Bloomberg News

Sistema Soars on Report State May Buy Phone Stake

October 29, 2008

AFK Sistema, billionaire Vladimir Yevtushenkov's holding company, rose the most in more than three years in London trading after a Vedomosti report Russia's government may buy its stake in the national phone company.

Sistema climbed as much as $1.68, or 60 percent, to $4.48 a depositary receipt, the biggest intraday advance since February 2005, and traded at $4.35 as of 2:42 p.m. Before today, the price had fallen 93 percent this year.

The government is considering a proposal Yevtushenkov sent Prime Minister Vladimir Putin to buy Sistema's 25 percent stake in OAO Svyazinvest, the holding company that controls all seven regional fixed-line phone operators, for $1.9 billion, Vedomosti newspaper said today, citing two unidentified state officials. Sistema bought the stake for $1.3 billion in December 2006.

``Investors are hoping Sistema will succeed in selling the stake back to the government for a high valuation,'' Chris Weafer, chief strategist at UralSib Financial Corp., said today.

Vnesheconombank, the state development bank, approved today the first $10 billion of loans out of $50 billion pledged to help Russian companies refinance debt from foreign lenders and avoid selling assets. VEB has also spent at least 25 billion rubles ($928 million) in the past 10 days buying stocks and bonds to support the markets, Chairman Vladimir Dmitriev said in remarks broadcast by state television channel Vesti-24.

Sistema spokeswoman Irina Potekhina declined to comment immediately on the Vedomosti report. Yevtushenkov delayed Sistema's planned asset sales and acquisitions because price volatility during the global financial turmoil complicates valuations, Interfax reported Oct. 22.

Alfa Group

The government may already be aiding another of the country's richest men, the Wall Street Journal reported today, as wealthy Russians who pledged stakes in companies to cover loans now face cash calls from banks as local stock prices tumble.

Alfa Group, billionaire Mikhail Fridman's holding company, received government support to help pay off a $2 billion loan secured with 44 percent of OAO VimpelCom, Russia's second- biggest mobile-phone company, the newspaper reported, citing unidentified people familiar with the matter.

``I won't comment on anything,'' Fridman said today when Bloomberg News called his mobile phone.

VEB's press service declined to comment on whether the bank agreed to lend to Alfa Group. VEB's supervisory board approved ``first-class borrowers that, because of the unfavorable situation on world markets, face the threat of losing their assets,'' Chairman Dmitriev said in interview on Vesti-24. Putin heads the board, which oversees large transactions.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net; Lyubov Pronina in Moscow at lpronina@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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