OREANDA-NEWS. June 23, 2010. VolgaTelecom shareholders approved the merger with Rostelecom at their AGM. Of the 64.3% of shareholders who attended, 92.7% voted in favor of the merger. VolgaTelecom is the fourth RTO to vote in favor, following Sibirtelecom, South Telecom and North West Telecom, reported the press-centre of OTKRITIE Financial Corporation.

View: VolgaTelecom's approval was expected, and this week we also anticipate that shareholders from Uralsvyazinform and Center Telecom will vote favor at their respective AGMs (on Wednesday and Friday). Far East Telecom, which meets next Monday, is a bigger question mark. The turnout for the VolgaTelecom vote was similar to that of Sibirtelecom, and suggests that many shareholders are maintaining the buyback option by not attending. 

Valuation: The combined Rostelecom trades on a 2010 EV/EBITDA of 4.1x. The current price of VolgaTelecom common shares implies that the price of one common share of the consolidated Rostelecom is RUB86.87, while VolgaTelecom preferred shares imply a price of RUB92.84. The upside to the buyback price is -1% for common shares and +18% for preferred shares.  

Action: We expect neutral market reaction, as the news was expected.