The founder of Marshal Capital told Forbes about the deal with Arkady Rotenberg, the conflict with VTB, the Safe Internet League and relations with former and current leaders of the Ministry of Telecom and Mass Communications

On February 28, the structures of a long-time friend of Vladimir Putin, a participant in the ranking of the richest businessmen in Russia according to Forbes, Arkady Rotenberg , bought out a 10.7% stake in Rostelecom from the investment company Marshall Capital of Konstantin Malofeev. The seller parted with the asset, which had been frozen for a year and a half by a London court decision due to Malofeev’s litigation with VTB, on the eve of the completion of the reform to create a united Rostelecom. In an interview with Forbes, the founder of Marshal Capital explained how the version of the deal with Rotenberg came about, what he expects from his conflict with VTB, why the Safe Internet League claims to be the main regulator of Runet, and why criticism of Rostelecom management by the leadership of the Ministry of Telecom and Mass Communications causes damage to the company.

“The price of securities does not reflect their market value at all”

— Last week, Marshall Capital sold 10.7% of Rostelecom to Arkady Rotenberg. Tell us how this version of the deal came about and how satisfied you are with its results?

“We are absolutely satisfied with the final result.” It was important for us that the buyer of our stake was a strategic investor who would take a responsible approach to asset management and who would continue to implement the company’s approved strategy.

I once headed the Rostelecom strategy committee for two years, so it is important for me that the work on building a national champion, the largest telecom operator in the country, does not stop. Arkady Romanovich (Rotenberg) is ideal for this role.

— How long ago did Rotenberg’s structures contact you with an offer to purchase and who else was vying for the asset?

— We had several proposals. Rotenberg’s structures appeared on the horizon around the beginning of February, and that’s when we entered into negotiations.

— The press talked about interest in the asset of the structures of Leonard Blavatnik and Alfa Group...

“I can assure you that neither Blavatnik’s structures nor Alfa Group laid claim to the package. I see no point in naming other potential buyers.

— That is, Rotenberg made the offer after the London court finally removed the interim measures in the VTB lawsuit from your stake in Rostelecom?

- Approximately.

— How were the negotiations going?

— It was absolutely a market transaction. The asset is clear; it does not require any additional due diligence on the part of the buyer. Plus we have a certain human relationship with this group, it didn't come out of nowhere.

— Was the continuation of the management strategy a condition on your part?

— Yes.

— Was the valuation of Rostelecom shares for the transaction higher than the market?

— Yes, but you need to understand that today’s price of securities does not at all reflect their real market value. It should be significantly higher. At the current price, these securities can be sold by simply selling Rostelecom equipment for scrap.

— Was the price higher than the estimate of 136.05 rubles approved for the conversion of Svyazinvest shares?

— Higher, but lower than the 167 rubles mentioned in the press.

— Marshal’s stake in Rostelecom was pledged under a loan from Gazprombank, did you manage to get it out of pledge before the agreement with Rotenberg? What share of the transaction amount did “Marshal” receive? The figure given was 40%.

— The shareholder funds attributable to me are not enough to get into the Forbes rating.

— Why didn’t the deal to bring the Marshal’s stake in Rostelecom into the Garsdale holding of Alisher Usmanov and Sergei Adonyev did not take place?

— I can only refer you to the interview of Alisher Usmanov and Ivan Streshinsky, in which they said that the deal did not take place due to the seizure of Marshal’s assets based on VTB’s claim.

— They also said that you asked for too high a premium to the market.

— We signed the main agreements, they were signed by all parties. I have no other comments.

— How do you feel about the version that either Sergei Ivanov Jr. (the son of the current head of the presidential administration), who at that time was on the board of Gazprombank, or Yuri Kovalchuk, was behind Marshal’s purchase of Rostelecom’s securities?

- It's a bullshit. Yes, we really communicated and communicate with Sergei Ivanov Jr., both during his previous work as deputy chairman of the board of Gazprombank, and during his current work as the head of Sogaz. But our communication does not mean at all that the information disseminated by a number of media outlets is true.

— That is, in all transactions “Marshal” acted exclusively independently?

- Yes. Don't believe rumors. Over the past three months, our company has generally lived under the conditions of a massive PR campaign to discredit my business reputation. In this regard, I have already filed a statement with the police, and last Friday a criminal case was opened against me for slander. I hope that not only the perpetrators, but also the organizers of the campaign will be discovered.

- Do you suspect anyone?

“I hope the police will sort it out.”

— That is, a criminal case was opened based on the fact, without specific defendants?

— The case concerns specific defamatory materials posted in the public domain on a number of Internet resources.

— Pavel Durov accused Marshal of organizing an information campaign against the social network in order to force the co-owners to sell their shares. How can you answer this?

- It is not true. I never met Durov and, of course, I was not involved in advertising or anti-advertising on VKontakte.

— Where are you going to invest the funds from the deal with Rotenberg?

— I myself left the management of Marshal a year ago and remain only a strategic investor and chairman of the company’s board of directors. Investments are carried out by a team of professionals led by Sergey Azatyan, they have their own developments in this regard, you will soon learn about them.

For me, a key part of my activities today lies in the field of charity. We plan to establish an endowment fund that will allow us to spend on charity an amount of money comparable to what we spend now. Last year, the budget of our St. Basil the Great Foundation was $42 million.

— Are there any major commercial projects in Marshal’s plans?

— I won’t talk about specific projects. I can only say that this will not be the raw materials sector. Russia is rich in hydrocarbons, but we have neither special competence nor special knowledge that would allow us to invest taking into account all the nuances of a particular asset.

Most likely, we will remain in those areas where we are already present. These are real estate, telecom and technology. After the sale of Rostelecom, we are left with a number of small telecom assets. With new investment opportunities, we will consider larger projects.

“It’s time for VTB and I to turn the page on the confrontation”

— A month ago, your litigation with VTB ended in British jurisdiction. To what do you attribute the persistence with which the bank sought to impose interim measures on Marshal’s assets?

— According to the decision of the Supreme Court of England, the seizure of assets for 14 months was illegal. In other words, all this time VTB was not interested in winning the case on the merits, but in freezing our projects. This is not my opinion, this follows from the court decision. However, in my opinion, it’s time for VTB and I to turn the page on the confrontation in our relations. I am and have always been ready for negotiations to resolve our dispute.

— Who do you think is ultimately to blame for the theft of VTB loan funds in the Russagroprom-Nutritek deal?

— The objective truth must be established by the investigation. I cannot comment on the case in more detail due to my procedural status as a witness.

— On November 20, when searches were carried out in your home and office in connection with the case, and you yourself were summoned for questioning, information appeared that on the same day you had a meeting with the head of VTB Andrey Kostin to discuss the bank’s claims against your address.

— Not on the same day, but the next, November 21, we were supposed to meet.

— “Marshal” estimated the damage from the trial in Britain at $500 million. How are you going to compensate for it?

— This is how our London lawyers assess the damage. We will look for the possibility of pre-trial settlement of this issue with the bank.

— Did your nomination for deputy of the Znamensky settlement of the Smolensk region have a senatorial background?

- Absolutely not. We were invited to the region by Bishop Panteleimon of Smolensk and Vyazemsk, with whom we collaborated as part of our charitable programs. He asked us to extend to Smolensk the experience of the “Area of Good” project, which we are implementing in Kostroma. Through Vladyka I also met Governor Alexei Ostrovsky. It was the head of the region who suggested that I become closer to the region through election as a deputy in Znamensky. On November 10, he personally campaigned in the settlement for my candidacy.

A few days later, unknown persons appeared who, allegedly on my behalf, began to bribe voters for 500 rubles. The police are already looking for these “representatives” and a criminal case has been opened. Then some State Duma deputies from the Communist Party of the Russian Federation joined the process, sending requests, and journalists who started talking about bribery as a fact proven by the court. None of this is true, and the investigation will find out who actually broke the law.

I can only forward your questions to Ostrovsky. Let him explain what happened in the few days that passed between his campaign trip to the village and the sudden cancellation of the election results.

— Will you continue to seek a mandate?

“What is important is not the mandate, but the elementary restoration of justice and the search for the people who committed the crime - a deliberately false denunciation.” If necessary, we will go to the Supreme Court.

“It’s not entirely clear to us why we need a “Clean Internet”

— The Safe Internet League you created recently announced plans to launch a “white Internet” project in Kostroma, which provoked a strong reaction from the industry and the Ministry of Telecom and Mass Communications. How can you respond to accusations of wanting to introduce censorship on the Runet?

“We discussed this topic in detail at the Safer Internet Forum in February and came to the conclusion that the press simply interpreted it incorrectly. This is an experiment in introducing new technology, which is not compulsory. We are talking about our desire to achieve approximately the same results in the fight against illegal content on the Internet that the Michael Bloomberg Foundation achieved in the fight against smoking. Cigarette packs today contain warnings about the dangers of smoking in bold letters, and sometimes they also contain photographs of organs affected by cancer.

We have a similar goal. Nobody will prohibit anything; this, if you like, is a form of educational influence. In social activities, as in business, the goal should not be the process, but the result. We already have the result - these are amendments to the register of prohibited sites. Just two years ago, when the league was created, no one asked the question “How to regulate?” There was only a universal howl that this should not be done in principle. And it took a lot of effort to explain that similar regulation already exists in the USA, France, Britain and other countries, and that the main channel for the distribution of child pornography is the Internet. Eventually people realized the threat. And this is the main result of our activities, it is more important than a separate law on the registry.

Claims that parents can install a child filter on home computers themselves are disingenuous. Many parents don't know what a browser is, let alone special security programs. They give their children a computer and are happy that they are not roaming the streets. All you need to do is communicate the risks to parents. If the provider, when providing a service, offers them a paper on which it is stated in large print that their children may encounter violence, pornography, etc. online. - this will certainly bring a positive result. In the Kostroma region, whose governor Sergei Sitnikov previously headed Roskomnadzor and understands the specifics of the problem, we propose to try this initiative and understand how much more popular the parental control option will become. Without any coercion.

— Small providers may simply not be able to afford additional software functionality.

— The League is ready to provide everyone with a software and hardware system that will allow them to gain free access to the necessary infrastructure and implement content filtering. This is not a tool for redistributing the market, not a tool for controlling or monopolizing the market by large operators.

The Internet is a very specific environment in which the way users are identified is very different from what happens offline. The fears of small providers are unfounded. Our goal is exclusively moral; it has neither commercial nor administrative implications.

— Is the league ready to engage, for example, in filtering information of an extremist nature if the state wishes to supplement such a register of illegal content? This often causes concern among the political opposition.

“It won’t be easy to add extremist activity to the register.” Out of court, only three types of content are blacklisted. And initially, the league’s bill even intended to filter only child pornography; suicides and drugs appeared already at the stage of Duma debates. Child pornography is easy to classify as a clear violation of the law. The deputies have made the task more difficult, which is evident from the fact that most of the scandals involving the blocking of YouTube or Lurkmore are related to decisions of Rospotrebnadzor and the Federal Drug Control Service. These departments have not previously dealt with the Internet, it is an unfamiliar environment for them, and what qualifies as promotion of drug use and suicide may be unclear.

It is even more difficult to define extremism out of court. We simply don’t have experts for this, and every decision to block content must go through a stage of expert assessment. Even specialists are sometimes powerless in dealing with extremism. For example, the historical slogan “Orthodoxy or death” was recognized by some experts as extremist.

In fact, since ancient times it means that without faith in God and eternal life, eternal death awaits a person. That is, it contains a deep theological meaning. So, without a court decision, it is unlikely that it will ever become possible to ban this type of content.

— Did the amendments on “black lists” need additional elaboration? For example, the clause on the possibility of blocking resources by IP address makes law-abiding resources dependent on lawbreakers.

— I definitely can’t call the law crude. Work on it was carried out for 9 months, and any claims that it was allegedly adopted in a hurry look like stupid excuses. The text of the document appeared on the league’s website at the end of last year; about 70 amendments were made to it. And if someone did not want to take part in its development, he, of course, could always shout that everything was being done in a hurry.

“ But market participants were actively trying to get the IP blocking clause lifted.

— There is discord among the participants. Let's not speak for everyone. Let's talk about unscrupulous market participants. So they didn’t have time to make their comments. Those who collaborated with us, if the argument was correct, were heard by both the league and legislators.

Regarding IP and URLs. We have one of the most correct forms in the world for notifying interested parties about the appearance of illegal content. The three-day system first involves notifying the site owners, then the hosting providers, and finally the telecom operator. Now, if none of the participants, including the operator, have prepared or are not going to prepare for the implementation of the law, the IP may be blacklisted. Is it the law’s fault that these three players do not comply not only with the latest amendments, but also with the Criminal Code?

— Does the league still have an ambition to become a registry operator instead of Roskomnadzor, and what place can your organization take in the regulatory sphere if a new law on the Internet, which is currently being written by legislators, is adopted?

— We work on the principle “do with us, do like us, do better than us.” The goal of the league is to make the Runet cleaner and safer for children. We don't care who does the work. The League is a collection of thousands of volunteers from all over the country; in any case, they will continue to work on a voluntary and free basis.

The law states that the registry operator must be a non-profit organization. But the government decided that Roskomnadzor should maintain the register. We handed over our software and network of volunteers to Roskomnadzor. We do not need government grants, and we do not apply for budget funding. On the contrary, we are ready to subsidize government activity in the field of safe Internet.

— Does the former head of the Ministry of Telecom and Mass Communications, and now assistant to the President of Russia Igor Shchegolev take part in the activities of the league?

- Direct. He is the chairman of the board of trustees.

- And what is hidden behind this definition?

— Any strategic decisions of the league are, of course, consistent with the board of trustees.

— It turns out that a hardware conflict arises: the former head of the Ministry of Telecom and Mass Communications approves the league’s decisions, which are then criticized by the current head of the Ministry of Telecom and Mass Communications, Nikolai Nikiforov. This, in particular, was the case with the “white Internet” initiative in Kostroma.

— There is no conflict of interest. Because, if you follow this logic, it turns out that Minister Nikiforov’s interest is the Internet, which is dangerous for children, while Shchegolev stands guard over a safe Internet. In fact, the longer the new minister and his team are involved with the Internet, the better they begin to understand it. This is illustrated by their initiative to create a certain organization called “Clean Internet”, founded by several individuals and Tattelecom, which is close to Minister Nikiforov.

— As far as I understand, the League wasn’t invited there?

— The League cannot enter there. The League was founded by other organizations, it has its own operating procedures, its own volunteers and employees. It’s not entirely clear to me why the “Clean Internet” is needed, but I welcome the very fact that the Ministry of Telecom and Mass Communications is increasing its attention to the fight against illegal content. If, in order to more effectively protect children from harmful, corrupting information, we need to rename or move to Kazan, we are ready.

“This is the most successful and fastest reform”

— Another field of confrontation is Rostelecom. The company's management, which was formed under Shchegolev, Nikiforov and Deputy Prime Minister Arkady Dvorkovich, is constantly criticized for inefficiency. What do you, as a former shareholder, see as the root of the problem?

— Frankly speaking, I don’t quite understand Nikiforov’s statements about the discrepancy between the value of Rostelecom shares and the market, which directly affected the company’s capitalization. Moreover, they raised many questions in me, as a shareholder, for our majority shareholder. Why seriously reduce the value of the company for the state with your statements?

Now criticism is becoming more constructive, and ministry employees, for example Denis Sverdlov, began to participate in the work of the board of directors of Rostelecom. A certain process of rapprochement has begun, and this is a positive result.

— Dvorkovich said last week, however, that the issue of changing the management of Rostelecom was not removed from the agenda.

— Any actions of the majority shareholder in relation to management must have a basis, but remain within the competence of the state as the main owner.

— Do you still connect the pressure on you in the VTB case with the desire of your opponents to indirectly weaken the positions of the management of Rostelecom and the company’s CEO Alexander Provotorov in particular?

— Law enforcement agencies act quite correctly and are trying to establish the truth in a specific criminal case. But I had, have and will continue to have complaints about the PR campaign that accompanied this case and which is trying to present everything that is happening exclusively in terms of connections with Rostelecom. This was a big factor of pressure, but in connection with the initiation of a criminal case for libel, we hope to solve this problem.

— What, in your opinion, are the fundamental reasons for the discrepancy between the growth of Rostelecom’s quotes and the market, which Nikiforov has repeatedly pointed out?

— There were no fundamental reasons for the decline in the value of Rostelecom shares, unless one considers the minister’s statements as such. After all, it was after them that the shares sharply lost in price.

— How do you assess the prospects for the merger of Rostelecom with Tele2, the possibility of which was discussed a lot last year?

— Rostelecom is certainly interested in the mobile business, no matter what anyone says. As an investor, I have always believed that the profitability of the mobile business is quite high and a big mistake, bordering on madness, was the policy of the management of Rostelecom and Svyazinvest in the 2000s to sell off mobile assets instead of increasing their presence in the segment. This is a key vector for the company, and the deal with Tele 2 is one of the options for the development of events, ways to strengthen Rostelecom’s position in the market.

— You came to Rostelecom on the eve of the start of the creation of the united company, and you are leaving on the eve of the completion of the reform. How successful was the investment?

— We made the investment in September 2010, when legally the reform was already completed, and personally, as a member of the board of directors, I came before the start of the reform and was one of its ideologists. In the end, as an investor, I am absolutely satisfied. Just like the person involved in the reform, I am proud of the way it was carried out. This is the most successful and fastest reform in the Russian economy, as a result of which the state significantly increased the value of its assets and actually returned to the industry, control over which was practically lost, and learned to compete on an equal footing with the Big Three.

“A miracle has happened to the Russian Orthodox Church over the past 20 years”

— Was your entry into the industry motivated solely by business considerations or did Igor Shchegolev play a role in this?

— Shchegolev once invited me to the board of directors of Svyazinvest. And instead of discussing any rumors and speculation, I would recommend that you judge by deeds. For example, while working at Renaissance in 1997-1998, as an investment banker, I was involved in a deal when the Mustcom consortium of George Soros and Vladimir Potanin paid the state $1.875 billion for 25% of Svyazinvest. Then they sold the asset cheaper, and Soros called the deal the worst investment of his life. In 2008, when I was a member of the board of directors, Rostelecom regained its stake by exchanging with Sistema for $850 million. The state earned $1 billion.

— Throughout the entire period of your connection with Rostelecom, there were accusations of affiliation with one of the company’s largest contractors, the Infra-Engineering form.

“We won all the courts on this issue, we were checked by the FAS. All that connects us is that the founder of Infra, Sergei Ogorodnov, once worked with me in the same bank.

— Has he never worked at Marshall?

“He didn’t stay at Marshall.” He took up his own investments, left Russia for a while, he had an engineering company in the Czech Republic, and Infra was exclusively his idea and his brainchild. The fact that we communicate does not in any way mean shareholder participation. And communication leads to a positive result in the form that Rostelecom at least understands what is happening and how it is happening at one of its largest contractors. This is always useful because the low profitability of a construction contracting company also affects the profitability of a telecommunications company. It is always better to have a large transparent counterparty.

Sergey created a large, good and useful company for Rostelecom. The operator’s relationship with her has always been market-based.

— Market sources also talk a lot about your administrative connections, which in one way or another refer to the influence of the Russian Orthodox Church. In particular, this concerns Archimandrite Tikhon, a member of the board of trustees of the St. Basil the Great Foundation.

— Father Tikhon is not my confessor.

- But is he still someone close to you?

- We've been friends for a long time. I was baptized at age 20. These were no longer Soviet times, it was not exotic, but there were much fewer churchgoers then than there are now. Lenten menus were not issued in Moscow restaurants. Orthodoxy has not yet played a big role in the life of society, and people who were churched in that period still communicate with each other.

Father Tikhon is a little older than me, and we were introduced by a common senior friend, Prince Zurab Chavchavadze, who now heads our charitable foundation. He remembers Father Tikhon as a student at VGIK, and not as a monk. We didn’t start living in the 2000s; we all have many different stories in the past.

In addition, I know many hierarchs of the Russian Orthodox Church and have great respect for Patriarch Kirill. He and I meet annually on the day of the Holy Great Martyr Tatiana on January 25 in the home church of Moscow State University, of which I have been a parishioner since it was returned to the church in the early 1990s, when I was still a student.

But I communicate with the first hierarch and other hierarchs exclusively on church issues. They are very far from business. In general, a miracle has happened to our church over the past 20 years. Such a revival of Orthodoxy has never happened in history, except for the period of iconoclasm in the 9th century in Byzantium. In a short period of time, millions of people believed in God. This is incredible.

— What was $42 million from the budget of your charitable foundation spent on?

— Our mission as philanthropists, firstly, is to help those directly in need, but at the same time (and a significant part of the fund’s funds is spent on this), it is to create an environment in which the risks of social problems arising in the future would be much lower than Today. Probably, this approach is why our fund is the largest private fund in the country.

We finance high-tech surgeries for children with heart disease and do a lot of work aimed at reducing abortions. This includes educational work, the creation of methods, and assistance to mothers who find themselves faced with a difficult, and most likely, the most important choice in their lives - whether to save the life of their child. We have a program to help disabled children.

A large item of our expenses is church: the restoration and construction of churches and monasteries. We support the Synodal Department of the Russian Orthodox Church for Charity and cooperate with orphanages.

On the other hand, in order not to get bogged down in the problems of today, it is necessary to work for the future. Here, a promising project is “Region of Good”, which we are implementing in the same Kostroma region together with the governor. With a minimum of investment and effective redistribution of existing budget funds towards social programs, achieve an increase in the “happiness index” in one particular region. Young people should not dream of emigration en masse. To do this, within the framework of legislation, we are using educational methods to combat such phenomena as drug addiction, prostitution, abortion, orphanhood, etc. For example, the issue of orphans, for whom 30,000 rubles a month are now spent in orphanages, and after adoption - 3000. Why not give the families adopting these children the same 30,000 rubles? The “Area of Good” is currently designed for three years; at the end of this period, measurements will be taken in Kostroma on socio-demographic indicators, including the notorious “happiness index”. If the project has a positive effect, then the model can later be extended on a federal scale.

Another major project is the St. Basil the Great Gymnasium. It has been operating for six years, and this year it moved to a new building. The overall project for its reconstruction is estimated at $50 million, partly it has already been implemented. The gymnasium is unprofitable, although education for two thirds of children is paid. We allocate the remaining third of places for talented scholarship holders.

The issue of restoring the historical memory of the people is also very important for the foundation. This year Russia celebrates the 400th anniversary of the Romanov dynasty. We came up with our own program to celebrate this anniversary, and it so happened that now we found ourselves at the very center of the celebrations. As part of the anniversary, we have already held some events in Moscow, held celebrations in Kostroma - the cradle of the Romanovs, and are preparing a large-scale celebration in St. Petersburg.

We launched the portal Romanovy2013.rf, which has already become the main information and coordination resource for the anniversary.

— Who else funds the St. Basil the Great Foundation?

— I am the largest donor, but there are others. They prefer to remain anonymous. The Savior said that he who receives glory here will not receive it in heaven. So far I am the only one deprived of the award. Why do you want to deprive her of all the rest?

Konstantin Malofeev: “My funds are not enough to get into the Forbes ranking”