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Russian Deputy Communications Minister Sverdlov resigns

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MOSCOW. Aug 5 (Interfax) - Russian Deputy Communications and Mass Media Minister Denis Sverdlov has resigned, a representative of Deputy Prime Minister Arkady Dvorkovich, who oversees the industry, told Interfax.

Communications Ministry spokesperson Yekaterina Osadchaya said Sverdlov, who previously headed wireless broadband provider Yota, is steppingdown because of the new law that bars federal officials and their family members from holding assets and bank accounts abroad.

Sverdlov declared income of 131.3 million rubles for 2012. He did not report owning any property abroad, but his wife owns a 400-square-meter home in France.

After his dismissal is confirmed by the prime minister, Sverdlov will remain at the Communications Ministry as an adviser to the minister and will continue to oversee the reforms he began, Osadchaya said.

Candidates to replace Sverdlov have not been selected yet, a source close to the ministry told Interfax. Sverdlovsk's responsibilities - government policy in the area of communications and electronic government services - might be divided between two deputy ministers, the source said.

Sverdlov joined the ministry in July 2012, after the appointment of Communications Minister Nikolai Nikiforov. Prior to this, Sverdlov had since 2007 headed Scartel (Yota), which in 2011 received LTE frequencies (60 MHz in the 2.5-2.7 GHz band) for all of Russia without a tender.

Last summer Yota, along with a controlling stake in mobile operator MegaFon, was folded into the Garsdale holding company controlled by billionaire Alisher Usmanov. Usmanov's USM Holdings owns 82% of Garsdale, Telconet Capital, which is equally owned by Sergei Adonyev and Albert Avdolian, holds 13.5% and state corporation Rostec holds 4.5%. MegaFon is now preparing to acquire Yota and has already obtained permission for this deal from the Federal Anti-Monopoly Service (FAS).

Sverdlov, born in 1978, graduated from the St. Petersburg State Engineering and Economics University. In 2003, he joined the board of the merged Korus Consulting and IT Vision, of which he was a cofounder. Sverdlov became chief executive of Scartel in 2007, and in 2010 became head of Yota Group.

In his position as deputy minister, Sverdlov was responsible for reforms of government regulation of communications, including the drafting of the new law on communications.

"Sverdlov has tense relations with market players - his initiatives have been given a hostile reception by operators. At closed meetings he has often had to wrangle with companies on many issues," business daily Vedomosti reported a manager at one of Russia's top three mobile operators as saying.

Osadchaya stressed that Sverdlov is resigning only because of the ban on owning foreign assets.

One of Sverdlov's controversial initiatives to change regulation was a restriction on the minimum frequency bandwidth for LTE and 3G networks held by operators. The Communications Ministry proposed a minimum threshold of 10 MHz for frequency bandwidth for LTE and other frequency ranges, as well as introduce a mandatory minimum of 5 MHz for 3G networks. Russia's top four telecom companies, which won LTE frequencies in the lower 791-862 MHz range with bandwidth of only 7.5 MHz in July 2012, were not happy at the prospect of such a decision. In the end, the State Commission for Radio Frequencies (GKRCh) did not make the decision.

Representatives of the leading mobile operators also had intense discussions with Sverdlov on the introduction of mobile number portability (MNP). The preparation of regulations for the introduction of MNP has dragged on and operators are worried that because of this they will not manage to launch the service by the deadline of December 1, 2013 specified by law. Sverdlov said recently that he sees no reason to push back the deadline.

In addition, Vimpelcom and Mobile TeleSystems (MTS) disagreed with the Communications Ministry on the selection of an operator for the MNP database. The operators want a competitive selection process, while the ministry is proposing to appoint the Coordination Center for TLD RU/RF as the operator of the database. "We're currently working in some kind of regulatory chaos. You can't do that," Vimpelcom CEO Anton Kudryashov said in a recent interview with Interfax.

Some market players also linked Sverdlov to the Communications Ministry's idea of creating a state LTE operator. The ministry proposed setting up a special state company to build LTE networks, and giving this company frequencies in the lower range, including those that Vimpelcom, MTS, MegaFon and national operator Rostelecom won in a tender last year. These frequencies were expected to be expropriated from the operators. This idea has lost momentum, sources on the telecom market said. There will not be any "coercive actions" to take frequencies away from operators, Nikiforov said after the media reports in July about the plans to set up the state LTE operator.

The ministry and operators also have differences on refarming of frequencies for LTE. The leading four operators believe it would be more effective and cheaper to gradually refarm frequencies and roll out LTE networks that are electromagnetically compatible with military and air traffic networks. The ministry has voiced displeasure with the current pace of frequency refarming and deployment of LTE networks.

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