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March 08, 2012

Russia's State-Run Rostelecom Takes Full Ownership of NTK
By Narayan Bhat
TMCnet Contributor

Russia’s state-owned telecom giant, Rostelecom (News - Alert), has taken full ownership of National Telecommunications (NTK), gaining a firm foothold in Moscow’s lucrative broadband service market.

Rostelecom had purchased 71.8 percent stake in NTK in February 2011, and now has acquired the remaining stake for a total sum of RUB 41.7 billion (US $1.4 billion).

NTK is mainly an Internet and paid-TV service provider. Rostelecom hopes that the acquisition will help it generate revenue in the commercial districts of the Russian capital.

For Russian telecom operators, Moscow is the major source of revenue and the number of broadband subscribers there doubled to reach 292,000 households in 2011. And, more importantly, digital pay-TV subscribers increased six-fold during the same period.

However, NTK’s market share in Moscow is minimal when compared to its competitors. In Moscow’s broadband Internet market, according to The Moscow Times, MTS (News - Alert) has the biggest share, holding 25 percent. Next is Akado with 19 percent, followed by VimpelCom with 18 percent and MegaFon with nine percent.

But NTK has a powerful growth record. NTK’s revenue increased by 14 percent year-on-year to RUB 10.8 billion for the full year of 2011 and OIBDA increased by 27 percent year-on-year to RUB 4.4 billion for the corresponding period, according to Rostelecom’s statement.

Over the past one year, NTK has even managed to reduce its net debt to RUB 2.3 billion from RUB 2.8 billion.

“Gaining full control over NTK is very important for Rostelecom as it enables us to strengthen the management of NTK’s assets, and it enables us to fully realize synergies in the regions where both companies operate,” said Alexander Provotorov, President of Rostelecom.

NTK serves to about 5.1 million subscribers in the Russian Federation, including 195,000 digital pay-TV subscribers and 530,000 broadband subscribers.

Analysts say the acquisition enables Rostelecom to increase revenues and reduce operational spending by streamlining resources such as network and IT infrastructure.

Rostelecom says it will reduce its capital expenditure “by optimizing the investment program to build networks in Moscow and St. Petersburg.”

Edited by Rich Steeves


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