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UPDATE 3-Rostelecom names Kremlin-backed Kalugin new CEO
March 27, 2013 / 7:39 AM / 4 years ago

UPDATE 3-Rostelecom names Kremlin-backed Kalugin new CEO

* Current CEO replaced after months of speculation

* Kalugin candidacy approved by presidential administration

* Rostelecom may decrease its mobile appetite after CEO switch (Releads with CEO appointment, adds detail)

By Maria Kiselyova

MOSCOW, March 27 (Reuters) - Russian state-controlled telecoms operator Rostelecom named former cable TV boss Sergei Kalugin as its new chief executive in a government-forced leadership change.

The ex-head of National Cable Networks, which was owned at different times by businessmen with connections to the Kremlin, has replaced out-of-favour Rostelecom CEO Alexander Provotorov, who has been under fire for months.

Provotorov came under pressure after a cabinet reshuffle last May. The new government, formed after Vladimir Putin was elected for a third Kremlin term, criticised Rostelecom’s weak share price and plans to expand in Russia’s cut-throat mobile sector.

Putin’s spokesman, Dmitry Peskov, told Reuters earlier on Wednesday that Kalugin’s candidacy was agreed with the Kremlin.

Speculation that Provotorov may be on his way out emerged in November when his home and the house of his former partner and Rostelecom investor Konstantin Malofeyev were searched by police in a fraud probe unrelated to Rostelecom.

The rumours flared again in early March when Malofeyev’s Marshall Capital Partners, which Provotorov used to run, sold its 10.7 percent stake in Rostelecom to Arkady Rotenberg, a construction tycoon close to Putin.

Kalugin has no apparent business links to Rotenberg, but the latter has had common business interests with former owners of National Cable Networks - metals tycoon Suleiman Kerimov and banker Yury Kovalchuk. In 2011, the TV operator was acquired by Rostelecom.

Kalugin will take over with immediate effect.

According to media reports, Provotorov will receive up to 280 million roubles ($9.06 million) in bonuses, including for early termination of his contract which was due to expire in 2015.

Analysts welcomed the arrival of a proven communications industry boss at the helm of Rostelecom, but were looking for indications on his strategy for the company.

The former fixed-line monopoly was transformed in 2011 into a universal operator by merging with several regional peers to boost its presence in high-growth areas such as broadband, mobile and Pay TV and offset declines in its core business.

Last summer, it was awarded an LTE mobile licence to offer high-speed data downloads on mobile devices and rival established mobile competitors MTS, MegaFon and Vimpelcom which also were winners in the tender.

While officials have suggested Rostelecom should focus on building out Russia’s backbone Internet infrastructure, Provotorov defended the mobile ambitions in a recent interview saying growth in fixed broadband was flattening out, unlike wireless broadband.

Kalugin has a good understanding of the fixed-line business, said Ivan Kim, an analyst at VTB Capital. But as he lacks experience in the mobile sector, Rostelecom is unlikely to be aggressive in this market, he added.

The government owns 53 percent of Rostelecom which has a market value of around $12 billion. The company is expected to be privatised after a restructuring is completed and list its shares on the London Stock Exchange.

It is in the process of merging with its state-controlled shareholder, holding company Svyazinvest, absorbing its assets and simplifying ownership structure, with the government set to keep control. ($1 = 30.8922 Russian roubles) (Additional reporting by Darya Korsunskaya; Editing by Erica Billingham)

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