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RDIF mulls buying into Rostelecom SPO, possibly with Arab co-investors

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MOSCOW. May 10 (Interfax) - The Russian Direct Investment Fund (RDIF) is considering participating in an SPO by Rostelecom, Russia's national telecom provider, newspaper Kommersant reported on Tuesday, citing RDIF CEO Kirill Dmitriev.

"We're looking at Rostelecom, along with a number of other companies," Dmitriev said, without specifying the parameters or timeframe of the possible deal.

He said the RDIF plans to discuss investing in Rostelecom shares with co-investors, foremost Arab investors. He did not name possible partners.

Rostelecom head Sergei Kalugin said that the issue of the RDIF investing in company shares is currently "not on the agenda," but that such a deal could be arranged.

The RDIF and its partners could be offered Rostelecom quasi-treasury stock held by the company's subsidiary Mobitel, a source close to the operator believes, the paper said. Mobitel holds 15.06% of common and 30.79% of preferred shares (16.24% of equity) in Rostelecom. This stake is worth about 41.3 billion rubles according to prices on the Moscow Exchange.

The source said that the RDIF and its co-investors could buy this whole stake.

Kalugin said last April that the shares held by Mobitel might be used in future to raise capital through an SPO or as a means of payment in the event of M&A deals.

The RDIF has owned shares in Rostelecom before. In 2013, the fund and Deutsche Bank each bought 1.35% of shares in Rostelecom at a price of 106.30 rubles per share, or a total of 7.67 billion rubles. Each buyer paid $120 million, which was equivalent to 3.8 billion rubles at the time. The deal included two-year options linked to the U.S. dollar that guaranteed the investors a return.

The RDIF gradually divested its shares in Rostelecom, selling part of its stake in the course of a mandatory offer at the beginning of 2014. In October 2015, Mobitel increased its stake in Rostelecom, buying 1.2% of common shares in the company from the RDIF for about 2.85 billion rubles.

Arab investors have been involved in financing Rostelecom's project to eliminate the digital divide. Last year, the operator received 10.1 billion rubles for construction through the RDIF and the National Welfare Fund (NWF). These resources were structured as borrowing from project company LLC Infrastructure Investment - 4, which is 51% owned by the Mubadala fund from the United Arab Emirates and 49% by the RDIF. In addition, Mubadela extended a loan of 387 million rubles to Infrastructure Investment - 4.

Rostelecom, Russia's largest fixed telecom provider, is controlled by the state, with the Federal Property Agency holding 48.71% of common shares (45.04% of equity) and state bank VEB holding 4.29% (3.96%).

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