Page 107 - RusRPTAug19

the combined company will be about RUB500bn.
Rostelecom currently owns 45% of Tele2. The rest is owned by Tele2 Russia Holding AB, in which state-controlled VTB Bank holds 50%, Invintel BV Alexey Mordashov 40% and 10% belongs to the Bank of Russia of Yuri Kovalchuk and his partner.
The value of the 55% stake is about RUB70bn ($1.1bn). "Rostelecom will pay through cash, treasure shares and newly issued shares, which will provide VTB a stake in a large public company [Rostelecom] vs it’s current share in a small private company [Tele2]," BCS Global Markets commented on the benefits to VTB Bank from the swap.
For Rostelecom, the issue would lead to about 17% dilution for commons in value terms, while minimum Tele2 valuation (RUB130bn for 100%) is above what BCS GM considers fair. However, some support could come to Rostelecom in the form of Tele2 dividends.
Tele2 and Rostelecom united their GSM assets in 2014 by creating the T2 RTK Holding joint venture that later began operating in the Moscow region as a discount operator. Already back in 2017 Rostelecom said it will seek full control in Tele2, after Michael Oseevsky, ex-chairman of VTB, was appointed CEO of the state-owned operator.
While initially takeover plans were met cautiously by analysts, in 2018 the joint venture with Tele2 turned a corner and went profitable, while continuing to decrease leverage. In 1Q19, Rostelecom's share in the increasing profit of Tele2 mobile subsidiary pushed the parent company's IFRS net profit by 46% year-on-year and 140% quarter-on-quarter to RUB5.6bn ($86.4mn).
Russian mobile major Veon (former VimpelCom) posted flat revenue year-on-year growth under IFRS in 2Q19 at $2.26bn, with adjusted Ebitda also flat y/y at $0.87bn, with a flat margin of 38%. Still, the results beat the consensus estimated by 2%. "Veon is apparently regrouping to make another push in non-telecom revenue," Maria Sukhanova of BCS Global Markets commented on July 16. "The success in that is not a given, but the strengthening of the team could provide a strong base," she believes, seeing the news as neutral for Veon at the moment.
9.2.10 Utilities corporate news
RusHydro has reported its unexciting 1H19 RAS results. With the 17.7% y/y reduction in hydro production (as water inflows moderated), and despite the supportive electricity prices, the company saw revenues slide 6% y/y to RUB59,675mn vs. the 1% y/y increase in operating expenses (with the largest expansion, 22% y/y, coming in the repairs and maintenance line). Thus, EBITDA was down 10% y/y at RUB39,383mn and net income slid 13% y/y to RUB23,257mn.
One of Russia’s leading renewable energy companies Enel Russia posted a 26% year-on-year growth in net IFRS profit to RUB4.3bn ($66.8mn) in 1H19, the company said on July 31. Revenues in the reporting period were up by 3.8% to RUB35.3bn and Ebitda advanced to RUB8.8bn. As reported by bne IntelliNews, Enel Russia plans to sell the Reftinskaya coal power plant for at least RUB21bn ($333mn) and it affected the 1H19 results of
107 RUSSIA Country Report August 2019 www.intellinews.com