Comstar buys into Svyazinvest

12 Dec 2006

Russian fixed line operator Comstar UTS has paid USD1.3 billion for a 25% plus one share blocking stake in Svyazinvest, the state-backed holding company which controls the bulk of the country’s fixed lines. Comstar, which is part of the Sistema group, acquired the stake from Mustcom Ltd via a series of transactions which also involved its subsidiary MGTS Finance. Comstar UTS itself has bought 3.38 million Svyazinvest shares, equivalent to 17.3% of the company, while MGTS Finance has taken a 7.7% stake through its purchase of just over 1.5 million shares. The Russian state still holds 75% minus one share of Svyazinvest, but is expected to offload all or part of its interest in the group in 2007. Svyazinvest has controlling stakes in Russia’s seven mega-regional fixed line operators, as well as the main wireline operator in Moscow, MGTS, which is 68%-owned by Comstar.

Sergei Shchebetov, Comstar UTS chairman and general director of Sistema Telecom, commented: ‘The acquisition of a blocking stake in Svyazinvest is in line with our previously stated intention to use IPO proceeds for value accretive acquisitions. This is a strategic deal for both Comstar UTS and Sistema Telecom, which enables us to become a leading fixed-line operator in Russia and CIS.’