Vimpelcom (VIP) and Mobile Telesys (MBT) have been weak lately for a variety of reasons related to investment supply and internal corporate strategy choices. Might be time to take a look. The big factor weighing on VIP has of course been the company's apparent ambition to buy into Orascom Telecom's (OTC:ORSTF) frontier markets business.
However, it and MBT have also been weighed down by worries that the next batch of frequency auctions will go to state-owned Sviazinvest.
Meanwhile, other plays on the Russian consumer -- including X5 and Magnit as well as marketing company CTCM -- have captured more investor attention, drawing flows from the traditionally consumer-focused telecom group.
With all this blowing against these names, it is time to take a fresh look at these companies' potential. MBT is a cleaner play right now but VIP can represent more value if you can get through the concerns on their potential deal as core shareholders of both groups huddle up.
In terms of news flow, government pressure is making operators reduce their roaming rates throughout Russia, Ukraine and the rest of the CIS region. VIP cut its tariffs for seven CIS countries by 30% on voice calls, 50% for text messages and 60% for internet. MTS is planning a similar move for five countries late this year. This is not a huge hardship for VIP, which gets about 4% of its revenue from roaming charges, but may be more substantial for MBT.
Disclosure: No positions