Page 169 - RusRPTSept21

that the potential valuation of the deal could reach RUB60-70bn. We see the news as neutral for VEON for now, as we think the exact effect of any potential deal on VEON’s investment case will depend on the financial conditions of the transaction (if any). We think that the potential value crystallization of VEON’s tower infrastructure could be a positive catalyst for the stock (assuming the valuation is right). The sale of its infrastructure should also potentially pass the infrastructure maintenance opex and capex on to the prospective buyer. The main side effects include potential limits on the company’s ability to differentiate from its competitors in terms of network quality. We also note that under IFRS 16, sales and leasebacks could lead to an increase in total financial liabilities and subsequently in interest payments.
Russian state integrated telecom major Rostelecom posted 9% year on year revenue growth to RUB139bn ($1.9bn) in 2Q21 under IFRS, with EBITDA up by 15% y/y to RUB56bn making a 40% margin. Net income was up 46% y/y to RUB11bn.
As reported by bne IntelliNews, in 2019 Rostelecom consolidated control in the "big four" mobile operator Tele2. The state company also remained the major recipient of B2B, B2G telecom and infrastructure contracts. Rostelecom is also in focus regarding the planned rollout of 5G in Russia.
Top line growth of Rostelecom continued to be supported by the mobile segment (+12%), as well as the digital services segment (+19%; includes cloud and data centre revenue), and other revenue (+27%). BCS Global Markets argued on August 6 that other revenue includes the factor of consolidation of Lukoil-inform.
EBITDA was helped by optimisations in staff costs, and higher gains from asset sales.
Rostelecom also upgraded the 2021 guidance for EBITDA to 8%-10% growth versus 5%+ previously, while reiterating 5%+ rise in revenues and capital expenditures excluding state projects at RUB110bn-RUB115bn.
BCS GM believes that Rostelecom has a possibility for another guidance upgrade in 2021, while affirming a Hold call on the company's shares. Sova Capital also sees the outlook as conservative given the strong 2Q21 results, and reiterated a Buy rating on the company's shares.
Most recently the company maintained the dividend recommendation at 77% of adjusted free cash flow (FCF) in line with its dividend policy.
169 RUSSIA Country Report September 2021 www.intellinews.com