, or 2008, for Svyazinvest

The long-awaited privatization of Svyazinvest, Russia’s national fixed-line telecoms operator, could finally get under way within the next two months.

Support from the communications and economy ministries in recent weeks suggests that the sale should take place this year, analysts say.

According to Konstantin Chernyshev, telecommunications analyst at UralSib Financial Corporation in Moscow, for the privatization to take place Russia’s legislature, the Duma, needs to pass amendments on “special users” of telecoms services before Svyazinvest can be officially included in the government’s privatization list.

This needs to be passed before the Duma’s summer break in July. “Therefore the next two months will be telling, and could spark a rally in telecoms stocks,” Chernyshev says.

Analysts believe that the government is keen to push through the sale this year. “Failing this, the amendments are unlikely to be adopted until mid-autumn and, taking into account that the holding privatization requires four to six months of preliminary work, the privatization will be unlikely to happen in 2006,” says Chernyshev. “If the sell-off does not occur in 2006, it might be postponed until after presidential elections in 2008. Therefore, the next two months will be crucial for the holding privatization.”

Likely winners in the privatization tender are expected to be Russian companies AFK Sistema, Telecominvest, Alfa Group, or a combination of the telecom holdings.

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