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expectations. The company managed to maintain the mobile service revenue in Russia at 1.6% growth, same as in 3Q18, despite facing full quarter of intra- country roaming cancellation. MTS also posted 10% revenue UAH- denominated revenue growth in Ukraine. The sales of handsets in Russia grew by 22% in the reported quarter, although it must be noted that the sales could have been hyped by the front-loaded purchases ahead of the January 2018 VAT hike. MTS announced the guidance for 2019 at 3% revenue increase, flat to slight decline in Ebitda and up to RUB90bn ($1.4bn) capital spending. "Guidance for 2019 is cautious, considering negative factors in place," BCS Global Markets said on March 19. "That said the company tends to guide conservatively recently: for 2018 it forecasted 2% Ebitda growth vs delivered 6%."
The major risk factor for the sector remains the implementation of the data storage or the so-called "Yarovaya Law". The capex forecast for the law was cut by MTS from RUB60bn to RUB50bn for five years. The MTS board also approved a new dividend policy for 2019-22, promising a payout of at least RUB28 per share (RUB56 per ADR) over a calendar year versus RUB20/share previously. "Based on the March 20 closing price, this translates into a 10.92% dividend yield per ADR and 10.85% per local share," Sberbank CIB estimated, noting that it was also stated that the company could use share buybacks in addition to dividends to enhance shareholder returns. "The new dividend policy exceeded our and investors' expectations and has been treated positively by the market. The current buyback program, which started in July 2018, is about 79% complete at the moment, on our estimates. So, the key thing to watch moving forward is what the next program will be, if there will be one," Sberbank believes.
Russian state integrated telecom major Rostelecom will consolidating 100% control over Russia mobile phone operator Tele2, the CEO of Rostelecom Mikhail Oseevsky told the press on March 12. The amount of the deal was not announced. Currently Rostelecom holds 45% in Tele2, with the rest controlled by Tele2 Russia Holding AB, owned by VTB Bank (50%), Invintel B.V. of steel tycoon Alexey Mordashov (40%), and Rossiya Bank of Yury Kovalchuk. 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. In 2017 Rostelecom already said it will seek control in Tele2, after Mikhail Oseevsky was appointed CEO of the state- owned operator (until recently he was Chairman of the board of VTB Bank). When Rostelecom first said it wanted to gain control in Tele2 "the market reacted cautiously as the mobile operator was loss-making," Aton Equity wrote bank in September 2018, adding that the company "subsequently asserted that it would concentrate on exploiting vast synergies from cooperation rather than increasing its stake in the short-term." But since then, Rostelecom has been reporting mixed results, while its joint venture with Tele2 in 2018 turned a corner and went profitable, while continuing to decrease leverage. In January 2019, Tele2 has been valued at RUB240bn ($3.6bn) ahead of the mooted acquisition. Previously reports claimed that Rostelecom could acquire about 5% of Tele2 from VTB, possibly in a non-cash deal, paying with own treasury shares held by its subsidiary Mobitel. In January market watchers reiterated that they expect VTB to exit and for Rostelecom to pay for the deal with a mix of cash and treasury shares.
Russia's third-largest bank state affiliated Gazprombank announced that it is no longer a shareholder of MegaFon, selling 18.96% back to the "big four" mobile operator on a buyout offer announced in the end of 2018, Interfax
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