MOSCOW--(BUSINESS WIRE)--
ROSTELECOM FORMS MEDIA JV WITH ALL-RUSSIA STATE TELEVISION AND RADIO BROADCASTING COMPANY (VGTRK)
Moscow, Russia – December 23, 2014 – Rostelecom OJSC (MOEX - RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia’s national telecommunications operator, today announces that its Board of Directors has approved a deal to create a media joint venture (“JV”) with the All-Russia State Television and Radio Broadcasting Company (“VGTRK”), Russia’s leading producer of pay-TV channels for cable and satellite broadcast. The JV will be made up of VGTRK’s Digital Television and Rostelecom’s subsidiary NKS-Media.
The main aim of the JV is to accelerate the development of the combined media assets in the field of production and distribution of semantic pay-TV channels for cable and satellite broadcast. The participation in creation of Russia`s leading producer of semantic pay-TV channels, together with one of the country`s largest media holdings VGTRK, will provide Rostelecom with access to an expertize of high-quality original content creation. In addition, this will also enable the company to benefit from economies of scale.
The deal is structured as follows:
- Digital Television will carry out an additional share issue by private subscription, with the proceeds going to Rostelecom;
- Rostelecom will acquire ordinary registered uncertified shares of Digital Television during its additional share issue and receive 25.33% of Digital Television’s voting shares. Rostelecom will pay for these shares using 100% of its equity interest in NKS-Media and RUB 250 million in cash.
Rostelecom’s assets contribution to the JV amounts to more than RUB 1 billion.
Sergey Kalugin, President of Rostelecom, commented: “We have considered a number of scenarios for the further development of our TV channels and have made the decision to consolidate them with VGTRK media assets, becoming a shareholder of the leading player on semantic pay-TV channels market. We believe they will generate greater value as part of a larger JV with VGTRK rather than attempting to develop our media business as a standalone entity. This will enable the combined company to obtain a much stronger position in the market, manage its costs more efficiently and enhance a leadership in quality of content.”
About the Joint Venture assets:
OJSC Digital Television and its subsidiaries (Digital Television Group) distribute 13 semantic TV channels of various genres such as “Russian Novel”, “Russian Bestseller”, “Russian Detective”, “My Planet”, “Science 2.0”, “Country”, “Dress”, “History”, “IQ HD”, “Mult”, as well as VGTRK’s channels “Sport”, “Sport 1”, “Fight Club”. The group is also planning to launch its new channel “Living Planet”.
LLC NKS-Media operates and distributes the following TV channels: “Mother and Child”, “24Techno”, “24 Doc”, “Scary HD”, “Real Scary TV” and “Amusement Park”, as well as the Ural Internet portal “u-mama.ru”, an information and entertainment website for parents.
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Rostelecom (www.rostelecom.ru) is one of the largest national telecommunications operators in Russia and Europe. The Group operates in all segments of the telecommunications market.
Rostelecom is an undisputable leader of the broadband and pay-TV markets in Russia with over 11.0 million fixed-line broadband subscribers and over 7.8 million pay-TV subscribers, 2.5 million of which are subscribed to Rostelecom’s IPTV services.
The Group generated RUB 75.5 billion of consolidated revenues, RUB 26.1 billion of OIBDA (34.6% of revenues) and RUB 24.5 billion of net income in the third quarter of 2014.
The Group is a market leader in providing telecommunications services to government bodies and corporates of all levels. It is also an important innovator that provides solutions in the field of medicine, E-Government, cloud computing, education, security and housing & utility services.
Rostelecom was assigned ‘BBB-’ and ‘BB+’ international credit ratings by Fitch Ratings and Standard & Poor’s respectively.
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Certain statements in this press release are forward-looking statements within the meaning of the U.S. federal securities laws and are intended to be covered by the safe harbors created thereby.
Those forward-looking statements include, but are not limited to:
- Management’s assessment of the Company’s future operating and financial results as well as forecasts of the present value of future cash flows and related factors;
- the Company’s anticipated capital expenditures and plans to construct and modernize its network;
- the Company’s expectations as to the growth in demand for its services, plans relating to the expansion of the range of its services and their pricing;
- the Company’s plans with respect to improving its corporate governance practices;
- the Company’s expectations as to its position in the telecommunications market and the development of the market segments within which the Company operates;
- economic outlook and industry trends;
- the Company’s expectations as to the regulation of the Russian telecommunications industry and assessment of impact of regulatory initiatives on the Company’s activity;
- other statements regarding matters that are not historical facts.
Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include:
- risks relating to changes in political, economic and social conditions in Russia as well as changes in global economic conditions;
- risks relating to Russian legislation, regulation and taxation, including laws, regulations, decrees and decisions governing the Russian telecommunications industry, securities industry as well as currency and exchange controls relating to Russian entities and their official interpretation by regulatory bodies;
- risks relating to the Company, including the achievement of the anticipated results, levels of profitability and growth, ability to create and meet demand for the Company’s services including their promotions, and the ability of the Company to remain competitive in a liberalized telecommunications market;
- technological risks associated with the functioning and development of the telecommunications infrastructure, technological innovations as well as the convergence of technologies;
- other risks and uncertainties. For a more detailed discussion of these and other factors, see the Company’s Annual Report and the Company’s other public filings.
Many of these factors are beyond the Company’s ability to control or predict. Given these and other uncertainties, readers are cautioned not to place undue reliance on any of the forward-looking statements contained herein or otherwise. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements (which are made as of the date hereof) to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required under applicable laws.