Emerging Stocks Pare Gains As Oil Weighs On Russia Energy Shares

Credit: Reuters/Sergei Karpukhin By Megan Davies MOSCOW | Thu Oct 17, 2013 6:43am EDT MOSCOW (Reuters) – Russian bank VTB (VTBR.MM) has agreed to sell 50 percent of Tele2 Russia, turning a quick profit and gaining investors with the expertise that could help it to challenge the dominance of Russia’s big three mobile phone operators. VTB bought Russia’s fourth-largest mobile operator from Sweden’s Tele2 (TEL2b.ST) in April for $3.55 billion. “It has been a profitable investment for us and we will stay as equal partners,” Yuri Soloviev, first deputy president of VTB’s management board, told Reuters. Soloviev declined to name the sale price, which has been put at $2 billion, including assumed debt, based on the price at which VTB has valued the stake on its books. VTB is selling half to a group of investors including affiliates of Bank Rossiya and entities of Alexei Mordashov, a billionaire tycoon who controls steelmaker Severstal (CHMF.MM). “Through the sale of 50 percent we get very experienced people in the TMT (technology, media and telecoms) sector, (who) have invested in a number of assets such as TV channels, content producers, cable companies,” Soloviev said. “We de-risk the position, we make some money on structuring the deal and we get a very strong partner in Russia.” 4G PUSH Bank Rossiya is part-owned and chaired by Yuri Kovalchuk, an old acquaintance of Russian President Vladimir Putin. Kovalchuk and Mordashov have a background in media investments, combining their media assets in 2008 to create National Media Group (NMG). Retaining VTB as an owner could help Tele2 Russia’s lobbying effort to obtain a license to provide high-speed 4G services. At a competitive disadvantage since losing a 4G license tender last year, it has argued for technology neutrality to allow faster internet speeds on its existing radio band. The Tele2 deal is seen by analysts as likely to lead to an eventual tie-up with state-controlled rival Rostelecom (RTKM.MM), Russia’s fifth-largest mobile operator, and challenge the top three of MTS (MBT.N), Megafon (MFON.MM) (MFONq.L) and VimpelCom (VIP.O). Tele2 Russia’s new owners have links to Rostelecom. In 2011 NMG sold its stake in cable TV company National Telecommunications to Rostelecom. The former chief of the cable company, Sergei Kalugin, became CEO of Rostelecom.

Russia Stocks Slump Most in Emerging Markets as Rally Overdone

government shutdown and extending the nations borrowing authority until early next year. The Micex advanced 3.4 percent this month amid optimism a deal would be struck. Crude fell 0.6 percent to $101.73 a barrel in New York . Many investors expected the U.S. government to come to a resolution and hence were buying riskier assets, like Russia, Vadim Bit-Avragim, who helps manage about $4.4 billion at Kapital Asset Management in Moscow, said by phone. And once the decision was made, many decided to fix profits after the rally. At the same time, the U.S. agreement will have to be revisited soon, which creates uncertainty. We may see an extended drop in the oil price now. Severstal sank 0.8 percent to $9.185 in London after reporting total steel-product sales in the third quarter fell 4 percent from the previous three-month period. Bull Market Surgutneftegas tumbled 1.9 percent to $9.03 in London while Gazprom dropped 1.1 percent to $9.695. The RTS Index (RTSI$) declined 0.9 percent to 1,486.28.

lawmakers agreed to increase the debt limit. OAO Gazprom and OAO Lukoil led a 1.2 percent slide in Russias Micex Index as MSCI Inc.s gauge of energy companies dropped for the first time in three days. The rupee rose 1 percent versus the dollar, the most since Oct. 10 and the largest appreciation among 24 developing-nation peers monitored by Bloomberg. Hyundai Steel Co. jumped 4.5 percent in Seoul on plans to acquire an affiliates cold-roll steel-making business. The MSCI Emerging Markets Index added less than 0.1 percent to 1,032.18 at 11:55 a.m. in London, trimming an earlier increase of as much as 0.3 percent. President Barack Obama signed into law a measure ending the 16-day government shutdown and extending the nations borrowing authority until early next year. The 21 countries in the developing-nations gauge send about 17 percent of their exports to the U.S., according to data compiled by the World Trade Organization. Investors had already pre-empted a resolution, so todays move is taking profits after the fact, Koon Chow, head of emerging-market strategy at Barclays Plc in London, said by e-mail. The premium investors demand to own developing-country debt over U.S. Treasuries rose two basis points, or 0.02 percentage point, to 320, according to JPMorgan Chase & Co.