Fitch: North-West Telecom on positive watch

Fitch Ratings said it put OAO North-West Telecom's B+ long-term issuer default rating and A(rus) national long-term rating on Rating Watch positive.

This action follows the company's decision to divest of a 15% stake for $410 million in Telecominvest, a company whose key asset is its 31.3% equity stake in Megafon (BB+ with stable outlook), one of the three nationwide operators in Russia.

Fitch said this deal significantly increases the company's financial flexibility. The expected proceeds of $410 million are about equal to 1.6x of expected 2006 EBITDA and are higher than the company's total debt, the agency said.

Fitch said the company is expected to remain free cash flow negative in the short-to-medium term. Its debt and leverage are expected to rise, but Fitch said it is likely to remain lower-leveraged that its domestic peers.

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