Daily analyst comments

It was reported on May 12 that Prime Minister Vladimir Putin named new government members. In particular, Igor Olegovich Shchegolev was appointed a new IT and Telecoms Minister, while the IT and Telecommunications Ministry was renamed the Telecoms and Mass Communications Ministry. In addition to its traditional functions, the new ministry was delegated the functions of the Culture Ministry, which were previously unusual for this ministry. Nothing is as yet known about the future appointment of Leonid Reiman, the former IT and Telecoms Minister.

For the record: Mr. Shchegolev is 42 years old. He is a graduate of the translation faculty of the Moscow State Linquistic University named after M. Torez and the Germanic Studies Faculty of the Leipzig University. Before his new appointment, Shchegolev served as the head of the presidential protocol service. Earlier still, he held positions in the ITAR-TASS news agency, the Russian government and the presidential administration.

Even though the appointment is unlikely to spell serious changes in the state policy with regard to the telecoms industry, we would like to express our position as to prospects for privatization of Svyazinvest (the newly appointed minister's duties will most likely be confined to administrative functions and nothing is known yet about his connections with large financial and industrial groups). It is common knowledge that Leonid Reiman is an outspoken proponent of the fast privatization of the the Svyazinvest state holding company. At the same time, there were both open and hidden opponents of the sale of a state share package in the telecoms company. Until recently, the odds were in their favor. Now that the helm of the ministry has been taken over by a person who has not even spoken out about the fate of Svyazinvest, we do not see serious grounds to believe that privation of the company will be given renewed impetus.

Privatization of Svyazinvest was not taken into account in our valuation models for the inter-regional telecoms companies and Rostelecom. We previously believed that privatization of the company would not go ahead in 2008-2009. We now deem the very possibility of the largest telecoms company going private unlikely.