Deutsche Bank and Russian fund take Rostelecom stake

Financial Times, 10.10.2013

Deutsche Bank and Russia’s $10bn sovereign wealth fund are buying a joint stake in Rostelecom ahead of a planned privatisation of the country’s state-owned telecom group.

Germany’s largest bank by assets and Russian Direct Investment Fund, which was set up by president Vladimir Putin in 2011, are investing a combined $240m in parity to “further develop and strengthen the company’s market position”, they said in a joint statement.

“We are committed to improving Rostelecom’s investor base and attracting high-profile investors,” said Sergey Kalugin, president of Rostelecom.

The deal is structured in a way that allows the two investors to be protected against a decrease in the share price, in exchange for sharing a portion of the profits when the Moscow listed price increases.

“We’re investing in a business with tremendous growth prospects,” said Kirill Dmitriev, who heads the RDIF. “This deal capitalises on the recent changes in Rostelecom’s corporate governance.”

The Russian government, which owns 55.2 per cent of Moscow-listed Rostelecom, has said it aims to sell a controlling stake for at least $5bn by 2016.

Meanwhile, VTB Group, the current owner of Tele2, has hinted at a possible merger between its mobile operator and Rostelecom. The deal would combine Rostelecom’s 14m subscribers and Tele2’s 23m to create a fourth major mobile operator in Russia.

Currently, the Russian mobile market is controlled three main operators, all controlled by oligarchs: Vladimir Evtushenkov’s MTS, Alisher Usmanov’s Megafon and Mikhail Fridman’s Vimplecom.