Page 133 - RusRPTDec20

Rostelecom released its 3Q20 results. Here are the key things you should know:
The 3Q20 numbers beat expectations across the board. Revenue came in 1.5-2.2% higher than our expectations and Interfax consensus thanks to higher-than-expected revenue from digital services (+62% YoY) and wholesale services (+9% YoY). As for clients, B2B/G remained the fastest growing vertical, delivering growth of 23% YoY. EBITDA beat both our forecasts and street expectations by 6%, and net income was 21-28% higher than our and consensus forecasts.
Rostelecom upgraded its FY20 guidance, and the company now expects revenue and EBITDA to grow at least 9% compared to the previous guidance of at least 5% growth. We note that this is about in line with street expectations, as FactSet consensus for Rostelecom currently has revenue and EBITDA growing at around 10% YoY in 2020E. The company’s FY20 capex guidance remained unchanged at a range of RUB 100-110bn (excluding state programs).
FCF in 3Q20 was strong at RUB 19.5bn (+26% YoY) thanks to the increase in accounts payables (due to the low base effect of 3Q19) and the hike in other liabilities related to the recognition of deferred revenue for certain B2G contracts.
Mikhail Oseevskiy, President of Rostelecom, noted that the company “plans to maintain an attractive dividend yield”. Mr. Oseevskiy also stated that the company would soon announce an updated strategy.
Rostelecom​ plans to buy 51% of Bolshaya Troika, a company specializing in waste-management automation solutions​, the companies’ representatives told Vedomosti. Rostelecom has already agreed to buy 1% of Bolshaya Troika, and it will hold call options for an additional 50% that are exercisable in 1H21, according to Vedomosti. Bolshaya Troika’s main product is its waste-management software platform, with around 170 waste-management operators in c. 60 Russian regions currently using its platform. Bolshaya Troika’s revenue stood at c. RUB0.5mn in 2019, and the company expects to bring in RUB1.3bn in revenue in 2020E, according to Vedomosti. We see the news as neutral for Rostelecom. We think that the acquisition should help Rostelecom to expand its product offering, especially in such segments as Smart City/Smart Region projects. That said, given the value of the deal and the size of the company, the acquisition should not have a significant effect on Rostelecom’s consolidated financials.
9.2.10 ​Utilities corporate news
133 ​RUSSIA Country Report​ December 2020 www.intellinews.com
InterRAO​ disclosed details about the deal concerning its cooperation