Comstar signs deal to sell Svyazinvest stake

MOSCOW, INDIA: Russian telecoms provider Comstar has signed an agreement to sell its stake in holding company Svyazinvest, which will help it to pay off debt and eventually get a bigger share in Moscow unit MGTS, the company said.

Comstar shares rose about 8 per cent on the news and were up 2.94 per cent by 1135 GMT against flat trade on Russia's Moscow Interbank Currency Exchange MICEX .MCX after it announced on Friday the deal with long-distance call operator Rostelecom, a unit of the state-controlled telecoms giant Svyazinvest.

Under the deal, Comstar will fetch 26 billion roubles ($848 million) by selling its 25 per cent plus one share stake in Svyazinvest and will channel the proceeds to repayment of its loan to state-run bank Sberbank.

The deal also foresees Russian services conglomerate Sistema, which controls Comstar through mobile phone subsidiary MTS, exchanging 100 per cent of shares in mobile operator Sky Link for Svyazinvest's 23.33 per cent stake in Moscow fixed-line operator MGTS, in which Comstar owns 69.93 per cent.

"We view this news as supportive for Comstar and Sistema, as it means that yet another issue has been resolved - however, this deal was expected and already priced in. Comstar and ... Sistema will benefit from gaining 93 percent control over MGTS and last mile access in Moscow, as well as gaining a net-cash position," Uralsib analysts wrote in a note.

The deal was last September approved by the Russian government which wants to play a bigger role in the telecoms sector through a merger of Svyazinvest's subsidiaries under the umbrella of Rostelecom, which is aimed at increasing Svyazinvest efficiency and market share.