Page 92 - RusRPTOct19

dividend policy (at least 50% of equity FCF) suggests the need for flexibility to invest in new growth areas. Some of the ‘future’ asset success that VEON had (JazzCash) will be hard to replicate, in our view. Capex in Russia is going up to improve the network, which we see as a right approach, but, coupled with data storage law related investment, is also affecting medium-term FCF. We have VEON as a Hold, with a $3 Target Price implying an ETR of 27%. Telenor retains a 9% stake to sell. Strategy framework. VEON’s long-term vision is to become a communications and digital services provider, acting as a digital concierge to guide customer choices. The three main business pillars of this vision are i) connectivity services, ii) a portfolio of new services built around digital technologies and iii) ‘future’ assets to develop ‘know-how’ and technology to open up adjacent growth opportunities. This is VEON’s digital strategy 2.0, after the failed first attempt, which, management distraction aside, also produced a significant cash burn ($100mn annually). We believe that it will take a lot of time and effort to persuade investors that the digital strategy will work (there are few successful examples globally).
Russian Ministry of Communication still sees the 3.4-3.8GHz frequencies as the priority range for the 5G rollout in the country, Kommersant daily reported on September 24 citing the final draft of the 5G development concept prepared by the ministry and an industry working group. Reports in August suggested that Kremlin is to go with 4.4-4.99 GHz as the key range for creating 5G networks, a frequency range unpopular in most countries except for China and Japan.
9.1.9 Tourism sector news
The Russian tourism industry was ranked 39th globally in the World Economic Forum's The Travel & Tourism Competitiveness Report 2019. Globally the growth of tourism exports of 4% exceeds the growth of goods of 3% for the seventh year in a row, making up 10.4% of global GDP and global employment with over 1.4bn travels effectuated in 2018. The Travel & Tourism Competitiveness Index 2019 (TTCI) includes 140 countries accounting for 98% of global tourism industry across 90 indicators such as tourism policies, infrastructure, natural and cultural values, etc. The index is topped by Spain with a score of 5.4 and followed by France, Germany, Japan, USA, UK, Australia, Italy, Canada, and Switzerland. Russia moved up four notches in the rating as compared to 2017 index to the 39th place, scoring the highest on healthcare and hygiene (6th), natural and cultural values (20th) and the lowest on tourism policies and ease of travelling (105th). Russia is perceived as being one of the least internationally open countries (123rd place, on par with Pakistan, Venezuela, and Egypt). Industry analysts and market participants argued that WEF index methodology skews Russia's scores downwards and believe Russia's tourism industry deserves a place in the top 30. Despite hosting a FIFA World Cup 2018 with no incidents, in the security category Russia scored only 98th, they note.
Starting on October 1, foreign visitors to Russia can get cleared for their visit to St. Petersburg or the surrounding Leningrad region simply by filling in data online and downloading an electronic visa at no cost. It is not clear yet whether the new e-visa will also apply travellers entering Russia via Finnish-Russian rail services. The list of nationalities eligible for e-visas has also yet to be released. Citizens of 53 countries (e.g. all EU countries, India
92 RUSSIA Country Report October 2019 ww.intellinews.com