FILED BY: OJSC Svyazinvest
PURSUANT TO Rule 135 and Rule 425
under the Securities Act of 1933, as amended
SUBJECT COMPANY: OJSC N. W. Telecom,
OJSC CenterTelecom,
OJSC UTK,
OJSC VolgaTelecom,
OJSC Uralsvyazinform,
OJSC SibirTelecom,
OJSC Far East Telecom,
OJSC Dagsvyazinform
EXCHANGE ACT FILE NUMBER: 001-14748
DATE: November 23, 2009
Important
Information
This communication does
not constitute an offer to purchase, sell, or exchange or the solicitation of
an offer to sell, purchase, or exchange any securities of OJSC Rostelecom,
OJSC N. W. Telecom, OJSC CenterTelecom, OJSC UTK, OJSC VolgaTelecom,
OJSC Uralsvyazinform, OJSC SibirTelecom, OJSC Far East Telecom or OJSC Dagsvyazinform, nor
shall there be any offer, solicitation, purchase, sale or exchange of
securities in any jurisdiction (including the United States and Japan) in which
such offer, solicitation, purchase, sale or exchange would be unlawful prior to
the registration or qualification under the laws of such jurisdiction. The
distribution of this communication may, in some countries, be restricted by law
or regulation. Accordingly, persons who come into possession of this document
should inform themselves of and observe these restrictions. To the fullest extent
permitted by applicable law, OJSC Svyazinvest and all the abovementioned
companies disclaim any responsibility or liability for the violation of such
restrictions by any person.
The securities of OJSC Rostelecom
that may be issued in connection with the proposed business combination to
holders of OJSC N. W. Telecom, OJSC CenterTelecom, OJSC UTK, OJSC VolgaTelecom,
OJSC Uralsvyazinform, OJSC SibirTelecom, OJSC Far East Telecom and OJSC Dagsvyazinform
ordinary and preferred shares (including those shares represented by American
Depositary Shares) may not be offered or sold in the United States except
pursuant to an effective registration statement under the United States
Securities Act of 1933, as amended, or pursuant to a valid exemption from
registration.
In connection with the
proposed transactions, the required information document will be filed with,
and certified by the Russian Federal Service for the Financial Markets
(FSFM) and to the extent that OJSC Rostelecom
is required or otherwise decides to register the issuance of shares by OJSC Rostelecom
in connection with the business combination in the United States, OJSC Rostelecom
may file with the United States Securities and Exchange Commission (SEC) a
registration statement on form F-4, which will include a prospectus.
Investors are strongly advised to read the information
document filed with the
FSFM
, the registration statement and the
prospectus, if and when available, and any other relevant documents filed with
the SEC and/or the FSFM, as well
as any amendments and supplements to those documents, because they will contain
important information.
If and when filed, investors may obtain free
copies of the registration statement, the prospectus as well as other relevant
documents filed with the SEC, at the SECs web site at www.sec.gov and will
receive information at an appropriate time on how to obtain these
transaction-related documents for free from OJSC Rostelecom or its duly
designated agent. Investors and holders of OJSC N. W. Telecom, OJSC CenterTelecom,
OJSC UTK, OJSC VolgaTelecom, OJSC Uralsvyazinform, OJSC SibirTelecom,
OJSC Far East Telecom or OJSC Dagsvyazinform securities may obtain free
copies of documents filed with the FSFM directly from OJSC Rostelecom on its
web site at www.rt.ru/en/index.php.
Disclaimer
Regarding Forward-Looking Statements
This
communication contains forward-looking information and statements about OJSC Svyazinvest,
OJSC Rostelecom, OJSC N. W. Telecom, OJSC CenterTelecom, OJSC UTK, OJSC
VolgaTelecom, OJSC Uralsvyazinform, OJSC SibirTelecom, OJSC Far East
Telecom, OJSC Dagsvyazinform and their combined business after completion of
the proposed transactions. Forward-looking statements are statements that are
not historical facts. These statements include financial projections,
synergies, cost-savings and estimates and their underlying assumptions,
statements regarding plans, objectives, savings, expectations and benefits from
the transaction and expectations with respect to future operations, products
and services, and statements regarding future
performance.
Forward-looking statements are generally identified by the words expect, anticipates,
believes, intends, estimates and similar expressions. Although the
management of OJSC Svyazinvest believes that the expectations reflected in
such forward-looking statements are reasonable, investors and holders of OJSC Rostelecom,
OJSC N. W. Telecom, OJSC CenterTelecom,
OJSC UTK, OJSC VolgaTelecom, OJSC Uralsvyazinform, OJSC SibirTelecom,
OJSC Far East Telecom and OJSC Dagsvyazinform ordinary shares are cautioned
that forward-looking information and statements are not guarantees of future
performances and are subject to various risks and uncertainties, many of which
are difficult to predict and generally beyond the control of OJSC Svyazinvest,
that could cause actual results, developments, synergies, savings and benefits
from the proposed transactions to differ materially from those expressed in, or
implied or projected by, the forward-looking information and statements. These
risks and uncertainties include those discussed or identified, or that will be
discussed or identified, in any public filings with the FSFM made by OJSC Rostelecom,
including those listed under Risk Factors in the most recent Annual
Report on Form 20-F filed by OJSC Rostelecom. Investors and holders of
OJSC Rostelecom, OJSC N. W. Telecom, OJSC CenterTelecom, OJSC UTK, OJSC
VolgaTelecom, OJSC Uralsvyazinform, OJSC SibirTelecom, OJSC Far East
Telecom or OJSC Dagsvyazinform securities should consider that the
occurrence of some or all of these risks may have a material adverse effect on
OJSC Rostelecom, OJSC N. W. Telecom, OJSC CenterTelecom, OJSC UTK, OJSC
VolgaTelecom, OJSC Uralsvyazinform, OJSC SibirTelecom, OJSC Far East
Telecom and OJSC Dagsvyazinform.
November 11, 2009
Inna Erokhina, the Russian daily Commersant
Svyazinvest Gets Go Ahead on the Restructuring Plan:
the Prime-Minister recommended not to linger with the reform
The
(Russian) government backed the Svyazinvest reorganization scheme proposed by
the holdings management and contemplating merger of the holdings
inter-regional telecommunications subsidiary companies into Rostelecom before March 2011.
Prime-Minister Vladimir Putin agreed with rationale put forward by Vice
Prime-Minister Sergey Ivanov, who wrote to Mr. V. Putin that under
alternative reorganization scenarios economic losses of Svyazinvest might well
exceed 15 billion Russian rubles. Earlier the Russian Finance Ministry,
Vnesheconombank and KIT-Finance bank proposed a two-stage restructuring plan,
meaning that the reform of the holding would be put off until at least 2013.
Commersant
has in its possession a letter from S. Ivanov who is in charge of the
government commission for transport and communications. In his letter to
Prime-Minister V. Putin the Vice Prime-Minister is calling for support of
Svyazinvest reorganization to be effected by merging the holdings
inter-regional subsidiaries (the so called Inter-regional Telecommunications
Companies, or IRCs) into Rostelecom (Svyazinvest controls 50.67% of
Rostelecom). The letter bears a decision agreed. The prime-Ministers
press-secretary Dmitry Peskov yesterday refused to comment on the internal
correspondence; Svyazinvests First Deputy CEO Alexander Provotorov did
likewise.
In
the address it is stated that both Russian and international consultancies,
such as McKinsey, Roland Berger, VTB-Capital, Morgan Stanley and Renaissance
Capital believe that this option is the only feasible under the current market
conditions solution capable to retract the negative trend: for instance,
Rostelecom has lost around 17% of the domestic long-distance and international
telecommunications market. Mr. S. Ivanov also draws attention to the fact
that according to the consultancies estimates under the proposed restructuring
scenario the market capitalization of the united company might jump up to over
410 billion rubles from current 240 billion rubles, while the total synergy
effect of the merger would exceed 30 billion rubles.
This
reform option was already approved by Svyazinvest Board on October 20.
Nevertheless the Vice Prime-Minister wrote that the state-owned holding and
consultancies also examined an alternative scenario: under which the
restructuring would be implemented in two stages: first, the merger Svyazinvest
itself should be merged with Rostelecom, and only several years later the
subsidiaries (IRCs) would follow suit. Among the drawbacks of this latter
option Mr. S. Ivanov cited deteriorated market position of the holding,
aggravated competition between Rostelecom and IRCs, resulting in economic
losses of Svyazinvest in excess of 15 billion rubles, according to Mr. S.
Ivanov. A source close to one of the engaged consultancies clarified that the
cited amount is the sum of the decreased synergy of 9.3 billion rubles and
additional outpayments for buy-out of shares from Rostelecom minority shareholders
totaling some 5.7 billion rubles.
Commersant
on November 6 already reported that a review of the second reform scenario
contemplating a two-stage restructuring to last at least until 2013 was
underway between the Ministry of Finance, VEB (owns 9.8% of Rostelecom and is
expected to add another 29.9%, to be transferred from the Deposit Insurance
Agency DIA), and KIT-Finance bank (earlier in summer this year KIT-Finance
bank sold 39.7% of Rostelecom to VEB and DIA at 230 rubles per share; since
then the share price at the stock exchanges has fallen below 200 rubles per
share).
Sources
close to the government said that several meetings had been held in Mr. S.
Ivanovs office. At the meetings opponents of the first restructuring scenario
insisted that merger of IRCs into Rostelecom would entail losses for the
government represented by VEB and DIA. The opponents explained that in order
for the restructuring to take place the plan should be approved by at least 75%
of shareholders of each MRC, to achieve this minority shareholders of IRCs
should be offered a fair share exchange ratios, meaning that Rostelecom
valuation should not be too high, at EV/EBITDA multiple close to the average
EV/EBITDA multiple of IRCs in 2010.
Based on this, the value of VEB and DIA stakes in Rostelecom may well
total around $750 million, or some $1.5 billion less than the amount the two
organizations paid to KIT Finance.
Analyst
from Deutsche Bank Igor Semyonov noted that Mr. V. Putin decision
effectively put an end to the reorganization scenario selection process, thus
enabling Svyazinvest management to finally focus at the restructuring itself.
As far as VEB and DIA, even sustaining a paper loss now, they will be able to
get the invested money back after the reform is completed, concluded Igor
Semyonov.
November 11, 2009
Oleg Salmanov, Igor Tsukanov, Russian daily Vedomosti
To be through by 2011
Vladimir
Putin has effectively killed an option of Svyazinvest restructuring
contemplating a time-phased merger of the holdings subsidiaries into
Rostelecom. The decision favors minority shareholders of the Intra-regional
Telecommunications Companies (IRCs).
Mr. V.
Putin rejected a scenario of Svyazinvest reorganization contemplating a
two-stage reform process: at the first stage Svyazinvest itself has to be
merged with Rostelecom, and at the second stage IRCs are to be merged into
Rostelecom. This resolution was appended to the letter of Vice Prime-Minister
Sergey Ivanov, in which he proposed to consider the expediency of such a scheme.
Sources close to the government and the holding said that the Prime Minister
chose the initial reorganization scenario, recommended for Svyazinvest by its
consultants that contemplate a simultaneous merger of IRCs into Rostelecom.
The
Prime-Ministers press-secretary Dmitry Peskov refused to comment on the
internal correspondence, and the Vice Prime-Ministers secretariat also
refrained from any comments.
At
the end of May the government commission for transport and communications
led by Mr. Ivanov approved the concept of Svyazinvest reorganization on
the basis of Rostelecom. Late in October Svyazinvest
Board of Directors approved the reorganization schedule, proposing its
completion by May 2011. Now the schedule is to be approved by the
government commission. Before its meeting, an alternative scenario appeared,
contemplating a procedure that is a year and a half longer.
Mr. Denis
Kulikov, Executive Director of Investors Rights Protection Association and
member of Svyazinvest Coordination Board, organized to provide interaction with
minority shareholders of the holdings subsidiaries, told us that early in November this
scenario had been considered at the Boards meeting. According to Mr. Kulikov, the Board
members did not back the alternative scenario.
He does not know the authors of this scenario, but believes that it
could have been developed to avoid an accusation of causing damage to the state
for the case if 39.8% of Rostelecom ordinary shares bought out from KIT Finance
by Vnesheconombank (VEB) and Deposit Insurance Agency (DIA) this summer at 230
rubles per share, are valued at a fair price in the course of reorganization.
According
to the consensus forecast made by analysts of top 11 investment banks, the fair
value of Rostelecom shares makes $3.87, or 111 rubles according to the current
exchange rate (Interfax data). If the exchange were based on the fair valuation
of IRCs and Rostelecom, the Government, VEB, and DIA would get 62.4% in the
united company, and minority shareholders would have 37.6%. Should Rostelecom
valuation increase up to the level, from which its shares were bought out by
VEB and DIA, the stake of minority shareholders would reduce to 28.8%. Ilya
Fedotov, an analyst of the Veles Capital Investment Company, concludes that the
rejection of the alternative scenario is to the benefit of IRC minority
shareholders. VEB and DIA representatives refused to comment on the situation.
Svyazinvest
First Deputy CEO Alexander Provotorov does not comment on the reorganization
scenarios, but notes that the time of reorganization is critical for the
management. He is sure that prompt completion of the reorganization will bring
a higher positive effect and will give the integrated operator a chance of a
more successful resistance to competition pressure.
Whence
the rise. Because of a significant increase in price and volume of trade of
Rostelecom shares, which took place from 16 to 20 October, Rostelecom General
Director Anton Kolpakov sent a letter to the head of the Federal
Financial
Markets Service Vladimir Milovidov asking him to check if there were any facts
of manipulations with the prices of Rostelecom ordinary shares (the letter is
at the Vedomostis disposal). In this letter Mr Kolpakov points out that during
this period the MICEX value of one share increased by 42.66%, and the volume of
trade rose increased by more than 24 times.
November 11, 2009
Igor Tsukanov, Russian daily Vedomosti
MegaFon in Exchange for Rostelecom
Businessman
Alisher Usmanov, who owns 31.1% of MegaFon, discusses with state
representatives the possibility of exchanging this stake for the shares of the
merged Rostelecom.
The
AF Telecom Holding, owned by Mr. Usmanov, considers a possibility of
exchanging its MegaFon stake for shares of the reorganized Rostelecom, a
subsidiary operator of Svyazinvest. The idea is to merge Svyazinvests seven
Inter-regional Telecommunications Companies into Rostelecom by the middle of
2011. Vedomosti obtained this information from a manager close to Mr
Usmanov. According to the same source,
the decision has not been taken yet, but consultations are taking place in the
government. A government official confirmed that the matter is being actively
discussed in the Ministry of Telecommunications and Mass Communications. Representatives
of the Ministry and Svyazinvest refused to comment on this fact. Mr Usmanov did
not answer Vedomostis inquiry.
A
person, close to Mr Usmanov, said that AF Telecom holding does not like the
idea of merging Megafon with Turkcell, the largest Turkish mobile operator (the
idea was recently suggested by Altimos Managing Director Alexey Reznikovich).
MegaFon and Turkcell have two common shareholders: Altimo (25.1% and 4.99%,
respectively) and the Nordic company TeliaSonera (43.8% and 37%, respectively).
Both companies would benefit from such merger, while AF Telecoms stake would
significantly decrease. However, if AF Telecom exchanges its stake in MegaFon
for a stake in Rostelecom, it will not only be able to carry on mobile
business, but become a player on the rapidly growing broadband Internet market.
According to the AC&M-Consulting data, in August Svyazinvest
controlled 54.2% of this market as to subscribers number (4.01 million).
According to the holdings estimation, in 2008 the share of Svyazinvest
companies on the local and long-distance telecommunication markets made 81.7%
and 76.7%, respectively.
At
the same time, Svyazinvest wants to develop mobile communications (in May its
share on this market made only 9%). According to the holding reorganization
concept, the most efficient way to do this is to take control of one of the Big
Three operators.
The
largest MegaFon shareholder is TeliaSonera. Sesilia Edström, Senior Vice
President of the company, does not say if TeliaSonera has received an offer to
sell its MegaFon stake. However, she points out that the aim of TeliaSonera is
to consolidate assets rather than sell them. According to Kirill Babayev,
Senior Vice President of another shareholder, Altimo, his company is not
planning to sell its stake in MegaFon (25.1%) and has not received any such
offers.
Konstantin
Chernyshev, Chief of the Analytical Department of Uralsib, believes that the
exchange of the stake in MegaFon for a stake in the merged Rostelecom would be
a profitable bargain for Mr. Usmanov. However, he reminds that the
Government has several times announced its intention to control the merged
Rostelecom. According to his estimation, the current fair value of the merged
Rostelecom would be $12 billion, whereas in the case of MegaFon it would be $15
billion; hence Mr. Usmanovs stake in Rostelecom can make 39%. The same
stake should pass to the minority shareholders of current Svyazinvest
subsidiaries. The deal with Mr. Usmanov will only be possible if
Rostelecom pays for part of MegaFon shares with money, concludes Mr Chernyshev.
Will
he be the fourth? If Alisher Usmanov gets a stake in Svyazinvest, reorganized
into Rostelecom, he will become the fourth joint owner of this holding. In 1997
a consortium headed by George Soros, purchased 25% plus one share of
Svyazinvest for $1.875 billion. In 2004 G. Soros, who called this deal the
worst investment he had ever made in his life, sold his stake to Leonid
Blavatnik for $625 million. In 2006 the latter, in his turn, sold his stake to
Vladimir Yevtushenkov at a double price. Right now Mr. Yevtushenkov, whose
expectations regarding participation in the second stage of Svyazinvest
privatization did not come true, is completing a transaction, which will return
the holdings blocking stake to the state.
OJSC
MegaFon is a mobile operator, which serves 47.7 million subscribers. The
shareholders of this corporation are: TeliaSonera (43.8%; 35.6% in a direct
possession and 8.2% - through Telecominvest), Alisher Usmanovs AF Telecom
holding (31.1%; 8% in a direct possession and 23.1% - through Telecominvest),
and Alfa Group (25.1%). Financial performance the first six months of the year
2009 (US GAAP): revenue - 86.1 billion rubles, net profit - 20.1 billion
rubles.
OJSC
Svyazinvest is a managing holding. It controls the telecommunication operator
Rostelecom, seven Intra-Regional Telecommunication Companies, the company
Central Telegraph, etc. The shareholders are: Rosimushchestvo (75% minus one
share) and Comstar-UTS (25% plus 1 share). Financial performance for the year
2008 (IFRS): revenue - 264.4 billion rubles, net profit - 25.8 billion rubles.
November 12, 2009
Tatyana Kapustina, Russian daily ComNews
Svyazinvest Goes to Commission
A
person close to Svyazinvest holding told a ComNews reporter that its
restructuring schedule will be finally approved at the next meeting of the
government commission for transport and communications, which will take place
on November 25, 2009.
As
early as in September Mr. Yevgeny Yurchenko, Svyazinvest CEO, told
journalists that the strategy of the state holding development would be
presented at the government commission meeting scheduled for October 30.
However, the date of the meeting was subsequently changed.
A
source told a ComNews reporter on condition of anonymity that the postponed
meeting of the government commission for transport and communications would
take place on November 25, 2009. One of the issues, which will be
discussed at the meeting, is a restructuring schedule of Svyazinvest holding.
The press office of the holding does not officially confirm information about
the date of the meeting. The press relations service of the Russian Government,
in its turn, said that it did not intend to disclose the date of the next
meeting of the government commission for transport and communications. The
government has already approved the schedule of Svyazinvest restructuring, -
an anonymous representative of the holding told a ComNews reporter. And the
approval of the schedule by the government commission is just a formal
requirement.
According
to the information released by ComNews earlier, in May 2009 the government
commission for transport and communications, headed by Vice Prime Minister
Sergey Ivanov, approved the concept of Svyazinvest restructuring on the basis
of OJSC Rostelecom. Several months later, on October 20, Svyazinvests
Board of Directors accepted a scenario of the holding reorganization, that
foresees a merger of Inter-regional Telecommunications Companies (IRCs) into
OJSC Rostelecom (see ComNews publication of October 21, 2009). As a result
of merger of Svyazinvest companies, an integrated company will be created,
which will cover the whole range of communication services in Russia. The
holdings consultants have already evaluated the synergic effect of this
restructuring as equal to 30 billion rubles.
At
the same time, asset exchange is taking place between the State and the
Joint-Stock Financial Corporation Sistema (JSFC Sistema). The latter will
transfer to the state the blocking stake of Svyazinvest and in exchange
Comstar-UTS, a subsidiary of JSFC Sistema, will receive shares of OJSC Moscow
City Telephone Network (MCTN), belonging to Svyazinvest holding. Comstar-UTS is
already in possession of 66.88% of MCTN ordinary shares; thus the debt of
Comstar-UTS to Sberbank (26 billion rubles) will be cleared. Besides, JCFC
Sistema will transfer 50% of Skylink to Svyazinvest. The remaining 50% of the
mobile operator belongs to RTDC company. We are negotiating with RTDC for
transfer of their stake in Skylink to Svyazinvest, - comments Yulia Belous,
Head of the JCFC Sistema press office. Therefore, the JCFC Sistema is
responsible for transfer of Skylink assets, belonging to RTDC. Yesterday we did
not manage to get in touch with RTDC representatives.
Vesti 24
Russian
Prime Minister Vladimir Putin approved the Svyazinvest reorganization scheme,
proposed by the holdings Board of Directors, and rejected an alternative one,
which contemplated a prolonged procedure of merger of Svyazinvest and Inter-regional
Telecommunications companies into Rostelecom. Among the disadvantages of the
rejected option, experts point out a downturn of the state-owned holdings
positions on the market and increased competition between Rostelecom and
Inter-regional Telecommunications companies. In this case possible economic
losses of Svyazinvest might well exceed 15 billion Russian rubles. Svyazinvests
First Deputy CEO Alexander Provotorov stated that prompt completion of the
reorganization will bring a higher positive effect and will give the united
operator a chance of a more successful resistance to competition pressure.
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