Moscow, Russia – December 9, 2021 – Rostelecom PJSC (MOEX – RTS: RTKM, RTKMP; OTCQX: ROSYY), Russia’s largest integrated digital company, today announces that it has entered into a legally binding parity agreement with VEB Ventures (VEB. RF’s venture fund) to acquire a stake in Atlas (or Operating company) and develop a new generation backbone fiber-optic communication line TEA NEXT (Transit Europe – Asia).
The new line will connect the Russian western and eastern borders with the largest cities and link to Russian borders with Mongolia and China. The network will also be extended from the country borders with Europe to the main European traffic exchange centers in Frankfurt and Stockholm, and will link Vladivostok to Busan, Tokyo and Hong Kong via submarine cable systems.
With the corporate set-up stage of the project now completed, the construction phase of the TEA’s main segment is expected to start in 2022. The project will see Rostelecom and VEB Ventures each invest around RUB 6 billion in Atlas at the initial stage, while the strong interest expressed by financial partners signals the potential for external investor groups to join the project. Signing of legally binding agreement, along with direct confirmation of project funding, triggers full-scale construction works – both on terrestrial and submarine segments of the network, which is planned to be fully ready-for-service by 2025.
As noted by Russia’s Deputy Prime Minister, Dmitry Chernyshenko, TEA NEXT will be instrumental in shaping the national digital economy and boosting innovation in every sector. The state of the art infrastructure developed by the joint partnership of Russia’s two digital leaders under a brand new business model is also a highly attractive investment project both in Russia and internationally.
TEA NEXT started in the summer of 2020 when Rostelecom founded the operating company Atlas and commenced the construction of the first segment running from Moscow via Saint-Petersburg through to the Latvian border.
Mikhail Oseevskiy, President of Rostelecom, commented: “TEA NEXT will be instrumental in delivering our ambition to become the leader across all segments of the telecom ecosystem. With its technically advanced new generation features, the project will provide the critical foundation for the national backbone fiber optic infrastructure in the next thirty years. Atlas, in turn, is set to become the leader in fiber optic services for national companies, as well as the largest international operators and OTT players. The main feature of the project is the brand new advantageous route from West to East of Russia with stations in key cities along the way.”
The total investment is expected to reach around USD 650 million in the next few years with a view to finance the project up until 2025, partially by Atlas (through the JV fund) and a syndicated loan facility from VEB.RF, other Russian and international banks, many of which have already contractually committed to the development of the project.
Oleg Teplov, Director General of VEB Ventures, commented: “With only the Chinese telecom export alone expected to reach US D50 billion by 2025, it is critical that we deploy the full potential of Russia’s infrastructure as the key ISP transit point, to be able to accurately forecast the demand and customise our solutions to fulfil it.
The sustainability impact in the communities and local economies throughout the entire span of TEA NEXT cannot be underestimated. The project will deliver significant social and economic benefits through local job creation, local SME supplier engagement and other economic contributions – effectively from Vladivostok to Saint-Petersburg. Moreover, the project design also entails the use of 100% of locally produced equipment, including the fiber optic cable.”
By 2025, the operating company plans to launch a set of brand new fiber optic rental services to help Russian and international companies set up communications lines throughout the entire country geography and along the Europe-Asia transit.
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VEB Ventures is a company of the VEB.RF group, created to support high-tech projects through direct transactions and venture capital fund management. Among the priorities of VEB Ventures are financing promising companies using their own funds, private and public funds, as well as assisting Russian startups in entering international markets. The company offers projects not only venture capital investments, but also operational management support tools, as well as access to financial products of VEB.RF Group companies. This allows us to formulate support schemes for Russian innovative companies taking into account their individual needs, including to facilitate access to international markets.
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PJSC Rostelecom is the largest integrated digital services and products provider, operating in all segments of the telecommunications market in Russia. The Company serves millions of households, state and private enterprises across the country.
Rostelecom is Russia’s undisputed market leader, providing high-speed Internet access and pay-TV. The total number of broadband users stands at over 13.5 mln users, it has more than 10.9 mln pay-TV customers, over 6.3 mln of which are subscribed to IPTV. Tele2 Russia, a Rostelecom subsidiary, is a major player in the mobile market with the industry leading NPS, a customer satisfaction benchmark. The joint mobile subscriber base is over 46.6 mln users.
Rostelecom is a key strategic innovator that provides solutions in the following fields: E-Government, cybersecurity, data-centres and cloud computing, biometry, healthcare, education and housing & utility services.
During the 9M 2021, the Group generated RUB 411.8 bln of revenues, RUB 169.7 bln of OIBDA (41.2% of revenue) and RUB 31.4 bln of net income.
Rostelecom is a key strategic innovator that provides solutions in the following fields: E-Government, cybersecurity, data-centres and cloud computing, biometry, healthcare, education and housing & utility services.
The Group’s stable financial position is confirmed by its credit ratings. Rostelecom has been assigned ‘BBB-‘ and ‘BB+’ international credit ratings by Fitch Ratings and Standard & Poor’s respectively, and AA(RU) by ACRA.
