History / acvhievements

Svyazinvest was incorporated for the purpose of drawing a stream of foreign and domestic investments into the telecommunications industry in accordance with RF Presidential Decree No. 1989 “On Special Features of State Management of the Public Switched Telephone Network in the Russian Federation”, dated October 10, 1994 and RF Government Resolution No. 1297 dated November 25, 1994 and RF Government Resolution No. 742 dated July 24, 1995. In accordance with these documents, the charter capital of Svyazinvest was formed by the consolidation of federally owned equity stakes in 85 joint-stock telecommunications companies. In June 1997, Svyazinvest was also assigned state-owned assets in another four enterprises – Rostelecom, Central Telegraph, Yekaterinburg Telephone and Giprosvyaz. Svyazinvest was registered officially on September 18, 1995.

After three years, a decision was adopted by the RF Government in October 1995 to sell a blocking stake in Svyazinvest (25% + 1 stake) at a commercial tender on investment terms. However, the tender never took place and the state remained the holding’s sole owner until mid-1997.

In July 1997 the Russian State Property Fund and the State Property Management Committee put up for sale a blocking stake (25% + 1 share) at a cash auction with no investment terms pursuant to RF Government Resolution No. 618 dated May 23, 1997. Both domestic and foreign investors were eligible to participate in the auction.

As a result of the auction, the above-mentioned stake in Svyazinvest was sold for $1.87 bln at a starting price of $1.18 bln to a Cypriot-based consortium Mustcom Ltd, which included Onexim Bank, investment company Renaissance Capital, investment bank Deutsche Morgan Grenfell, Morgan Stanley Asset Management and Quantum Fund, owned by George Soros.

The sale of a second equity stake in Svyazinvest was slated for 1998, but the implementation of these plans was hindered by the financial crisis. The sale of a second stake failed to take place in 1999 due to the insufficient capital of the holding’s subsidiaries and associates and, consequently, the low appraisal of Svyazinvest itself.

At the end of 2000, the RF Federal Agency for State Property Management adopted a decision to postpone the sale of his equity stake until the reorganization of the holding, at which time, according to the agency, the value of the Svyazinvest’s state-owned interests had risen considerably. The reorganization of the Group as a mega-merger resulted in the formation of seven regional telecommunications operators and was completed at the end of 2002, although the RF Federal Agency for State Property Management did not reconsider the issue of selling a second stake in Svyazinvest.

In December 2006, consortium Mustcom Ltd. sold its 25% + 1 share stake in Svyazinvest to Comstar - United TeleSystems. As a result of the transactions performed, Comstar-UTS and MGTS Finance S.A., controlled by the latter, acquired 17.31% and 7.69% of the charter capital of Svyazinvest, respectively. The total amount of the transaction amounted to $1.3 bln.

In October 2010, Comstar-UTS, a subsidiary of AFK Sistema, sold its 25% + 1 share stake in Svyazinvest to Rostelecom for RUR 26 bln as part of an asset swap with AFK Sistema. In line with the deal, Svyazinvest received 100% of mobile operator Sky Link in exchange for a 23.3% stake in the voting shares of MGTS.

On December 3, 2010 RF Prime Minister Vladimir Putin signed Resolution No. 2165 on the assignment of state equity positions in Central Telegraph, Bashinformsvyaz, Chukotkasvyazinform and Moscow Inter-City Telephone Exchange No. 9 (MMTS-9).

In order to enhance the operating efficiency of companies controlled by the Svyazinvest Group of companies, a decision was adopted concerning its reorganization. In May 2009, the Government Committee for Transportation and Telecommunications approved the concept for the reorganization of the Svyazinvest Group of Companies as a merger between Svyazinvest’s regional telecommunications operators, Dagsvyazinform and Rostelecom. In October 2009, the Board of Directors of Svyazinvest adopted a decision to proceed with the reorganization. Then in December 2009, the timeline for the merger process was endorsed by the Government Committee for Transportation and Telecommunications. All merged-related procedures were completed by April 1, 2011. The merged Rostelecom is expected to rank among the top ten largest companies in Russia and become a universal provider capable of conquering leadership positions in key segments of the Russian telecommunications market.