Analysts at Credit Suisse have said that Russian operators MTS and Vimpelcom will catch a little pain from the global liquidity crisis and expected economic slowdown, but are both in a good position to continue growing.
A note from the analysts said, “Although having defensive characteristics, the sector is unlikely to be fully immune from the impact of the global liquidity crisis and slower economic growth in the CIS and we think mobile volumes and take up of new (data) services could be at risk. We now expect 5% revenue growth for MTS (vs 16% previously) and 15% for Vimpelcom (vs 21%) in 2009E.”
Greater exposure to corporate business (16% of revenues for MTS) and Ukraine (a further 16% of revenues) were likely to male MTS more vulnerable to global economic factors.
Despite a slow down across Europe in voice minutes and data revenue growth, Credit Suisse said it expects double digit growth in revenues for both operators. ARPU should hold up as well, with Credit Suisse saying it predicts ARPU reaching US$15-16 under the six month subscriber count rule and about US$19 under three months subscriber count rule over the next 10 years.
The analyst also felt that VIMPELCOM is better placed to finance any M&A activity without having to go to the markets for money, But it estimates that MTS will need an additional $200 million cash this year, and $300 million next year. “Therefore, Vimpelcom may look to have more flexibiltiy on small M&A,” the analysts reckoned. This would help the company in its aim to buy a minority 9% stake in Russia’s largest distributor, Euroset, a deal which has been given approval by the regulator.