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VimpelCom hit by post-earnings Citi downgrade; MTS also off

  • Citing disappointment with the carrier's Q4 numbers, Citi has cut Vimpelcom (VIP -2.9%) to Neutral, and lowered its PT to $10.10 from $12.10. Rival MTS (MBT -1.1%) is joining VimpelCom in trading lower.
  • While VimpelCom's global subscriber base rose 4% Y/Y in Q4 to 219.6M, its revenue fell 7%. The carrier says Italian mobile termination rate cuts, along with regulatory pressures and macro issues in various markets, took a toll.
  • Also hurting VimpelCom (and many other carriers): The pressure placed on voice/SMS revenue streams by the adoption of mobile messaging and VoIP services, none more prominent than Facebook-acquired WhatsApp.
  • Ovum estimates WhatsApp and its peers cost carriers $32.5B in SMS revenue in 2013, and sees that number rising to $54B in 2016.
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