Telecoms set for shakeup as minority interests cast wary eye

Russia will create one of the world's largest telecoms firms by bringing together the largest national operator with regional providers. But experts warn the deal will leave minority shareholders out in the cold.

The government will group Svyazinvest with regional players into long-distance specialist Rostelecom. Viktor Klimovich, Analyst at VTB Capital says that can be done in several ways, but most will trample on smaller shareholders.

“The first scenario is an asset swap between Rostelekom and the regionals. The second scenario is Rostelekom will try to move all the interesting cash flows to itself, leaving regionals with low-margin businesses, and minorities again will end up with a very small portion of economical interest.”

The Communication Minister, Igor Schegolev, denies the allegations.

“No, absolutely, all minority shareholders' rights will be guaranteed. The problem is at the moment the company is not efficient, they're losing market share. The idea is to make out of Svyazinvest an operational company on the basis of Rostelekom so that they can compete.”

Moscow has previous experience in nationalising its oil and gas. But after it dubbed telecoms one of Russia's 42 'strategic sectors', experts fear foreigners and minorities will get used to being cut off.