OREANDA-NEWS. September 22, 2010. Evgeny Yurchenko, former CEO of Svyazinvest and minority shareholder in Rostelecom and the RTOs, resumed purchasing shares on Friday, reportedly spending about RUB200m to increase his stake in 6 of the 7 RTOs. His stake in the consolidated Rostelecom now stands at approximately 2.5%. Yurchenko has not disclosed his target stake, while at least a 7% stake would be necessary to guarantee him a seat on the Board of Directors without the support of other minorities, reported the press-centre of OTKRITIE Financial Corporation.

View: Yurchenko's decision to resume buying into the RTOs somewhat undermines his claims of underhanded dealings on the part of the company's other leadership. Regardless of his motives, RTO liquidity is low enough that any substantial buyer can raise the share price considerably – shares of Uralsvyazinform and South Telecom rose over 5% on Friday. If he continues to accumulate shares, it will provide upward pressure on prices.

Valuation and Action: The consolidated Rostelecom trades on a 2011 EV/EBITDA of 3.3x. We consider Rostelecom commons and RTOs overvalued by 30% and 5%, respectively, and recommend that investors sell into strength.