On December 5, 2002 the Russian Telecommunications Development Holdings Corporation (hereafter "RTDHC"), a 49% shareholder of CJSC Eniseytelecom and CJSC Baikalwestcom, made an official offer to OJSC Sibirtelecom (hereafter "Sibirtelecom" or "Company") to purchase the RTDHC shares in CJSC Eniseytelecom and CJSC Baikalwestcom for USD 12.5 mln and USD 8.5 mln, respectively (please see Appendix 1 for companies' snapshot).
The management of Sibirtelecom along with its financial advisor OJSC Alfa Bank has closely studied the offer to determine whether it corresponds with the strategy of Sibirtelecom as well as the financials of the transaction.
Upon its analysis the management of Sibirtelecom has come to the conclusion that the acquisition of the 49% ownership interest in CJSC Eniseytelecom and CJSC Baikalwestcom fully corresponds with the strategy of Sibirtelecom and is beneficial to its shareholders due to the following:
· The acquired companies provide highly profitable services, the development of which is a priority for Sibirtelecom's strategy;
· The acquired companies are already successful, with healthy financials and a strong customer base;
· Full-scale integration of the mobile companies into Sibirtelecom will lead to acceleration of growth of Sibirtelecom's mobile business in other regions (Kemerovo region and the Republic of Buryatia);
· As a result of the transaction the decision-making process in the acquired companies will be simplified, which will allow its management to properly react to current market conditions in a timely manner.
Sibirtelecom along with its financial advisor has appointed an independent certified appraiser CJSC AK-Consulting for the evaluation of the transaction's financials. CJSC AK-Consulting conducted a valuation analysis of CJSC Eniseytelecom and CJSC Baikalwestcom implementing the following valuation methods: discounted cash flow, comparable transactions, and comparable companies.
Upon valuation of CJSC Eniseytelecom the independent appraiser concluded that the market value of 100% ownership interest as of October 1, 2002 is in a range between USD 29.5 mln and USD 31.3 mln.
Upon valuation of CJSC Baikalwestcom, the independent appraiser concluded that the market value of 100% ownership interest as of October 1, 2002 is in a range between USD 18.9 mln and USD 19.9 mln.
Therefore, the financials of the acquisition of the 49% ownership interest in CJSC Eniseytelecom and CJSC Baikalwestcom prove to be beneficial to the shareholders of Sibirtelecom. In connection with the above, the management of Sibirtelecom made a decision to call for an extraordinary shareholders' meeting.
According to the laws of the Russian Federation, the acquisition of the 49% ownership interest in CJSC Eniseytelecom and CJSC Baikalwestcom are the interested parties' transactions (RTDHC is a subsidiary of OJSC RTK-Leasing, which is affiliated with OJSC Svyazinvest). Therefore, an interested party - OJSC Svyazinvest - may not participate in the voting process.
As a result, at the shareholders' meeting only shareholders of common shares may vote on the above issues (except for OJSC Svyazinvest). The shareholders' meeting will be qualified (i.e. will have a quorum) if shareholders holding a total of more than 50% of the common voting shares of the company participate in the meeting. The transaction will be deemed approved if 50% of shareholders participating in the meeting vote in favor of the proposed transactions.
The board of directors of Sibirtelecom made a decision to call for an extraordinary shareholders' meeting by means of absentee voting. The results of the shareholders' voting will be summed up on February 12, 2003. The voting ballots may be forwarded to:
ул. Каланчевская, дом 15а, а/я 45;
Financing of the transaction
The management of Sibirtelecom plans to finance the above acquisitions via a ruble bond issue, the details of which are currently being defined.
For further information regarding the proposed acquisitions, all shareholders of Sibirtelecom may contact Sibirtelecom (in Russian):
Head of Investor Relations Department of OJSC Sibirtelecom
Telephone: (3832) 191-169
or its financial advisor OJSC Alfa Bank (in Russian and English):
Vice President, Corporate Finance Department, OJSC Alfa Bank
Telephone: (095) 745-70-75