On September 2 mass media outlets issued a public statement made by Telecoms Minister Igor Shchyogolev. The minister stated that the state is not currently preparing any privatization plan for telecoms holding company Svyazinvest.
The position voiced came as an unpleasant surprise for many market participants. The IT and Telecoms Ministry, when headed by Leonid Reiman, was an outspoken proponent of the telecom company's privatization. The ministry gave sound reasons: a market economy, competition on the market, deregulation of the industry, a decrease in state involvement in the industry and the arrival of an efficient owner. Replacement of the minister in May 2008 was followed by a period of uncertainty. The new telecoms minister is a newcomer to the industry and would not publicly voice his position on the future of Svyazinvest. Despite this, some market participants found grounds to believe that a green light had been given to the company's privatization.
We have repeatedly stated over the past two years that we see no serious reasons to believe an auction for the company will go ahead. Neither the active position adopted by the Economic Development and Trade Ministry on this issue, nor the appointment of a new minister (see daily of May 13, 2008), nor the statements made by high-ranking officials in the summer of 2008 (see daily of June 9, 2008), nor the recent speculation about the possible appointment of a new general director for Svyazinvest (see daily of August 27, 2008) have been events that, in our view, could speed up the privatization of the company.
So, we would like to reiterate one again that there have been no serious preconditions for the privatization of Svyazinvest or for any significant reform of the company in recent months, which is why we do not expect a steep decline in quotations for telecoms company shares. Political forces that could get the stalled process moving are also absent.
We have pointed out many times that Russian authorities have in recent years been moving in a direction opposite to privatization, with priority now given to the establishment of large-scale state holding companies intended to bring together formerly private firms. To add to this, it is highly unlikely that the state would want to cede control of a socially significant industry to private hands at a time when inflation has reached threatening dimensions. A vivid illustration of this is the recent decision by Svyazinvest to drop an announced hike in tariffs on local phone calls (see our daily of March 25, 2008).
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