On Tuesday, June 21, RBC visited the annual meeting of shareholders of the state operator “Rostelecom” and watched the failed attempt of minority shareholders to elect their representative to the Board of Directors of the company.
Firms Scotter Limited and Red Hand Investments Limited, which owns a 3.25% of voting shares of Rostelecom, proposed its own candidate — member of the Supervisory Board of ALROSA Oleg Fedorov. Supported Fedorova and other minorities — the former General Director “Svyazinvest” Evgeny Yurchenko (owns 1.5% of the voting and 10% of preferred shares of “Rostelecom”) and the Association of institutional investors (API), representing the interests of other owners of a small share (accounting for about 5% of state-owned companies).
But in the end Fedorov, who was the only candidate from a minority shareholder, and not from the state, was not included in the Board of Directors of JSC “Rostelecom”, according to the results of the vote. The President of “Rostelecom” Sergey Kalugin spoke out against the occurrence of Fedorova to the Council. Independent candidate associated with shareholders with a certain history, which can lead to the emergence in the company of people pursuing “is not always corporate interests,” he explained. “We don’t want this to happen”, — said Kalugin.
Red Hand Investments was linked to billionaire Kenneth dart. The materials of the factory “Red October” in 2007 stated that the Red Hand Investments, which owns a minority share of the company, represents the interests of dart.
The only new member of the Board of Directors eventually became Vice-President of “Rostelecom” Michael Lijewski; he replaced a member of the Board of Directors of “Bashneft” Vitaly Sergeychuk. The remaining ten seats on the Board of Directors of JSC “Rostelecom” took Kalugin, head of the presidential administration of Russia Sergey Ivanov, CEO of RDIF, Kirill Dmitriev, member of the Board of Directors of the holding “Open” Ruben Aganbegyan, Dean of the economic faculty of Moscow state University Alexander Auzan, the first Deputy Director of VGTRK Anton Zlatopolsky, the former head “Svyazinvest” Vadim Semenov, the first Deputy Chairman of Vnesheconombank Mikhail Poluboyarinov, Executive Vice-President of Gazprombank Alexander Pchelintsev and Chairman of the Board of Directors UK “April Capital” Anatoly Milyukov.
Who owns Rostelecom
48,7% of the ordinary shares (45% in the authorized capital) of JSC “Rostelecom” directly belongs to the state represented by Rosimushchestvo. Even with 15.06% of the shares owned by a subsidiary of “Rostelecom” — “Mobitel”, 4,29% – owned by the VEB.
Only among the shareholders of the company 718 legal entities that control for 94.6% of the ordinary shares and 83% of preferred, and 154,3 thousand individuals — they own about of 5.38% of the common shares and 17% of preferred shares.
The revenue of “Rostelecom” in 2015, compared to 2014 decreased by 0.5%, to 297,3 billion rubles, net profit increased by 9%, to 14.3 billion rubles.
According to the analytical company “TMT-Consulting, as of the end of 2015, the operator occupied more than 30% of the Russian market of broadband access to the Internet, 14.3 percent of data centers, 28% — pay TV.
The very shareholders meeting began with a presentation Kalugin, who reported on the results of the company for 2015 and spoke about her vision of the future: the operator is going to earn on development of cloud services, data centers, GEODATA, Internet of things and video. A few years a significant proportion of the revenue of “Rostelecom” will be in new sectors of the economy — primarily for the industrial Internet hopes Kalugin. In 2020, “Rostelecom” plans to increase the share of digital services in the revenue from the current 40% to 60%, to the report of the operator.
For example, according to Kalugin, the OTT video service company (technology OTT is not tied to a specific provider available in any part of the world where there is Internet), “begins to live according to the best canons digital age” using artificial intelligence for analyzing customers ‘ preferences. “Here we are somewhat similar to the well-known global [company] Netflix, which in this market active on a global scale is working,” he said.
During a speech Kalugin shareholders can send their questions to the management in writing. The head of “Rostelecom” said that in the collected notes from the hall there are many requests for material support from the company. Then the leaders of JSC “Rostelecom” answered a few questions. CFO Kai-Uwe Milhon at the request of one of the shareholders told how to calculate free cash flow (dividends are paid in percentage in this figure), and Kalugin assured that Ivanov as Chairman of the Board of Directors does not receive a salary in “Rostelecom”, and promised to think over preferential services for shareholders.
With criticism of the leadership of Rostelecom in the meeting was made by Yurchenko. He noted that the company’s capitalization in five years has fallen by almost 5.5 times, from $20 billion to $3.6 billion, the cost of the government’s stake in three years dropped from $5 to $1.6 billion, despite the fact that other state-owned companies (Aeroflot, Sberbank, Rosneft, etc.) are at historic highs” on this indicator, said Yurchenko. The Board of Directors of JSC “Rostelecom” there are no representatives of minority shareholders with an independent opinion on the company’s development,” he added.
Kalugin has linked the decline of capitalization with the economic situation: “If the market falls and the currency depreciates, then perhaps the stock price in dollars is also falling.
Yurchenko condemned and expenses “Rostelecom” M&A transactions, which it considers inefficient: over the past three years, investment in new businesses did not give the operator any added value or additional revenue, the shareholder. “For example, the search engine “Sputnik”, the construction of data centers, participation in Maykor, DTV, FreshTel, “vostoktelekom”… none of these acquisitions does not provide a sufficient increase in the income of the company”, — said Yurchenko. This affects the drop in profits and free cash flow by 20% over last year), he added. The solution to the above problems, according to Yurchenko, could be the development of a strategy for increasing the capitalization and debt reduction programme, frost M&A projects, review of investment programs and selection of a candidate from the minority shareholders in the Board of Directors.
“When it comes to freezing M&A, talking about the fact that we have some sort of a deal do bad. It is quite possible, I do not think that we are perfect, we also occasionally mistaken. But we live in the digital age and the digital era and M&A is twins, because there are many small high-tech companies that need to buy in order to enter new markets, ” said Kalugin in conversation with journalists.
Did not agree with the criticism Yurchenko and CEO of IPAS Alexander Shevchuk. He supported the nomination of Fedorova to the Board of Directors: “Investors, whom I represent, is more optimistic than the previous speaker [Yurchenko], we believe that the company has significant potential.” Though the problem of capitalization of API is also concerned, he added.
The Board of Directors of JSC “Rostelecom” it was not representative of minority shareholders, so his absence this year will not affect the company and its capitalization, says the analyst of Gazprombank Sergey Vasin. In his opinion, the situation cannot be called a conflict of minority and majority shareholders: a group of minority shareholders headed Yurchenko with his vision of the company, but they do not represent the interests of all owners of small packages. A year earlier, the minorities also failed to hold a Council of their representatives: whereas a sufficient number of votes has not received the General Director of investment company “Aton” Andrey Zvezdochka did and the Finnish investor Seppo Remes, who nominated the Association for the protection of investors ‘ rights, wrote “Interfax”.
Others present at the meeting on 21 June of the shareholders surveyed by RBC, was of little interest to the agenda and plans of Rostelecom. Basically they were saying that they approve the company grow. “I am a shareholder for two decades, come to the meetings to drink coffee and eat,” said one of them. At this point in the other end of the hall among the shareholders arose the conflict over watering Tupperware lunch: mobile counter started to clean up, and some participants of the meeting tried to take a few boxes with food, resulted in a small crowd.