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S&P: Svyazinvest Subs Governance Scores Unchanged By Planned Hybrid Printing Systems Investment

February 07, 2008 | Cbonds

MOSCOW (Standard & Poor's) Feb. 6, 2008--Standard & Poor's Governance Services said today that its corporate governance scores (CGS) on fixed-line telecom providers Dalsvyaz (OJSC) (CGS-5/5.4), North-West Telecom (JSC) (NWT; CGS-5+/5.6), Sibirtelecom (OJSC) (CGS-5/5.3), Southern Telecommunications Co. (OJSC) (CGS-4+/4.9), and VolgaTelecom (OJSC) (CGS-5/5.2) will be unaffected by the decision to acquire equity stakes in Hybrid Printing Systems CJSC (HPS). The decision has already been passed by Southern Telecommunications Co.'s board and similar resolutions are expected in the near future from the boards of other interregional telecoms (IRTs).

Between December 2007 and February 2008, the state-owned holding company Svyazinvest (OJSC) submitted to the boards of its major subsidiaries, including those of the IRTs, a proposal to jointly acquire an equity position in HPS. HPS is a newly created venture that is expected to become the Svyazinvest group's main contractor for the printing and delivery of bills to subscribers. Svyazinvest's subsidiaries are expected to jointly invest $130 million in HPS in return for a shared 49% of equity. Under the proposed plan, cash contributions and equity participation will be divided between companies of the group in proportion to their installed capacity.

Independent directors of STC and the Investor Protection Association, a shareholder rights watchdog, had opposed this deal, citing the noncore profile of the investment, low expected margins, and risks associated with minority participation in this venture.

Risks that inter-regional telecoms may engage in transactions with questionable economic rationale under Svyazinvest's influence are already reflected in the current levels of corporate governance scores. These risks remain the primary constraint on the scores.

Company: Svyazinvest

Full company name
Country of riskRussia


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