OREANDA-NEWS. October 08, 2010. Svyazinvest (hereinafter, the Company), held a regular meeting of the Board of Directors (hereinafter, the Company).

The Board of Directors of the Company adopted a decision to convene an extraordinary general shareholders meeting held by absentee voting with the following agenda:

premature termination of the powers of the sole executive body (general director) of the Company;

formation of the sole executive body of the Company.  The Board of Directors of the Company has put forward Vadim Semenov, Vice-President of the Board of Directors, as a candidate for the position of General Director of the Company.  Ballot sheets will be accepted until November 3, 2010. 

In line with the merger process, the shareholders of RTOs and Rostelecom are to switch over to a single share as a result of the conversion of common and preferred RTO shares into the common shares of Rostelecom.  This move aims to boost the liquidity of the single share and simplify the equity structure of the merged company.  As a result of the merger process, the state’s stake in the merged Rostelecom will amount to 53.2% of its common shares.  Including the mandatory buyback of shares at the demand of shareholders who voted against the merger, the state’s stake will be 55.9% of common shares or 53.8% of the merged company’s charter capital.  The repurchased shares will be subject to cancellation after RTOs are folded into Rostelecom in case they are not sold by the companies at a price less than market price. Thus, there is no risk that the state will lose control over the merged Rostelecom.

The Board of Directors heard a report on the current financial condition of the Svyazinvest Group of companies.  In 2010, the Svyazinvest Group showed positive expansion trends as the financial downturn showed signs of abating.  During the first six months of the year, net profit (+46.8%) and EBITDA (+14.3%) rose sharply, while revenue growth was insignificant (3.6%).

The net debt of Svyazinvest Group including leasing and financial investments as of July 1, 2010 amounted to RUR 75.4 bln compared with 88.1 bln as of January 1, 2010.  Svyazinvest increased its proportion of ruble-denominated borrowings in its debt portfolio from 75% at the beginning of the year to 87% as of July 1, 2010, while the proportion of dollar-denominated loans dropped from 16% to 11% and euro-denominated loans from 9% to 2%.  The cost of financing ruble-denominated debt decreased in the first six months of the year from 11.15% to 9.21% as of July 1, 2010.

Capital expenditure of the Svyazinvest Group increased by 1.5 times in the first six months of 2010 to RUR 15.8 bln compared to RUR 10.1 bln in the first six months of 2009.  During the first half of this year, investments in business expansion projects accounted for 78% of total capex compared to 22% spent on maintenance of telecom facilities.  In addition, the proportion of investments in traditional telephony decreased by 2.5 times in the capex structure during the first six months of the year, down to 4%, while the proportion of broadband investments, by contrast, surged 6% to 46%.

The Group’s companies executed in full and within the prescribed deadline their obligations to buy back shares from minority shareholders opposed to the reorganization, allocating RUR 14.4 bln to the buyback.

The Board of Directors of the Company took under advisement information on the current financial of the Svyazinvest Group of companies.

The Board of Directors of the Company also heard an analysis of the main financial trends of UTK as per the results of the first six months of 2010.  The main efforts of the operator’s management were focused on cost containment and raising the efficiency of its operating activity.  As a result, the 1H10 net profit of UTK tripled compared to the year-earlier period and amounted to RUR 1.54 bln.  The main revenue driver was Internet services, as the number of broadband users soared 40.7% during the first six months of 2010 to 636,500.  Furthermore, EBITDA increased by 23.7% to RUR 4.84 bln, and EBITDA margin went up by 6.1% to 42%.  Net debt remained essentially unchanged, while the net debt/EBITDA multiple reached 3.8x.  The Board of Directors took this information under advisement.

The Board of Directors also determined the number and lineup of the Board of Directors.

The Strategic Development Committee will consist of 4 people: Konstantin Malofeev, member of the Board of Development and Chairman of the Committee; as well as board members Mikhail Butrin, Nikita Ryauzov and deputy general director of the Company Mikhail Leshenko.

The Audit Committee will consist of 5 people.  Under the leadership of Ivan Rodionov members of the Board of Directors Mikhail Butrin, Leonid Reiman, Evgeny Yurchenko and deputy general director of the Company Elena Umnova will operate.

The lineup of the Executive Salary Committee will consist of 4 members: Chairman of the Committee Nikita Ryauzov, members of the Board of Directors Marlen Manasov, Ivan Rodionov and Deputy General Director of the Company Nadezhda Filippova.

The Corporate Governance Committee will have 4 members. The committee will be chaired by Marlen Manasov, while other members of the Board of Directors include Ivan Rodionov, Nikita Ryauzov and Evgeny Yurchenko.

The Board of Directors also reviewed other issues related to the Company’s internal activities.

The attendees of the meeting also paid homage to the memory of board member Yury Kornev, who passed away on September 21, 2010.

The persons who attended the meeting of the Board of Directors included:

Konstantin Malofeev, managing partner of the representative office of MarCap Advisors Limited;

Marlen Manasov, member of the Board of Directors of UBS Bank;

Leonid Reiman;

Ivan Rodionov, professor of state university Higher School of Economics;

Igor Schegolev, RF telecommunications minister;

Evgeny Yurchenko, general director of Svyazinvest.