AFK Sistema may sell its blocking stake in Svyazinvest, which was acquired almost 2 years ago, Vedomosti reported on October 1 with reference to some unnamed sources. The newspaper also published the price asked by Sistema: a total of USD 2.1 billion, including a 5-year USD 1 billion loan from Sberbank, and the exact cost of the asset on sale without accout for the debt, which equals USD 1.1 billion. Vedomosti named the potential purchaser of the blocking stake: Rostelecom.
The sale of a blocking stake in Svyazinvest to Rostelecom is an absolutely new idea, which has never been voced at any serious level of discussion. However, the freshness of the idea does not make it more attractive, since the acquisition of Svyazinvest at a comparably high price would not be profitable for minority holders of Svyazinvest subsidiaries, in our view.
Additionally, the cost of acquisition looks quite high for Rostelecom itself: the company's IFRS net profit for FY 2007 amounted to USD 110 million, and total liabilities equaled USD 667 million. Therefore, it would not be easy for Rostelecom to spend USD 1.1 billion of its funds and raise its debt by USD 1 billion more in order to acquire a stake in Svyazinvest.
However, we will be able to carry out a detailed analysis of this offer only after some more details of the deal are disclosed.
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