RUSSIAN COMPANY TO BUY ARMENIAN TELECOM MONOPOLY – PAPER

Aykakan Zhamanak, Yerevan
26 Apr 06

Text of Vaagn Hovakimyan report by Armenian newspaper Aykakan Zhamanak
on 26 April headlined “Who owns Sistema”

It’s already clear that one of the Russian telecom companies will
shortly buy [Greek company] OTE’s 90-per-cent share of ArmenTel.

Potential buyers themselves say that they will: in early April a
public relations official of Sistema Telecom, Anna Boyko, announced
that the company was going to buy the shares and even specified how
much it was ready to pay – 350m dollars. And this sum may well turn
out to be bigger. As far as we know, OTE expects to get between 400m
and 450m euros for ArmenTel.

Sistema Telecom is part of the Sistema financial corporation, a group
of several dozens of companies operating in various markets.

Systema’s total capital is about 11bn dollars. Sistema Telecom is a
kind of the head office for the group’s six other telecom companies,
three of which are mobile service operators. Officially, Sistema
Telecom has 40m subscribers. One of its member companies is MTS,
Russia’s biggest mobile service operator.

Obviously, the Russian wish to buy ArmenTel has political motives
too. Before Sistema Telecom made its bid public, ArmenTel had
named other Russian buyers. So why exactly Sistema Telecom? In
fact, the Sistema corporation is a network of companies of various
specialization, and the Russian government is also involved in it:
it holds shares in several telecom companies which are also owned by
the Sistema corporation. So, Sistema’s structure seems to be specially
designed to mislead as to who actually owns the shares of which of its
companies or, respectively, the shares of their daughter companies
and who is ultimately behind all this network of indirect ties. The
key point here is that the corporation is said to have close relations
with the Moscow authorities. That is probably why it won several big
contracts years ago and has grown strong enough ever since to buy
major stakes at various companies. The Russia mass media have widely
reported about these bizarre and mysterious contracts.