Rostelecom, the state-backed former long-distance operator, isncontinuing to execute its strategy of expanding its broadband marketnshare by entering into negotiations to buy independent Moscownbroadband provider Gorcom. The price has been estimated atnRUB1.2-1.4bn, which would increase Rostelecom’s share of thenMoscow fixed broadband market to around 7%. BMI believes gainingna foothold in the lucrative Moscow market requires acquisitionnas the market is too developed for a new entrant, and as such we in August 2011 that National Telecommunications Companyn(NTC), which is 71.8% owned by Rostelecom, was looking to acquirenGorcom. However, it now appears that Rostelecom is lookingnto acquire a direct stake. The price estimate of RUB1.2-4bn is derivednfrom Gorcom’s 2011 revenue forecast of RUB450mn and EBITDAnof RUB200mn, with reports stating that a representative of Rostelecomnagreed the estimate is close to a fair price. The acquisition isnof particular value to Rostelecom as it increases its presence in thenMoscow market, which is very limited compared to its broadbandnsubscriber base in Russia’s other regions.
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