MTS Premium Shrinks to Eight-Year Low: Russia Overnight

OAO Mobile TeleSystems, Russia’s largest wireless carrier, fell in New York on concern sales will falter amid an economic slowdown. The stock’s premium to its price in Moscow shrank to the smallest in eight years.

American depositary receipts of MTS, as the company is known, slid 2.7 percent to $21.30 in New York, trading at a 6 percent premium to the Moscow stock. Qiwi Plc rallied 6.4 percent to the highest since its May initial public offering as earnings beat estimates. The Bloomberg-Russia-US Equity Index of the most-traded Russian stocks in the U.S. fell 1.5 percent to 99.56. RTS stock-index futures declined in U.S. hours.

Sales at MTS will increase at least 5 percent in 2013 from a previous projection of as much as 7 percent, the company said yesterday, citing slower economic growth. While the carrier controlled by billionaire Vladimir Evtushenkov boosted third-quarter earnings, revenue trailed the average of 11 estimates in a Bloomberg survey. Russia’s growth will probably fall short of the government’s 1.8 percent target this year, Economy Minister Alexey Ulyukayev said Nov. 13.

“Corporate clients of mobile companies are particularly sensitive to an economic slowdown as companies cut spending in response to slower growth,” Ksenia Arutyunova, an analyst at Rye, Man & Gor Securities who has a hold rating on MTS, said by phone from Moscow yesterday. “Investors are concerned over macroeconomic risks as disposable incomes also fall as the economy slows.”

Russia’s Economy

Russian gross domestic product expanded 1.2 percent from a year earlier, the Federal Statistics Service in Moscow said Nov. 12. That trailed the 1.4 median of 19 estimates in a Bloomberg survey. Real disposable incomes unexpectedly fell in September and consumer spending slowed, adding to signs the economic recovery is failing to gain momentum.

OAO Rostelecom, Russia’s state-controlled telecommunications operator, may merge its mobile assets with VTB Group’s Tele2 Russia, boosting competition for carriers including MTS, Russia’s telecommunications Minister Nikolay Nikiforov said in a Nov. 15 interview in New York.

“The market is showing some concerns over how MTS’s revenue will look like next year, as the economy continues to slow, while competition in the mobile market intensifies,” Alexander Kazbegi, an analyst at Renaissance Capital Ltd. in Moscow, said by phone yesterday. He cut his recommendation on the ADR to a hold on Nov. 4 and is the most accurate among 24 analysts covering it, according to data compiled by Bloomberg.

Qiwi Rallies

Qiwi rallied to $44.73, extending a surge since its May IPO to 163 percent. The Russian electronic-payment operator posted third-quarter adjusted earnings of 35 cents a share, beating the average estimate of four analysts in Bloomberg survey by 10 cents. Sales will increase at least 42 percent this year from an earlier prediction of 30 percent at most.

The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, fell 1.2 percent to $28.51. Futures expiring in December on the RTS slipped 0.3 percent to 144,580, while the RTS Volatility Index, which measures expected swings in the stock futures, increased 2.7 percent to 21.78.

United Co. Rusal, a Moscow-based aluminum producer, was unchanged at HK$2.20 in Hong Kong trading as of 10:35 a.m. local time. The MSCI Asia Pacific Index fell 0.2 percent.

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