The company plans to list shares on the LSE

Rostelecom sent a request to the Federal Service for Financial Markets (FSFM) to circulate 24.99% of preferred shares outside Russia. The operator does not plan to place securities controlled by the state, hoping that the right to convert shares into GDR will be used by minority shareholders, who account for 71.2% of Rostelecom's preferred shares.

Rostelecom submitted an application to the Federal Financial Markets Service for the placement and organization of circulation on the LSE of 60.707 million preferred shares of the company. This is 24.99% of all Rostelecom “prefs” and the maximum volume allowed for circulation on foreign exchanges. Yesterday on the MICEX this package was worth 4.3 billion rubles. The company's application for circulation of 735.8 million ordinary shares (about 24.99%) was approved by the Federal Financial Markets Service in May. An application for listing on the LSE of the company’s ordinary and preferred shares will be sent to London “any day now,” Rostelecom’s press service told Kommersant.

Rostelecom's revenue in the first quarter according to IFRS amounted to 72.4 billion rubles, OIBDA - 27.2 billion rubles. 53.25% belongs to the state represented by Svyazinvest, VEB and the Deposit Insurance Agency. Capitalization yesterday on the MICEX was 441 billion rubles.

Rostelecom's plans to obtain a listing on a foreign exchange became known at the beginning of 2010. The placement of more than 25% of Rostelecom shares was planned for April 2011, said former Svyazinvest CEO Evgeny Yurchenko. The shares were planned to be listed on the LSE and possibly the NYSE and the Hong Kong Stock Exchange, but the listing date was postponed. According to a source in Rostelecom, this was due to the need to list a single issue of Rostelecom on the LSE, having current financial statements of the company. 17 issues of Rostelecom shares were merged into a single issue on August 10, and the publication of the first IFRS financial statements after the reorganization of Rostelecom is expected in October.

The company itself and the state do not plan to participate in the placement of preferred shares, Rostelecom claims. “There is no point in forcing the placement, given the situation on the markets. First, we need to complete the restructuring of Rostelecom, complete the merger with Svyazinvest, and eliminate cross-ownership,” lists Konstantin Chernyshev, head of the analytical department of Uralsib Capital.

2.69% of ordinary shares and 28.8% of preferred shares of Rostelecom are on the balance sheet of its subsidiary Mobitel. Minority shareholders own 44.1% of ordinary shares and 71.2% of preferred shares. “Any shareholder who owns preferred shares will be able to convert securities into global depositary receipts and own more liquid securities,” says Rostelecom representative Oleg Rumyantsev. A number of foreign investors who currently cannot invest in local shares will also get access to Rostelecom's GDRs. Rostelecom minority shareholder Evgeniy Yurchenko, whose portfolio includes (0.015%) preferred shares, does not plan to convert them into GDRs, arguing that “there is no difference - that they are in London or in Russia.”

By submitting an application for "prefs", Rostelecom leaves room for maneuver if ordinary shares are in demand among foreign investors, explains TKB Capital analyst Kirill Bakhtin. Listing on the LSE will help reduce the spread between ordinary shares and preferred shares of Rostelecom, adds Konstantin Chernyshev (currently about 50%). Foreign investors who purchase GDRs at the end of 2011 can receive a return on preferred shares at the level of 6-7% per share (4.5 rubles or a total of 273.1 million rubles), Uralsib Capital estimates. . Rostelecom has not yet completed work on its dividend policy, but at least 40% of the company’s net profit could be used for these purposes, a source told Kommersant earlier. At the end of 2010, Rostelecom allocated about 30% of net profit, or 1.15 billion rubles, as dividends.

A representative of the depository bank for Rostelecom's GDR program, JP Morgan Chase, did not comment on questions about the listing.

Vladislav Novy

Rostelecom has prepared a clean listing