VimpelCom Closing Gap With Peers on Debt Cuts
VimpelCom Ltd. (VIP) jumped in New York to the smallest-ever discount versus emerging-market telephone companies as the mobile company said that it will expand in Russia while reducing debt and expenditure.
American depositary receipts of VimpelCom rallied 7.1 percent to $11.77 yesterday, to trade at 12 times estimated earnings. The average valuation for the MSCI Emerging Markets Telecommunications Services Index (MXEF0TC) is 12.5 times. The Bloomberg Russia-US Equity Index (RUS14BN) of U.S.-listed stock rose 0.6 percent, while futures on the RTS Index added 0.5 percent to 157,830.
VimpelCom has slumped 38 percent since 2010 as it gave up its ranking as Russia’s second-biggest mobile provider by subscribers to OAO MegaFon (MFON) and as the nation’s anti-monopoly watchdog barred it from paying dividends amid a shareholder dispute last year. The Amsterdam-based company, which got 42 percent of 2011 revenue from Russia, aims to cut net debt 17 percent by 2015 and shave $2 billion off spending, Chief Executive Officer Jo Lunder said in a presentation yesterday.
“The market clearly likes their strategy,” Alexander Vengranovich, an analyst at Otkritie Financial Corp. in Moscow, said by phone yesterday from London, where he took part in VimpelCom’s meetings with analysts. “The question now is how successful implementation of that strategy will be. Russia remains a strategically important market for VimpelCom as their main source of cash.”
VimpelCom wants to invest in boosting the quality of its services in Russia, Lunder said in London yesterday.
VimpelCom had 56 million customers in Russia in the third quarter of 2012, compared with 70.7 million for OAO Mobile TeleSystems (MBT), the country’s biggest mobile phone operator, and 62.8 million for MegaFon, data by Moscow-based researcher Advanced Communications & Media show.
“Their decision to increase investments into the country is the right step to make,” Vengranovich said.
The ADRs advanced to the highest level since Oct. 4 in New York yesterday as trading volume was more than four times the daily average in the past three months, data compiled by Bloomberg show. The jump yesterday was the biggest gain since Aug. 17, the data show.
VimpelCom was formed in 2011 when its Moscow-based unit merged with Italy’s Wind Telecom SpA to create the world’s sixth-biggest mobile phone company by subscribers.
Russia agreed in November to withdraw a case against Fornebu, Norway-based Telenor ASA (TEL) for raising its stake in VimpelCom. The dispute was settled when Altimo Cooperatief U.A.’s billionaire Russian owner Mikhail Fridman lifted his voting stake to secure control of the company.
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, was little changed at $29.89 yesterday. The RTS Volatility Index, which measures expected swings in the stock futures, declined 0.2 percent to 21.92 points.
Mobile TeleSystems, or MTS, as the company is known, increased 1.3 percent to $18.99 in U.S. trading. The company’s Moscow-listed stock rose 0.2 percent to 247.75 rubles, or $8.18. One ADR equals to two shares.
Yandex NV (YNDX), owner of Russia’s most-used search engine, slumped 1.8 percent to $22.96 in New York yesterday, with trading volume 53 percent above the three-month daily average, data compiled by Bloomberg show.
The stock fell after Facebook Inc. (FB), an owner of a social network with more than 1 billion users, announced on Jan. 15 a tool for searching information posted to its website. The move creates an alternative to services now offered in Russia by companies such as Yandex, Google Inc. (GOOG) and Mail.ru Group Ltd. (MAIL)
Mail.ru’s global depositary receipts slipped 0.8 percent to $31.75 in London yesterday, the lowest level since Dec. 10. The stock has declined for an eighth consecutive day, losing 11 percent in the longest plunge since its listing on the London Stock Exchange in November 2010.
Crude oil for February delivery gained 1 percent to $94.24 on the New York Mercantile Exchange yesterday, the highest settlement level since Sept. 18. Oil increased after the U.S. Energy Information Administration, the Energy Department’s statistical arm, said stockpiles fell 951,000 barrels last week. A gain of 2.2 million was the median of 11 analyst estimates in a Bloomberg survey.
Brent oil for February delivery, which expired yesterday, added 0.3 percent to $110.61 a barrel on the London-based ICE Futures Europe. Urals crude, Russia’s chief export oil blend, increased 0.3 percent to $109.14.
Ruble futures showed the currency strengthening 0.2 percent to 30.611 per dollar yesterday after rising 0.1 percent to 30.311.
United Co. Rusal, the world’s largest aluminum producer, was unchanged at HK$4.95 in Hong Kong trading as of 10:06 a.m. local time. The MSCI Asia Pacific Index gained 0.4 percent.
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