Rostelecom Jumps Most in 2 Months on Strategy: Russia Overnight

OAO Rostelecom, the Russian phone company poised for its worst year since 2009, surged the most in two months in New York after its board approved a five-year plan to boost profitability by diversifying its services.

American depositary receipts of Rostelecom, the nation’s biggest phone company by subscribers, rallied 3.9 percent to $23.52 in the U.S., the biggest jump since Nov. 1. The advance pared this year’s decline to 18 percent, the steepest plunge in three years. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the U.S. rose for a second day as futures expiring in March on Moscow’s dollar-denominated RTS Index dropped 0.6 percent to 152,880.

Rostelecom, which gets more than half of its revenue from fixed-line phone services, is seeking to expand its Internet broadband access, sell more mobile phone services and boost sales from pay television services, the company said in a statement yesterday. The Moscow-based provider will cut costs by upgrading its land-line networks, it said. Rostelecom will post the first slowdown in profit growth since 2009, according to the mean estimate of 16 analysts surveyed by Bloomberg.

“Such strategy means predictability and the market appreciates it,” Elina Kulieva, an analyst at Alfa Bank whose rating on the company is under review, said by phone yesterday from Moscow. “They dramatically cut their investment plans and defined areas for future growth. Lower spending potentially means higher dividends in the case of Rostelecom.”

The stock was little changed at 119.09 rubles, or $3.93. in Moscow. One ADR equals six shares.

Dividend Yield

Rostelecom’s dividend yield, at 3.94 percent, is the third-lowest among global peers, according to data compiled by Bloomberg. This level compares with 16.6 percent for France Telecom SA and 8.1 percent for Telekomunikacja Polska SA, data compiled by Bloomberg show.

Rostelecom plans to “gradually” boost dividend payouts to reach the level of its peers, Chief Executive Officer Alexander Provotorov said on a conference call with analysts and investors in Moscow on Aug. 30.

Net income is expected to decline to 40.5 billion rubles ($1.34 billion) in 2012 from 46.2 billion rubles in 2011, according to the analysts surveyed.

The Bloomberg Russia-US gauge gained 0.8 percent to 97.96 in New York yesterday. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, increased 1.2 percent to $29.28, gaining by the most since Dec. 18. The RTS Volatility Index, which measures expected swings in the stock futures, declined 1.6 percent to 23.62 points.

CTC Viewership

CTC Media Inc. was the biggest decliner on Russia-US gauge yesterday, dropping 1.9 percent to $7.81, the lowest level since Aug. 6. The stock is down 11 percent this year.

CTC’s television channel, the company’s biggest source of revenue, saw its share of viewers 4 years and older fall to 6.2 percent in the week to Dec. 23, from 6.3 percent in the previous week, TNS Global researcher said in a report yesterday.

OAO Mobile TeleSystems, the nation’s chief mobile operator, increased 1.8 percent to $18.46 in U.S. trading, extending its gain this year to 26 percent. The company’s Moscow-listed stock dropped 1.2 percent to 243.42 rubles, or $8.03. One ADR equals to two shares.

Crude, Russia’s major export commodity that together with natural gas accounted for half of the nation’s budget revenue in 2011, fell from the highest level in more than two months in New York yesterday as Senate Majority Leader Harry Reid said lawmakers and President Barack Obama are unlikely to reach a deal to avert a fiscal crisis.

‘Risk Appetite’

“A resolution on the U.S. budget crisis would help foster the greater risk appetite of which Russia would be a beneficiary,” Julian Rimmer, a trader at CF Global in London, said by e-mail yesterday.

Crude oil for February delivery slipped 0.1 percent to $90.87 on the New York Mercantile Exchange. Brent oil for February settlement slid 0.2 percent to $110.80 a barrel on the London-based ICE Futures Europe. The number of contracts trading was 53 percent lower than the 100-day average. Urals crude, Russia’s chief export oil blend, dropped 0.8 percent to $110.12.

Ruble futures showed the currency little changed at 30.744 per dollar yesterday after rising 0.9 percent to 30.25.