Rostelecom to receive RDIF funds for fiber optic construction in the regions

Interfax, 01.10.2014

MOSCOW. Oct 1 (Interfax) - The Russian Direct Investment Fund (RDIF) may in late October start financing a JSC Rostelecom (MOEX: RTKM) project to eliminate digital inequality in Russian regions.

"We expect that the money will be allocated at the end of October," Kirill Dmitriev, the head of the fund, told Interfax.

The project will use money from the RDIF and its partners, as well as funds from the National Wealth Fund. Various international investors, including from the Middle East, will invest in the project, Dmitriev said without naming these.

As reported, Kuwait Investment Authority (KIA) participates in RDIF deals through the automatic co-investment scheme. KIA accounts for 5% of investment. In last year's deal to buy a minority stake in Rostelecom, Mubadala Development Company of United Arab Emirates and Deutsche Bank also participated. The RDIF and Rostelecom have not commented on the new consortium of investors.

The project to eliminate digital inequality was approved by the RDIF board in May 2014. The fund and its partners will invest up to 67.5 billion rubles in the project, of which 27 billion rubles will consist of National Wealth Fund resources.

RDIF will set up a special project company, in which funds will be accumulated in the form of investment in share capital, as well as financing at market conditions and loans from the National Wealth Fund.

Repayments to the National Wealth Fund will be guaranteed by regular payments, which Rostelecom receives from the universal servicing fund, to which all Russian operators pay 1.2% of their annual revenue (around 15 billion rubles per year).

Rostelecom plans to build around 200,000 new fiber optic cables in the next five years and connect villages with 250 to 500 inhabitants to them.

The contractor for fiber optic construction is LLC Energy Efficiency Center Inter RAO UES, a joint venture owned by Inter RAO UES (MOEX: IRAO) and Atomstroyexport, which is part of Rosatom. The company is carrying out the contract for 61.5 billion rubles.

Rostelecom has already started implementing the project with its own funds, spending several hundreds of millions of dollars, the company's president, Sergei Kalugin, told the press.