PLD: Merger Will Not Threaten Rostelecom

Managers at two Russian telecommunications companies and their major Western backers were tight-lipped Tuesday on reports of a possible linkup, but said they had no plans to challenge the dominance of the country's long-distance operator Rostelecom.


The Financial Times reported Friday that PLD Telekom, a long-distance company one-third owned by Britain's Cable & Wireless, might merge with the Russian Telecommunications Development Corp., a cellular operator in which US West holds a two-thirds stake. The newspaper said talks were still several weeks from completion.


Cable & Wireless officials in Moscow and London referred questions about the report to PLD Telekom, which they called the "driving force" in the discussions. Principals at PLD, US West and RTDC -- which has holdings in seven Russian regional mobile-phone companies -- also would not comment on the status of any negotiations.


"We're always looking at new opportunities for the company, acquisitions and investments," said Simon Edwards, chief financial officer for PLD Telekom in London. "If we have anything to announce we'll announce it at the appropriate moment."


PLD Telekom, a Russian company that is quoted on U.S. and Canadian stock exchanges, started long-distance operations in St. Petersburg in 1992 and raised more than $100 million in a high-yield bond offering last summer. It now provides international connections in 20 cities, including Moscow, through a joint venture with Rostelecom called Teleport.


"We very much see ourselves as cooperating with Rostelecom," Edwards said. "We wouldn't want to jeopardize any of those relationships" with Rostelecom or other Russian partners.


Philip Townsend, a telecommunications analyst at SmithBarney Europe, said PLD's relationship with Rostelecom meant that the premise of the Financial Times article -- that the merger would create a company to challenge Russia's Rostelecom-Svyazinvest monolithic phone system -- was "far-fetched."


"[PLD] is not going to provide a competing company to itself, is it?" Townsend said.


SmithBarney was named by the Financial Times as an adviser to PLD in the merger talks, but Townsend, an analyst, said he had no information on whether a deal was in the offing.


Townsend said a loose alliance between PLD and RTDC would be "a logical stopgap" to provide high-end services for some customers while Rostelecom still cannot provide adequate long-distance capacity across Russia. But he said satellite-cellular-fixed wireless technology would be too expensive and too limited to challenge Rostelecom in the long term, even if PLD wanted to.


RTDC, which now has major shareholdings in Moscow Cellular and wireless operators in Yekaterinburg, Irkutsk, Vladivostok and other cities, is in the market to expand its Russian operations through an alliance.