UPDATE 1-Putin ally buys stake in Russia's Rostelecom

Fri Mar 1, 2013 11:53am GMT

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* Rotenberg buys 10.7 pct stake from Malofeyev's fund MarCap

* Move may lead to change in Rostelecom management

* Rotenberg quoted as saying he's a long-term investor

* Rostelecom privatisation seen in 2015

By Maria Kiselyova and Anastasia Teterevleva

MOSCOW, March 1 (Reuters) - Arkady Rotenberg, a construction tycoon and former judo sparring partner of Russian President Vladimir Putin, has bought a stake in Rostelecom in a move that could trigger a management change at the state-controlled telecoms group.

Rostelecom said Rotenberg's Bellared Holdings Limited had bought a 10.7 percent stake from Universal Telecom Investments Strategies fund, part of Marshall Capital Partners (MarCap).

While Rostelecom did not disclose the price and other terms of the deal, the Vedomosti newspaper reported Rotenberg paid 150 roubles ($4.90) per share, representing a 22-percent premium and valuing the stake at $1.55 billion.

The exit of MarCap, a fund owned by investor Konstantin Malofeyev, could herald a change at the top at Rostelecom, which is currently headed by MarCap's former head Alexander Provotorov, analysts said.

Since a cabinet reshuffle last May, the government, which has a 53 percent stake in Rostelecom, has become critical of management's plans to expand in the competitive mobile market, as well as a weak share price.

Anna Lepetukhina at Sberbank Investment Research said the stake sale was positive because it removed uncertainty over the future of MarCap in Rostelecom.

"However ... the more important issue is whether Marshall Capital Partners' exit will unify the views of shareholders and government officials on the company's strategy," she said.

The sale was largely expected after a British court lifted an order freezing MarCap's stake in an unrelated legal dispute. It had been seized over a case brought by state-owned bank VTB against Malofeyev and MarCap over a 2007 loan.

Last November, Russian investigators searched the homes of Provotorov and Malofeyev as part of the case.

LONG-TERM INVESTMENT

"The acquisition of Rostelecom shares is for us a long-term investment into the Russian telecoms sector," Rotenberg was quoted as saying in a statement issued by MarCap on Friday, which described Rotenberg was a "strategic investor."

It also said Rotenberg, as well as Nikolai Sabitov and Artyom Obolensky, would be nominated to Rostelecom's board of directors as the new shareholder's representatives.

"It remains to be seen whether Rotenberg is a financial investor or has a strategic interest. We do not rule out he wants to understand the asset better ahead of the Rostelecom privatisation," said Ivan Kim, an analyst at VTB Capital.

Russian communications minister Nikolai Nikiforov said late last year the long-expected privatisation of Rostelecom would be possible in 2015.

Rotenberg has had no previous exposure to the telecoms sector but Vedomosti in January named him and his brother as potential bidders for the Russian fixed-line retail broadband business of Vimpelcom.

Rotenberg was not immediately available for comment.

Rostelecom shares were trading 1 percent higher at 124.00 roubles by 1110 GMT, outperforming the broader market index , but were still down 16 percent from the year-ago levels.

RIVALRIES

Last year, Putin swapped jobs with Dmitry Medvedev who became prime minister and replaced communications minister Igor Shchyogolev, undermining the government backing that Rostelecom management previously enjoyed.

Rotenberg's purchase is the latest in a string of acquisitions by oligarchs who have grown rich since Putin rose to power in 2000, while those who made their fortunes in the chaotic 1990s are increasingly cashing out.

In an example of the latter, Mikhail Prokhorov, who ran for the presidency last year, recently sold his $3.6 billion stake in gold miner Polyus. He had been named in reports as a possible buyer of the Rostelecom stake.

In another sign of the Kremlin's increasing influence in business, state-controlled Rosneft is taking over Anglo-Russian oil firm TNK-BP in a $55 billion deal that would put two-fifths of the country's oil production under state control.

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