GEM Telecom Update 18 Jan 2011

8/7/2019 GEM Telecom Update 18 Jan 2011

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Global Emerging Markets Telecom Update - 18 January 2011

Regional New s

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Summary

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Calendar o f upcom ing eventsHrvatski Telekom - FY results

TPSA - FY resultsMagyar Telekom - FY results

Date

14-Feb-10

24-Feb-1024-Feb-10

Analys tn.a.

Dalibor VavruskaDalibor Vavruska

Recent news h is toryVimpelcom: Lets hope that the board will be rational at its meeting this SundaTPSA: the DPTG dispute may still take months to settleEn route for 2020 Netia confirmed its medium term financial roadTPSAs network sharing deal should help to support our positive storyGood cop, bad cop or a confusing cop? Why is Telenor surprisingly changing its heart?MTEL: Use of a dividend policy to influence the government would be like playing with fireThree ways in which the upcoming consolidation in Polish telecoms may impact TPSA

Vimpelcom - Does strong Wind mean nice Weather?Netia - ING Prague conference feedback - More LLU to cope with more pressureVimpelcom 3Q10: Numbers delivered (almost), mistakes admitted, point about Ukraine madMagyar Tel: An ultra-populist new tax proposal would be very damaging.Thrust toward the West: Why are EM telcos suddenly expanding into developed markets?VIP/ORTE: The price is out, focus now turns on execution and rebuilding credibilityVimpelcom 2Q10 preview: Awaiting clarification of M&A principlesComstar 2Q10: in line resultsVIP / ORTE: It ma be too earl to look at scenarios but its time to think about the lo ic

20-Dec-1020-Dec-1013-Dec-107-Dec-106-Dec-106-Dec-106-Dec-10

06-Oct-1026-Aug-1026-Aug-1019-Aug-1019-Aug-1019-Aug-1019-Aug-1019-Aug-1019-Au -10

Recent recom mendat ion/va luat ion changesVodacom - Initiation of coverage with a SELLTPSA - Target price cut to PLN18.7 from PLN20.7Vimpelcom limited - Initiation of coverage with a BUYMagyar Telecom - Downgraded to SellSafaricom, Initiation of coverage, TP = KES4.67, BUYComstar - downgraded to HoldTurkcell - Target price cut to US$16.4Turk Telekom - Initiation of coverage - TP = TRY 5.7

SellBuyBuySellBuyHoldBUYBUY

15-Oct-1020-Jul-1023-Apr-1014-Jan-1021-Oct-0914-Aug-0922-Jun-0922-Jun-09

TPZAR60.1PLN18.7US$21.3HUF652KES4.67US$5.3US$16.4TRY5.7

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Valuat ion com par isons - Mobi leClosing 12 month Fair Upside Mkt Div yield EV/Customer Debt/ ROE

price target value to FV cap 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2010F 2011F Equity(%) (%)

Stock Rec price (%) (US$bn) (x) (x) (x) (x) (x) (x) (%) (%) (%) (US$) (US$) 2010F 2010F

EMEAMTS Buy US$ 20.7 16.3 14.0 32.3- 20.6 2.5 2.3 5.2 4.8 12.9 11.3 8.6 9.4 7.7 225 219 17.3 16.6Sistema Sell US$ 26.0 20.7 18.6 28.5- 12.5 1.4 1.3 4.9 4.6 16.4 14.6 - - 1.5 - - 123.2 23.5Turkcell Buy US$ 17.1 16.4 15.4 9.6- 15.0 1.8 2.1 5.0 5.5 10.2 10.3 4.5 5.4 19.6 297 341 30.3- 21.1Vimpelcom Ltd Buy US$ 15.3 21.3 20.2 31.6 19.9 2.4 2.0 4.9 4.1 9.6 8.4 6.7 11.6 6.2 467 444 45.4 14.0

#VALUE!#VALUE!

#REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!#REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

#VALUE!

#VALUE!#VALUE!

Total / weighted average -7.9 68.1 1.9 1.8 5.0 4.6 11.5 10.4 5.5 7.4 8.8 468 469 43.9 21.6

Simple average - - - - - - - - - - - - -

o Developed Market sMobistar Hold EUR 46.4 51.0 - 3.7 2.1 2.1 5.6 5.7 11.0 11.3 10.1 9.0 8.7 1,084 1,031 92.0 63.5Vodafone Hold GBp 1.75 1.45 - 145.8 2.1 1.9 6.0 5.5 11.4 10.3 3.9 5.8 4.6 530 468 36.3 8.5

Total / weighted average - 149.5 1.8 1.7 5.2 4.8 10.0 9.1 4.4 6.5 5.1 538 476 36.5 10.3

Simple average 2.1 2.0 5.8 5.6 11.2 10.8 7.0 7.4 6.7 807 750 64.2 36.0

Source: Thomson Datastream, Company data, ING estimates

Notes:

Weighted averages weighted by Market Capitalisation

FCF yield is calculated as free cash flow after interest divided by market capitalisation

M Mobile

EV/Rev EV/EBITDA FCF yieldP/E

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Char ts

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Per formance

Source: ING estimates Source: Thomson Datastream

Source: Thomson Datastream Source: Thomson Datastream

Upside t o DCF fa ir value (%) Top & Bot t om 5 MK TCap vs. l iquid i t y (US$m ) Top & Bot t om 10

12 m ont hs best per form er - ($ ) Sibi r t e lec om (90.0%) 12 m ont hs w orst per form er - ($) Magyar Te lek om (-33.4%)

0.0

0.0

0.0

0.1

0.1

0.1

0.1

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2.00

2.50

3.00

3.50

4.00

4.50

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-100

-80

-60

-40

-20

0

20

40

VimpelcomL

td

TPSA

Magyar

Telekom

Turkcell

Netia

Sibirtelecom

Uralsvyazinform

CenterTelecom

Rostelecom

Ukrtelecom

100

1,000

10,000

100,000

MTS

VimpelcomL

td

Rostelecom

TurkTelekom

Turkcell

Sistema

TPSA

TelefonicaO2

CZ

Magyar

Telekom

Comstar

Comstar

CenterTelecom

Uralsvyazinform

Ukrtelecom

VolgaTelecom

Sibirtelecom

Northwest

Telecom

Netia

Southern

Telecom

Dalsvyaz

0.0001

0.001

0.01

0.1

1

10

100

MKTCap ($m) LHS Liquid ity ($m) 1M av. RHS

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MSCI Com parat ives



MSCI (EMF* ) vs. MSCI (EMF* ) Telec om s (re-based) MSCI Wor ld t e lec om s vs. Europe & EMF t e lec om s (re-based)

MSCI EMF Te lec om s vs. EMF Tec hno logy (re-based) Relat ive per form anc e t o MSCI (EMF* ) (12M, %) Top & Bot t om 10

80

90

100

110

120

130

140

150

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MSCI EMF MSCI EMF Telecoms

70

80

90

100

110

120

130

140

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MSCI World Telecoms MSCI Europe Telecoms MSCI EMF Telecoms

60

70

80

90

100

110

120

130

140

150

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MSCI EMF Telecoms MSCI EMF Technology

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Sibirtelecom

Uralsvyazinform

CenterTelecom

SouthernTelecom

VolgaTelecom

Dalsvyaz

NorthwestTelecom

TurkTelekom

Ukrtelecom

Comstar

Ukrtelecom

Comstar

Rostelecom

Netia

MTS

Sistema

TPSA

TelefonicaO2CZ

Turkcell

MagyarTelekom

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Com par ison Tables

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EMEA

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EMEA Fixed-l ine and in t egrated incum bents

Company name Recom. To grp MCp (US$m) Rev Rev/avg Total Mob

Reuter Code Mkt price To uni EV (US$m) % perf. gwth EBITDA EPS Op EV/ EV/ EV/ Debt/ Debt/ Div FCF f-lines lines ofBloomberg 12M target Av vol (US$m) absol Rev (US$, EBITDA margin NI FCF EPS growth CFPS EBITDA rev line P/E P/OCF ROE EBITDA equity yield yield (/mth) (YE, rev

Fair value Absol # shrs (m) (US$) Yrs (US$m) %) (US$) (%) ( US$) (US$) (US$) (US$, %) (US$) (X) (X) (US$) (X) (X) (%) (X) (%) (%) (%) (US$) m) (%)

Russia

Volga Telecom Hold -14.2% 1,209 1D -0.6 12F 1,314 7.5 577 44.0 218 137 0.89 7.9 2.15 3.2 1.4 381 6.0 2.3 10.3 0.2 7.2 4.2 10.1 23 4.7 16.0

NNSI.RTS RUB 147 -25.2% 1,829 1M 4.1 11F 1,222 3.2 541 44.2 202 160 0.82 13.2 2.17 3.3 1.5 389 6.2 2.3 11.4 0.2 8.8 3.7 11.3 22 4.7 15.3

VTEL RX RUB 105 0.9 12M 50.1 10F 1,184 -7.8 520 43.9 178 196 0.73 8.5 2.15 3.6 1.6 410 7.1 2.3 12.8 0.4 15.8 2.7 13.4 21 4.7 14.4

RUB 90.6 -38.4% 246 YTD 6.2 09 1,285 568 44.2 164 0 0.67 63.5 2.10 4.0 1.7 430 8.7 2.3 14.5 0.6 27.3 1.8 0.0 22 4.8 13.8

Ukra ine

Ukrtelecom Sell -81.1% 1,280 1D -0.4 12F 1,216 13.6 317 26.1 5 -24 0.00 146.2 0.02 6.2 1.6 213 307.9 3.2 -19.9 1.6 71.1 0.0 -1.2 11 9.2 348.90 UAH 0.54 -83.6% 1,980 1M -14.1 11F 1,070 16.3 284 26.5 2 -5 0.00 - 0.02 6.6 1.8 209 726.2 3.2 -20.0 1.7 70.8 0.0 -0.2 9 9.5 268.2

UTEL UZ UAH 0.12 0.0 12M 17.3 10F 921 -33.6 231 25.1 -23 1 0.00 -88.1 0.02 7.6 1.9 207 neg. 3.9 -19.7 2.0 75.8 0.0 0.0 8 9.8 211.1

UAH 0.07 -86.5% 18726 YTD 0.4 09 1,386 269 19.4 -195 80 -0.01 - 0.02 10.6 2.0 204 neg. 3.9 -17.6 2.9 77.6 0.0 3.9 11 10.1 143.8

Turkey

TurkTelekom Buy 4.3% 15,831 1D -2.9 12F 8,259 13.6 3,552 43.0 1,826 1,793 0.52 18.4 0.00 4.7 2.0 - 8.6 - 26.7 0.3 19.0 11.0 11.0 - - -

0 TRY 6.94 -9.0% 17,045 1M 3.7 11F 7,268 3.4 3,128 43.0 1,543 1,797 0.44 8.6 0.00 5.1 2.2 - 9.6 - 28.9 0.4 26.6 9.4 11.0 - - -

TTKOM TI TRY 5.70 9.9 12M 31.5 10F 7,030 -14.5 2,969 42.2 1,421 2,099 0.41 -1.7 0.00 5.6 2.4 - 10.7 - 31.6 0.5 34.7 8.4 11.1 - - -

TRY 5.20 -25.1% 3500 YTD 4.6 09 8,223 3,440 41.8 1,446 870 0.41 -20.3 0.00 5.9 2.5 - 12.9 - 34.9 0.5 42.2 6.8 4.2 - - -

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EMEA Mobi l e

Company name Recom. To grp MCp (US$m) Rev Rev/avg Total Mob

Reuter Code Mkt price To uni EV (US$m) % perf. gwth EBITDA EPS Op EV/ EV/ EV/ Debt/ Debt/ Div FCF f-lines lines ofBloomberg 12M target Av vol (US$m) absol Rev (US$, EBITDA margin NI FCF EPS growth CFPS EBITDA rev line P/E P/OCF ROE EBITDA equity yield yield (/mth) (YE, rev

Fair value Absol # shrs (m) (US$) Yrs (US$m) %) (US$) (%) ( US$) (US$) (US$) (US$, %) (US$) (X) (X) (US$) (X) (X) (%) (X) (%) (%) (%) (US$) m) (%)

Russia

MTS Buy -26.5% 20,588 1D 0.0 12F 9,320 2.4 4,563 49.0 1,959 1,984 1.97 7.3 4.59 4.6 2.3 215 10.5 4.6 14.8 0.1 6.1 9.5 9.6 8 97.5 100.0

MBT.N US$ 20.7 -17.8% 21,221 1M 2.8 11F 9,102 5.6 4,452 48.9 1,826 1,930 1.83 14.7 4.48 4.8 2.3 219 11.3 4.6 15.2 0.1 9.9 8.9 9.4 8 96.9 100.0

MBT US US$ 16.3 58.1 12M 2.3 10F 8,619 9.3 4,188 48.6 1,592 1,774 1.60 82.1 4.25 5.2 2.5 225 12.9 4.9 16.6 0.2 17.3 7.7 8.6 7 96.1 100.0

US$ 14.0 -32.3% 997 YTD -1.1 09 7,889 3,830 48.5 874 1,776 0.88 -57.8 4.29 5.9 2.9 237 23.5 4.8 17.6 0.5 39.2 4.2 8.6 7 95.0 100.0

Russia

Sistema Sell -22.4% 12,545 1D 3.5 12F 0 -100.0 0 - 0 0 0.00 - - - - - - - 41.7 - - 0.0 0.0 - - -SSAq.L US$ 26.0 -13.2% 30,199 1M 2.0 11F 23,032 8.1 6,506 28.2 860 0 1.78 12.4 0.00 4.6 1.3 - 14.6 - 21.7 1.4 108.2 2.7 0.0 - - -

SSA LI US$ 20.7 0.0 12M 1.8 10F 21,302 22.8 6,034 28.3 765 0 1.59 -57.3 0.00 4.9 1.4 - 16.4 - 23.5 1.6 123.2 1.5 0.0 - - -

US$ 18.6 -28.5% 483 YTD 2.9 09 17,353 5,201 30.0 1,794 0 3.72 14.1 0.00 4.8 1.4 - 7.0 - 27.8 1.2 82.0 1.4 0.0 - - -

Turkey

Turkcell Buy -1.9% 15,004 1D 0.0 12F 6,283 4.9 2,377 37.8 1,413 742 1.61 -3.4 2.47 5.9 2.2 381 10.6 7.4 30.1 0.6 40.7 7.5 4.9 14 37.0 300.0

TKC.N US$ 17.1 9.8% 12,397 1M 3.5 11F 5,991 3.7 2,241 37.4 1,463 817 1.66 -0.6 2.31 5.5 2.1 341 10.3 7.4 22.5 -0.1 -4.3 19.5 5.4 14 36.4 200.0

TKC US US$ 16.4 10.5 12M -11.9 10F 5,777 5.1 2,122 36.7 1,472 673 1.67 9.6 2.13 5.0 1.8 297 10.2 8.0 21.1 -1.0 -30.3 19.6 4.5 13 35.9 100.0

US$ 15.4 -9.6% 880 YTD -0.5 09 5,496 1,931 35.1 1,343 -109 1.53 -0.5 -0.56 5.5 1.9 298 11.2 -30.3 23.5 -1.1 -36.5 5.4 -0.7 13 35.4 100.0

Russia

Vimpelcom Ltd Buy 42.9% 19,933 1D 0.0 12F 12,971 7.1 6,211 47.9 2,571 2,627 1.98 8.4 4.78 3.9 1.9 439 7.8 3.4 8.8 0.7 32.8 12.9 13.2 20 55.0 100.0

VIP.N US$ 15.3 59.8% 24,230 1M 3.4 11F 12,113 13.3 5,859 48.4 2,372 2,315 1.83 14.4 4.50 4.1 2.0 444 8.4 3.4 9.3 0.7 33.9 11.9 11.6 19 54.6 100.0

VIP US US$ 21.3 45.6 12M - 10F 10,688 22.8 5,179 48.5 2,073 1,326 1.60 84.8 3.89 4.9 2.4 467 9.6 3.9 14.0 1.0 45.4 6.2 6.7 17 53.9 100.0

US$ 20.2 31.6% 1299 YTD 2.0 09 8,703 4,272 49.1 1,122 0 0.86 -23.3 3.03 6.0 3.0 508 17.8 5.1 25.9 1.4 131.0 1.6 0.0 14 50.9 100.0

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GEM Telecom Update 18 Jan 2011

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