MOSCOW Dec 26 Russian state-controlled telecoms
operator Rostelecom said it would focus the bulk of
its investments on broadband after calls from the government to
build out the backbone of Russia's Internet infrastructure.
The company said on Wednesday that 60 percent of total
capital spending planned for 2013-2017 would go into development
of wireline Internet connections, backbone networks and pay TV,
with 25 percent earmarked for the mobile business including
wireless Internet service.
Capital expenditure will average 14 percent of sales in the
next five years, Rostelecom said in a statement, which followed
a board meeting requested by its state shareholder, the Federal
Agency for State Property Management, to update its strategy.
It also plans to cut costs in core fixed-line telephony,
aiming to maintain its total core profit margin, or operating
income before depreciation and amortisation (OIBDA), at 39
percent until 2017, while targeting annual sales growth of 6 to
10 percent in 2013-2017.
The former fixed-line monopoly was transformed last year
into a universal operator by merging with several regional peers
in a move to boost its presence in high-growth areas such as
broadband, mobile and Pay TV and offset declines in its core
It said in April that efforts to challenge rivals in these
segments would keep its capital spending at more than 20 percent
of sales over the next two years, with 30 percent of the total
going to fixed broadband and 25 percent to mobile.
Since a cabinet reshuffle in May, however, officials have
questioned the priorities and efficiency of Rostelecom's
investments, suggesting it should not splurge on expanding in
the highly competitive mobile market.
This criticism has fuelled speculation that the government
wants to oust Chief Executive Alexander Provotorov, whose home
also was unexpectedly searched by investigators last month in a
fraud probe unrelated to Rostelecom.
Reports have suggested that Vadim Semyonov, the head of
Rostelecom's state shareholder, holding company Svyazinvest,
could be a potential candidate for replacing Provotorov.
Dmitry Strashnov, who recently stepped down as CEO of
Swedish operator Tele2's Russian unit, has also
emerged as a candidate amid talk of a possible merger of the two
firms' Russian mobile assets.
Rostelecom is Russia's fifth-biggest cellphone operator with
13 million subscribers, behind the 'Big Three' operators - MTS
, MegaFon , and Vimpelcom -
The government, which controls 53 percent of Rostelecom, has
long planned to sell more of the company and is eyeing a
sell-off in 2015 after the restructuring of state telecoms
assets is completed.
As part of the reorganisation plan, Rostelecom is due to
merge with Svyazinvest, in which it in turn holds a one-quarter
stake, in 2013, absorbing Svyazinvest's assets and simplifying
its ownership structure.
(Editing by Douglas Busvine and Jane Baird)