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Sky Link is being prepared for buy out

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Before the end of the year Rostelecom may redeem from its largest shareholder - "Svyazinvest" - a mobile communication operator working in CDMA standard Sky Link.

The transaction amount will depend on the result of evaluation carried out by Ernst & Young

"Svyazinvest" evaluates Sky Link to sell it to a subsidiary - Rostelecom, told "Vedomosti" a source in Rostelecom. Assessment will be carried by "Ernst & Young", said a source close to "Svyazinvest". In mid-October, answering questions from analysts, Rostelecom CEO Alexander Provotorov reported that Sky Link buy-out from "Svyazinvest" has to be completed by end of 2011. Such plans o exist, confirmed a source close to "Svyazinvest". Rostelecom has operational control of Sky Link - in spring of 2011 CEO of cellular operator became director of Rostelecom wireless communications Vladislav Shvaybovich. But to combine Sky Link with its mobile business and liquidate mutual payments (for leasing of channels, traffic) Rostelecom will only be able through Sky Link purchase.

"Svyazinvest" has got Sky Link one year ago, exchanging with AFK "Sistema": company had given 28% of MGTS ordinary shares for it. At the same time Rostelecom bought from the AFK the right to claim debts of Sky Link, which on March 31, 2010 amounted to 10.63 billion rubles. The exchange took place on the basis of assessment of Sky Link at the level of 9.4 billion rubles (it was led y the same "Ernst & Young"). Accounts Chamber considered the validity of the evaluation as unproved because of the difficult situation wit the debts, but also because of the assumptions with which it was made. Since the Sky Link moved to "Svyazinvest", its debt has risen slightly, according to "Svyazinvest" source.

In a conversation with analysts Provotorov expressed the hope that Sky Link cost Rostelecom about the same price at which the company was bought by "Svyazinvest". But so far there is no assessment, "Ernst & Young" will complete it in early November, knows a source close to "Svyazinvest". Will the deal involve money, or Sky Link will be exchanged for shares of Rostelecom on the balance of its subsidiary "Mobitel" has not been decided yet, he added.

One of the assumptions that the appraiser did in 2010, was speculation that Sky Link will get 1,9-2,1 GHz frequency in Moscow and St. Petersburg to build a network of more modern standard EV-DO. In September 2010, the State Commission for Radio Frequencies (SCRF) allocated these frequencies to the operator. But equipment for EV-DO network is available from fewer manufacturers than of standard UMTS, which is used by cellular "big three", and is more expensive. Therefore, in March 2011, after purchasing Sky Link by "Svyazinvest" SCRF has allowed the operator to build on these frequencies UMTS-network (same standard for third generation mobile communication, which run the "big three") in 73 regions of the country.

Given the large debt of Sky Link, its assessment for the deal with "Sistema" was overstated, says a senior analyst at "Unicredit Securities" Nadezhda Golubeva. But after Sky Link got an opportunity to build a UMTS-network, its fair value should increase and therefore the price at which it was purchased by "Sistema"is fair at the moment, she says.

Representatives of "Svyazinvest", Rostelecom and Sky Link declined to comment, attempt to contact a representative of "Ernst & Young" yesterday was unsuccessful.

RusTele.com |

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