Shareholders of the mobile operator are ready to transform the company from a closed joint stock company to an open joint stock company.

Today an extraordinary meeting of shareholders of SMARTS CJSC will be held in Samara. It is expected that the owners of the mobile operator will decide to transform the company from a closed joint stock company to an open joint stock company. This will be the operator's second attempt to change the form of ownership. The first, undertaken in 2005, was blocked by a court decision at the initiative of the Sigma company, which at that time was laying claim to the operator’s shares. According to experts, if the issue is resolved positively, SMARTS will be able to begin preparing for an IPO, but will not yet protect itself from takeover. Today in Samara there will be a meeting of shareholders of JSC SMARTS. The company's general director, Andrey Girev, explained that one of the key issues that will be discussed is changing the form of ownership of the company and transforming it into an OJSC. “In general, the decision to transform was made by shareholders in October 2005 as part of SMARTS’ strategic plans, including preparations for an IPO,” Andrey Girev told the history of the issue. “But it was blocked in court as part of a raider attack on the company.” The raiders, who insisted that they were shareholders of SMARTS, were not interested in losing the preemptive right to repurchase the company's shares. And therefore, as an interim measure, we obtained in court the blocking of this decision of the shareholders.”
Mr. Girev clarified that he “has no doubt that the change in the form of ownership of the company will be approved by the shareholders,” and to make a decision, the support of more than 75% of the voting shares is required.
CJSC SMARTS is the fifth largest mobile operator in the Russian Federation. Just over 80% of the shares directly and through a number of offshore companies belong to the family of the chairman of the board of directors of SMARTS CJSC Gennady Kiryushin (his son Konstantin Kiryushin, daughter Yulia Kiryushina and Gennady Kiryushin himself), 15% belongs to Boris Skvortsov, 2.97% to OJSC Volgatelecom " The subscriber base of SMARTS Group as of October 1 amounted to 3.9 million subscribers. Average monthly revenue per subscriber (ARPU) for the SMARTS Group as a whole for the 3rd quarter of 2007 amounted to $6.0, which corresponds to an increase of 13% compared to the same period in 2006. Based on the results of 9 months of 2007, the average monthly traffic per subscriber at SMARTS CJSC was 116 minutes. and 165 min. per subscriber according to the Civil Code. Revenue from the Group of Companies at the end of 9 months amounted to more than 5.7 billion rubles. (revenue growth was 29% compared to the same period last year).
While remaining a closed joint stock company, SMARTS could have been absorbed by any of the minority shareholders, which almost happened in the situation with the attack on the operator by Sigma. Having purchased 5 shares of the operator in 2005 (0.125%), Sigma in court claimed rights first to 20% of the shares of the company, and then to 95%. However, after two years of lengthy litigation in courts of various levels, Sigma’s purchase of 5 shares was declared illegal, and the court removed it from among the operator’s shareholders. Let us note that if Sigma had managed to absorb SMARTS, then its owners’ plans to enter an IPO and subsequently sell the company would have remained unrealized. When the company changes its form to OJSC, Mr. Kiryushin will be able to sell his stake at the price he considers worthy: analysts estimate SMARTS at $650-800 million.
“To actively attract investment, a method such as placing additional issues of shares is widely used. However, for closed joint-stock companies, the maximum number of shareholders is limited by law - no more than 50. CJSC SMARTS strives to maintain an investment-attractive image and transformation into an open joint-stock company will allow the company to attract an unlimited number of investors,” explained the benefits of the transformation, a senior lawyer in the corporate practice of the law firm. Vegas-Lex" Yulia Eremenko. “The main contender for the exercise of the preemptive right has recently been Volgatelecom (owns 2.97% in the operator’s capital). In turn, the disappearance of the pre-emptive right makes it easier to place an additional share issue at the highest possible price,” says Ivan Ilyushin, head of the analytical research department at VTB Asset Management, who also does not rule out that after the transformation the company will begin preparing for an IPO.
However, experts do not rule out that this time, even if today’s positive decision of SMARTS shareholders to change the form of ownership of the company, the transformation may not take place. Volgatelecom, which is actively showing interest in purchasing SMARTS, may try to challenge the decision of the shareholders' meeting in court. The subsidiary of Svyazinvest yesterday did not voice its position on the issue of transforming the operator into an OJSC. “It takes several weeks to re-register a closed joint-stock company into an open joint-stock company with the tax authorities, so the minority shareholder may not have time to challenge the decision of the shareholders’ meeting. However, SMARTS already had a sad experience when the necessary court decisions appeared in record time. So, before the official appearance of the new company - SMARTS OJSC - it is too early to say that Gennady Kiryushin will soon be able to safely sell the company,” says a representative of the Samara branch of one of the federal cellular operators.
Elena Kolycheva

Kommersant (Samara) No. 30 from 02.22.2008

SMARTS will make a discovery