Rostelecom secures strategic partnership to boost the development of its data centers and cloud business

Print version

VTB Bank has acquired 44.8% in Rostelecom Data Centers and cloud divisions

Moscow, Russia – December 24, 2020 Rostelecom group (MOEX: RTKM, RTKMP; OTCQX: ROSYY), the largest integrated digital service provider in Russia, today announces that it has signed the deal to attract VTB Bank as the strategic partner (“The Transaction”) to jointly develop Rostelecom Data Centers (RTK-DC), a subsidiary that combines data centres and cloud assets. VTB Bank invests RUB 35 billion in RTK-DC for a 44.8% stake with a transaction multiple of 7.8x EV/OIBDA 2020. The deal is expected to be closed until the end of 2020. It also provides for the possibility of a Rostelecom Data Centers IPO within the coming three years.

Mikhail Oseevsky, CEO & President of Rostelecom:

"We are very excited to initiate our strategic partnership with VTB Bank for the development of our cloud division. This is a significant milestone that will accelerate growth and facilitate the realisation of our data centers and cloud potential. Over the next couple of years, we expect this part of the business to deliver double-digit growth which will continue to power the delivery and expansion of Rostelecom’s digital proposition.

We are seeing growing interest in Russian tech companies from capital markets, and together with VTB, we will plan for RTK-DC to go public in the medium term. This will provide the opportunity for institutional and retail investors to support our plans to drive future growth of this promising division. We expect the IPO of our cloud segment to yield higher valuation multiples that usually apply to data centers and cloud companies, which will ultimately lead to better market valuation of Rostelecom itself.

Yuri Soloviev, First Deputy President and Chairman of VTB Bank Management Board:
Rostelecom is a long-standing partner of VTB and our investment in RTK DC is another milestone of this strategic relationship. Along with a great potential of joining up our forces for cloud development, we are seeing significant synergy opportunities for RTK DC and VTBs own cloud integration and digitalisation projects. We believe that RTK DC will benefit from the steadily growing demand for cloud models, as well as a significant backlog of demand for these technologies due to a relatively slow implementation pace in the Russian markets historically. Today, it is almost impossible to operate successfully without reliable digital technologies allowing real-time communication, which is why companies are increasingly relaying on these models. We are also confident of RTK DCs long-term success because of the growing investor interest in and focus on tech companies. Our professional team is excited to bring our capital markets expertise for a successful listing of RTK DC together with Rostelecom, in order to attract a broad range of investors.

Transaction strategic goals

The strategic partnership with VTB Bank will support Rostelecoms investment in the growth of data centers and cloud business. The transaction funds will be deployed for debt repayments and to drive the RTK-DC investment programme which includes the development of its regionally distributed data center network and the development of new cloud solutions.

The transition of state and corporate clients of various size onto subscription models of IT and cloud services consumption is the key driver of growth. Additional growth is also expected to come from the expansion of digital economy projects which captures demand for storing and processing digital data coming from mobility, AI, analytics, IoT and edge computing.

Further information is available at https://www.company.rt.ru/en/ir/news_calendar/.

* * *

In early 2021 Rostelecom intends to host a conference call for investors and analysts where it will discuss the Transaction details and share the outlook of the core data centers and cloud business streams within the Rostelecom Group.

Further details of the conference call will be announced closer to the date.

* * *

Rostelecom Data Centers (RTK-DC) manages Rostelecoms data centers and cloud services, including DataLine acquired in 2019. Today, RTK-DC is an undisputed leader in the data centers market with a 25%[1] share, and 26%[2] in cloud / IaaS market. The combined capacity of its data canter network is powered by 12,200 racks. The 2020 revenues are expected to exceed RUB 26 billion[3] with an OIBDA margin of 40%.

RTK-DC key business priority is the development and provision of wide-ranging turnkey solutions for the business and the State: including the development, roll-out and maintenance of information systems and software/hardware infrastructures through the geographically distributed data centers network and smart access to the cloud ecosystem.



[1] By #of racks as of 1 December 2020, according to IKS Consulting data

[2] By revenue as of 1 December 2020, according to IKS Consulting data

[3] Including revenues from companies of Rostelecom group