Russian telecoms giant Rostelecom is in talks to buy one of Russia’s leading data storage companies DataLine, as telecoms companies scramble to get into the storage business for both commercial and political reasons.

Rostelecom "is considering the purchase of the second largest player on the Russian market of data centres (DPC), DataLine, included in the IT-holding Inline Technologies Group,” two telecommunications market sources told Kommersant on January 15.

DataLine has been on offer for several months and was reported also to be in talks with Mobile TeleSystems (MTS), a leading mobile phone services provider.

MTS just closed a deal in January to acquire 100% of the share capital of IT-Grad 1 Cloud LLC, one of the biggest cloud companies in Russia, paying $37mn. Having greatly increasing its own data storage, presumably MTS interest in DataLine is diminished.

The new Yarovaya law is due to come into force this year and is driving some of the interest in data storage. Under the terms of the law telecoms companies have to keep a copy of all their data and traffic for six months. The hardware needed to store this much data will run to an estimated $1bn for the sector as a whole, say analysts.

DataLine management denied the reports that it was close to selling to Rostelecom, but did confirm that it is negotiating with a number of investors, although no decision on a sale has been made yet.

Experts estimate that DataLine's business is worth $500mn–600mn before debt is deducted. Experts cited by Kommersant say a final deal should be worth about $200mn–250mn.