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June 3, 2013
www.bne.eu
Contents
TOP STORY
1. Belarus overtook USA as world's top SPAM source
2. File-sharing network users may face liability for unauthorized
content
3. MTS suggests Skype be subject to licensing
4. Putin Urges Better Online Intellectual Property Protection
5. Record Cinema Attendance in Estonia
6. VimpelCom launches 4G LTE network in Moscow
7. ‘Russia’s Facebook’ Put on Internet Blacklist by Mistake
NEWS
8. CTC Media - CFO positive comments from VTBC conference
9. MegaFon enters partnership agreement with Telefonica
10. MegaFon may consider acquisition of Scartel
11. OTH: Altimo tender offer results – BNY Mellon says it gathered
7.7% of GDRs
12. Polish telecoms company Polkomtel upgrades to LTE to reach
66% of population due to rising data demand
13. Putin Wants Better Russian Movies
14. Reston firm turns to decades-old technology to set up mobile
banking in Central Asia
15. Russian Private Equity Fund may purchase 4.2% stake in
Rostelecom
16. Russian deputy PM warns defense shipbuilding program may fail
17. TV services subscriptions in Romania up to 6m
18. US authorities shut down the largest-ever online moneylaundering bank
19. VimpelCom launches 4G LTE network in Moscow
20. Yandex.Money teams up with British payment integrator
OTHER NEWS
21. Ukraine is ready to give control over its GTS to Russia
22. Digital River opens office in Moscow
23. IT Specialist Convicted for Siberian Closed City Security Breach
24. Key shareholders streamline ownership in Russia’s MegaFon
25. MTS - Uber-confident
26. MegaFon enters partnership agreement with Telefonica
27. New MTV Russia to start working in October
28. Production of full-length films hit record in Estonia last year
29. Rostelecom’s ex-CEO Provotorov appointed president of Tele2
Russia
30. Russia's Mikron buys 12.5% in JV with Rusnano for RUB2bn
31. Sbne
32. Sitronics IT to operate under NVision brand in Ukraine from
June 1
33. The Western Paradox
34. VimpelCom: Analyst visit creates positive impression
SECTOR SNAPSHOTS
35. 25% of Russian Internet users make online payments
36. Russian mobile retail report for 1Q13 - smartphone sales keep
growing
37. Russia’s mobile phone sales rise 12% in January–March
38. Survey: 80% of Russians support development of e-government
REGULATION, REFORMS
39. Russian minister wants to distribute all frequencies at auctions
COMPANY RESULTS
40. IBS Group 4Q12 operating update: revenue misses guidance
41. IBS Group reports operating results for the quarter and full year
ended March 31, 2013
42. RBC 1Q13 preliminary financials show unimpressive
performance
43. Yandex - Weekly internet search share
bne:TMT
June 3, 2013
Page 2
Top story
1. Belarus overtook USA as world's top SPAM source
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Belarus has eclipsed the US to become
the biggest single source of global spam,
according to cloud-based email and web
security firm AppRiver.
messages per day from Belarus. After the
spike happened on 13 April, AppRiver said it
began recording an average of 12.3m spam
messages per day - which is now climbing.
Junk volumes from the landlocked former
Soviet republic, which borders Poland and
Russia, hit an all-time high on 13 April and
have sustained this level since then.
Only one in a thousand messages from
Belarus is legitimate, with 99.9% of the
electronic messages consisting of junk mail,
said the security firm. Current volumes of
junkmail from Belarus are exceeding those
from the US, the historic source of most of
the world's internet detritus.
In January, AppRiver security researchers
were seeing an average of 3.1m spam
2. File-sharing
network users may
face liability for
unauthorized content
RIA Novosti
MOSCOW, May 29 (RAPSI) - Russia's Culture
Ministry has proposed introducing sanctions
against users of file-sharing networks
for posting unauthorized content online,
Kommersant daily reported Wednesday.
The Ministry proposed the establishment
of a state Intellectual Property register.
Each entry in the register should include
the owner's name and contact details, and
information on the copyright item.
In accordance with the bill, holders of
Intellectual Property rights would be able
to notify Internet Service Providers (ISP)
that a file-sharing network user has
infringed upon its rights, and to report the
perpetrator's IP address, Kommersant
wrote citing the Culture-Ministry sponsored
legislation. The ISP would be required to
notify the user within 24 hours of the need
to remove the disputed content. If the user fails to remove the content within
24 hours, the ISP can delete or block access
French told El Reg that most users would likely
recognise the messages, which come from .ru
domains and make no attempt at spoofing, as
spam. He's currently at a loss to explain the
sustained spam spike from Belarus.
Belarus now accounts for 16.3% of the
world's spam, compared to 15.1% from the
US and 7.45% from the Ukraine, according
to exclusive figures produced for The
Register. China accounts for 5.78% of the
world's spam-relaying.
to it within the following 12 hours.
In cases where an ISP fails to notify the user, or
where it fails to act pending a user's inaction,
it would face the same administrative liability
as website owners: a 5,000 ruble ($160) fine for
individuals, 50,000 rubles ($1,590) for officials
or sole business proprietors, and 1m rubles
($31,870) for companies.
Once certain adjustments are made, the
final edition of the bill, will be considered
on June 3 at a panel of the Economic
Development Ministry, the Education and
Science Ministry, and the bill's working
group. After that, the bill will be sent to the
Justice Ministry and the Government for
approval, Kommersant wrote.
bne:TMT
June 3, 2013
Page 3
News: MTS has suggested to the regulator,
RosComNadzor, and the Ministry of
Communications, that Skype and other
OTT-service companies (Over the Top)
be subject to licensing, according to
Vedomosti.
VTB Capital
Our View: Competition from OTT-service
companies, and from Skype in particular,
is becoming more and more of an issue
for mobile network operators. OTT-service
companies do not invest in infrastructure,
but take the traffic away from operators.
The impact of Skype has so far been mostly
visible on long-distance calls, in our view,
but the increase of speeds on mobile
networks is set to be more detrimental. In
other countries, OTT-service companies
are not regulated and we think it is unlikely
4. Putin Urges Better
Online Intellectual
Property Protection
“Without defending intellectual [property]
rights, a great damage will be done,” the
Russian president said on Friday at a
meeting to discuss the development of the
country’s film industry.
3. MTS suggests
Skype be subject
to licensing
RIA Novosti
Russian President Vladimir Putin said on
Friday a more effective system was needed
to protect intellectual property rights on the
internet.
5. Record Cinema
Attendance in
Estonia
Putin said that without effective protection,
“only enthusiasts will stay [in Russia],
others will leave to make movies where
their rights are protected.”
Estonia reached a 20 year high in cinema
attendance in 2011, with 2.5 m tickets sold
at an average price of 4.1 EUR, an increase
of 100,000 tickets over 2011.
www.filmneweurope.com
6. VimpelCom
launches 4G LTE
network in Moscow
VimpelCom has launched the first segment
of the network in the central part of the
city. The operator said it expected to cover
almost all districts of Moscow with LTE
services by the end of 2013.
Major Russian mobile operator VimpelCom
has launched commercial operations of its
fourth generation (4G) network based on
Long Term Evolution (LTE) technology in
Moscow, the company said, Prime reported.
Ivan Kim
called on Russian filmmakers to produce
movies that promote patriotic and moral
values.
Russia has done a lot to help produce and
promote Russian films, with financing of the
domestic movie industry rising from 528.6m
rubles ($16.9m) in 2000 to over 6.6bn rubles
($211m) in 2013, Putin said.
Earlier on Friday, Putin vowed to continue
supporting the domestic film industry, but
Estonian public broadcasting ERR reported
that 332 feature-length films were released
in 2012, establishing another record.
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that Russia would be ahead of the curve.
Another solution for operators is to
distinguish the traffic, and charge more or
provide lower speeds to traffic generated
by Skype. This is also a direction regulators
and operators in other countries are
negotiating.
In mid-May, VimpelCom’s Vice President
Igor Parfyonov said that the company had
installed 104 LTE base stations operating
within the 800 MHz and 2.6 GHz frequency
bands in Moscow.
In 2013, VimpelCom also plans to launch
commercial operations of 4G LTE networks
Thirteen feature films and 33 full-length
documentaries were produced in Estonia in
2012. The country had a domestic hit with
the adventure comedy Mushrooming (All
Film), which had nearly 74,000 admissions,
putting it in fourth place. The film accounted
for almost 20% of admissions for Estonian
films.
in six regions, including Kaliningrad,
Astrakhan, and Altai regions, as well as
republics of Adygeya, Ingushetia, and
Kalmykia.
The operator was assigned with licenses to
develop 4G LTE networks within the 806.0–
813.5 and 847.0–854.5 MHz bands at a tender
held in July 2012. VimpelCom also received
radio frequencies in the 2.5–2.7 GHz range.
Under the terms of the tenders, VimpelCom
must start providing LTE services no later
than July 1, 2013.
bne:TMT
June 3, 2013
7. ‘Russia’s
Facebook’ Put on
Internet Blacklist
by Mistake
RIA Novosti
Page 4
Vkontakte, Russia’s biggest social
networking site, was put on a state registry
of blacklisted websites by mistake earlier
today, a spokesman for Russia's telecoms
watchdog Roskomnadzor said.
block access to sites containing child
pornography, drug-related material,
extremism and details about how to
commit suicide. No court order is needed
to block access.
“This was a mistake. Our employee put
a tick in the wrong place,” said Vladimir
Pikov, as reported by Digit.ru. “We will
remove VKontakte from the registry and it
should be accessible for everyone.”
Other sites containing offensive material
can be shut down by a court order.
Some 40m people every day use VKontakte,
often referred to as “Russia’s Facebook.”
A law creating a register of blacklisted
websites containing what the authorities
deem “harmful content” was approved by
the Russian parliament in July.
Rights groups condemned the registry,
which has been up and running since
November, as an attempt to crack down on
internet freedom.
Roskomnadzor has in the past temporarily
blocked access to Google and YouTube due
to “technical errors.”
Under the law, the authorities can
News
8. CTC Media - CFO positive
comments from VTBC conference
VTB Capital
CTC Media’s CFO, Nikolay Surikov, hosted 1-on-1 meetings at our
conference for international investors in London last week. His
comments underpin our fairly positive view on the Russian TV ad
market fundamentals, and highlight some upside risks to our model
for CTC Media. We cover the key points of his presentation below.
Positive on TV ad market growth potential in 2013. Surikov
reiterated his estimates that for FY13, CTC Media is likely to deliver
growth in line with the market. Video International had earlier
forecast Russian TV ad growth of around 10% for FY13 (while the
Russian FTA ad market was up 13% YoY in 1Q13). Management’s
growth guidance implies potential CTC Media revenues of RUB
27.5bn (USD 872mn), while we expect USD 877mn.
Advertiser demand for TV inventory remains solid. According to
Surikov, the company does not see any change in the behaviour of
multinationals, which account for 75% of its TV total ad revenues.
Management has not noticed any slowdown across the company’s
clients, despite the macro deceleration. According to the CFO,
CTC’s prime-time slots are fully contracted until the end of the year
(the first time in the past four years).
Focus more on domestic and humour. According to management,
the Russian content market is also looking brighter: the company’s
programming expense growth is to slow down over 2Q13-4Q13.
Importantly, Surikov believes that the company has power when
acquiring content. Management sees a shift in the Russian
audience’s preference for reality and humor, while comedy and
humor remain the biggest hits. There are to be new series of the
highly popular The Kitchen, The Eighties and The Voronins, as well
as several new projects like Molodezhka (an ice hockey-based
series) by the end of the year. Foreign content currently accounts
for one-third of CTC Media’s pipeline (mainly American movies
for CTC and Turkish series for Domashny), but is becoming less
popular.
OIBDA margin to be around 32% in 2013, flat YoY; in-house to
expand. Finally, management sounded fairly upbeat on its ability
to sustain the 2012 margins in 2013, saying that the pipeline it has
produced has already translated into a scheduled programming
grid until the end 2013 (thus making the respective amortisation
expenses predictable). This might create slight upside risks to our
profitability forecasts: we currently expect a 1pp EBITDA margin
dilution on higher costs for transmitting digitalised signals. The
company is to focus on acquiring domestic content and producing
more of its own in-house content, increasing it from less than 10%
of overall programming spend now to 30% within 3-5 years. Given
that Russian production houses enjoy profitability in the mid-teens,
this could create a cushion for the medium-term margins.
Anastasia Obukhova
bne:TMT
June 3, 2013
9. MegaFon enters partnership
agreement with Telefonica
VTB Capital
News: MegaFon has joined Telefonica's Partners Programme,
which already includes partners such as China Unicom and
Telecom Italia among others. Telefonica said its partnership
with MegaFon will involve joint procurement, the exchange of
technological know-how and the provision of services to their
respective multinational clients. The two companies' specialised
subsidiaries might also work together to develop new businesses,
including OTT, cloud services or M2M. Telefonica and its partners
currently serve customers in 52 countries covering a population of
1.5bn people.
Our View: The strategic partnership would allow MegaFon to get
better equipment prices, access to know-how and better roaming
rates. We note that MTS has a strategic partnership agreement
with Vodafone.
Ivan Kim
10. MegaFon may consider
acquisition of Scartel
Alfa Bank
According to Vedomosti, MegaFon’s AGM on June 28 is planning to
approve an MVNO agreement with Scartel worth RUB55.17bn. The
two companies have a common controlling shareholder, Alisher
Usmanov’s Garsdale Holding. The contract will be signed for five
years with an option to extend it for an additional five years. This
implies RUB5.52bn, or $175m per year, while the annual payment
being speculated in the press is $150m. The agreement has to be
approved by the AGM since its value exceeds 2% of MegaFon’s net
assets.
Page 5
11. OTH: Altimo tender offer
results – BNY Mellon says it
gathered 7.7% of GDRs
VTB Capital
News: Yesterday, Altimo announced the level of acceptances of the
tender offer to Orascom Telecom Holding (OTH) minorities (USD
3.5/GDR and USD 0.7/share) at 15.9%. Although it is below the
26.2% acceptance threshold, Altimo still plans to buy the tendered
OTH stock. Altimo is now seeking regulatory approval of the offer.
Yesterday, BNY Mellon said it executed a transaction to acquire a
7.7% stake in OTH in the form of GDRs on 24 May.
Our View: As we expected, Altimo would take fewer shares, subject
to regulatory approval. It remains to be seen whether the Egyptian
regulator will approve the tender offer. If Altimo acquires 16%
stake, we think minorities and Altimo would be in the same boat,
which is not a bad thing, in our view. We note that according to a
recent Reuters press report, VimpelCom might consider de-listing
OTH (it would require a quorum of 75% to carry out a voluntary
de-listing); however, we think the latter would hurt its corporate
governance perception. Altimo has recently said it has no plans to
increase the tender offer price.
Ivan Kim
12. Polish telecoms company
Polkomtel upgrades to LTE to
reach 66% of population due to
rising data demand
bne
Project
Vedomosti also speculates that MegaFon is considering purchasing
Scartel from Garsdale. In 2011, previous Scartel shareholders –
Leading Polish telecoms company Polkomtel says it has restarted
Sergei Adoniev’s Telconet Capital and Rostechnologii – were ready
its capital investment programme and intends to cover two thirds
to sell 100% of the company’s shares for $1bn.
of the population with LTE network and the whole population with
the HSPA/HSPA+ technology.
As Scartel does not disclose its financials, we find it difficult
to evaluate the impact of a potential deal on MegaFon’s share
The operator of Plus GSM wireless brand is upgrading its netowork
price. Since both companies have the same shareholder, we do
in response to the higher demand for data services.
not believe the deal would be structured in a way that damages
MegaFon’s value. Thus, we view the news as NEUTRAL at this
Polkomtel CEO Wojciech Pytel says the company wants to offer the
time.
best-quality services on as big a territory as possible. The operator
started upgrading its infrastructure in the autumn of last year.
Elina Kulieva, Ph.D.
Dmitry Doronin
bne:TMT
June 3, 2013
Page 6
13. Putin Wants Better Russian
Movies
“Right away, we wanted to take advantage of older, but extremely
well-deployed technology,” said Sean Kidder, chief technology
officer of GeoPay. “For us, it’s about how many customers we can
reach, not whether someone who’s hip and cool may turn their
nose up at the technology we’re using.”
RIA Novosti
GeoPay introduced mobile banking to Kyrgyzstan, in central Asia,
in October. Since then, more than 40,000 people, 2,000 merchants
and 80 bank branches have signed up.
Russian President Vladimir Putin vowed on Friday to continue
supporting the domestic film industry, but called on Russian
filmmakers to produce movies that promote patriotic and moral
values.
“I have said many times that the state can help produce movies,
but it cannot force people to go and watch them,” Putin said at a
meeting on the development of the Russian movie industry. “Slots
for domestic movies can be reserved [at movie theaters], but the
problem is what to fill those slots with.”
Putin said that the state had done a lot to help produce and
promote Russian films, with financing of the domestic movie
industry rising from 528.6m rubles ($16.9m) in 2000 to over 6.6bn
rubles ($211m) in 2013.
Read the rest of this piece http://articles.washingtonpost.
com/2013-05-26/business/39544965_1_mobile-banking-platformmobile-banking-chief-technology-officer
15. Russian Private Equity Fund
may purchase 4.2% stake in
Rostelecom
Alfa Bank
The president said that Russians expect an appropriate return, and
expressed the hope that filmmakers would put out more and more
movies with content that meets viewers’ demands and promotes
key social, cultural, patriotic and moral values.
The president said that Russians are attracted to films that relay
the essence of human relations and feelings, and choose between
“good and bad” movies rather than Russian and foreign movies.
Russian Private Equity Fund (RPEF) may purchase a 4.21% stake of
Rostelecom common quasi-treasury shares belonging to Mobitel,
Kommersant reports today. The price of the potential deal was not
disclosed. Based on the current share price, the stake is worth
RUB13.3bn. The breakeven point for Rostelecom of RUB180 per
share (the minimum price at which the company will not post a loss
on the sale) implies a value of the stake of RUB22.3bn. The deal
could reduce Rostelecom’s debt burden from the current 1.8x net
debt/EBITDA to 1.63-1.55x. Kommersant also reports that RPEF
may be interested in acquiring Marshall Capital’s 10% stake in
Rostelecom. All parties involved have officially declined to comment
on the deal.
Putin cited several movies that came out in the past few years,
including Admiral, Turkish Gambit, Faust and Legend Number 17, as
evidence of how Russian films can compete with foreign blockbusters.
We view the news as POSITIVE for the company, as the entrance of
RPEF in Rostelecom equity will strengthen the position of minority
shareholders and allow the company to reduce its debt burden.
However, these goals have not been attained so far, as foreign
movies continue to dominate the Russian box office, while the
share of Russian films in overall box-office receipts in Russia and
the CIS states is only 15.5%, Putin said.
14. Reston firm turns to decadesold technology to set up mobile
banking in Central Asia
On a separate note, several media sources have reported that VTB
may soon initiate the appointment of a former CEO of Rostelecom,
Alexander Provotorov, as CEO of Tele2 Russia. This confirms that
an alliance between Rostelecom and Tele2 Russia via a merger or
a JV is likely in the medium term.
Elina Kulieva, Ph.D.
Dmitry Doronin
The Washington Post
Not all new ideas for technology have to be, well, new.
As the start-ups around it tinkered with the cutting edge, a
Reston company called GeoPay stuck by decades-old technology
— the same used in messaging systems that led to the earliest
cellphones — to create a mobile-banking platform.
The start-up, founded in 2011, provides cellphone-based banking
services for people who might not otherwise have accounts at
financial institutions. The simpler the interface, the more people
the system could reach in the developing world, GeoPay said.
16. Russian deputy PM warns
defense shipbuilding program
may fail
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Russian Deputy Prime Minister Dmitry Rogozin has warned that
bne:TMT
June 3, 2013
the state program on shipbuilding and ship overhauling may fail,
RIA Novosti reported Friday.
“We are going to invest large amounts and have already invested
a lot in shipbuilding; I see no feedback so far. Moreover, there
is the real threat that our plans linked to the fulfillment of the
state armament program in the field of shipbuilding and ship
repairing will go bust,” Rogozin said at a meeting with directors of
shipbuilding companies.
He said that the problem may be tackled through a direct dialogue
between the government, state-owned United Shipbuilding
Corporation, and private companies.
Disputes between the Defense Ministry and defense industrial
manufacturers over the price of their products nearly resulted in a
failure to fulfill the 2011 state armament order.
Rogozin also urged shipbuilders to start shifting from simple sales
deals to using advanced technologies and attracting investment.
17. TV services subscriptions
in Romania up to 6m
bne
The number of subscribers to television retransmission services
increased to over 6m in Romania last year, according to the
country’s communications authority ANCOM, Romania-Insider.
com reports. There were increases across the different reception
type sectors; cable, IP, satellite, taking the overall penetration rate
to over 85 percent of households in Romania.
There was a 5% overall rise in subscribers in 2012, but the biggest
percentage increase was recorded among IP television service
subscriptions, up 34%, albeit to a low overall number, some
37,000.
Subscriptions to cable TV services were up 6.4% to 3.8m, while the
number of subscribers to satellite TV increased by 2.3% to reach
2.19m.
The number of cable subscriptions in digital format increased
by 40% to 1.24m subscribers. Meanwhile, out of the total 6m
retransmission service subscriptions, 3.4m are to services in
digital format, a 13.4% increase on the previous year.
18. US authorities shut down
the largest-ever online moneylaundering bank
Page 7
number of persons and the closing down of Liberty Reserve, an
online pseudo-bank that allegedly laundered $6bn in money that
the U.S. authorities believe was the result of drug dealing and
child pornography. Bharara and other federal official said Liberty
Reserve was believed to be the largest online money-laundering
case in history.
Liberty Reserve was a Costa Rican corporation, and was registered
by a man who is commonly known as Arthur Budovsky, Ukraine
Business Online reports. However, in local newspaper reports
Costa Rican prosecutor José Pablo González said that Budovsky,
a Costa Rican citizen of Ukrainian origin, has been under
investigation since 2011 for money laundering using Liberty
Reserve, a company he created in Costa Rica. “Local investigations
began after a request from a prosecutor’s office in New York,” Tico
Times reporter L. Arias wrote. “On Friday, San José prosecutors
conducted raids in Budovsky’s house and offices in Escazá, Santa
Ana, southwest of San José, and in the province of Heredia, north
of the capital. Budovsky’s businesses in Costa Rica apparently
were financed by using money from child pornography websites
and drug trafficking.” [A television report from Costa Rica may be
reached at: https://www.youtube.com/watch?v=UH1ryOM-iyk
In the indictment filed by the U.S. attorney, the leader of the
alleged money laundering operation was indicted under the name
Arthur Budovsky with an indication that he at some times used
what is believed to be his Ukrainian birth name, Arthur Belanchuk
and also a third name Eric Paltz. The kingpin is the only obvious
Ukrainian connection to the case but one other person, identified
in press reports as “Russian” was named Maxim Chukharev.
There is no further information regarding Belanchuk and any
current connections he might have in Ukraine.
19. VimpelCom launches 4G LTE
network in Moscow
bne
Major Russian mobile operator VimpelCom has launched
commercial operations of its fourth generation (4G) network based
on Long Term Evolution (LTE) technology in Moscow, the company
said, Prime reported.
VimpelCom has launched the first segment of the network in
the central part of the city. The operator said it expected to cover
almost all districts of Moscow with LTE services by the end of 2013.
In mid-May, VimpelCom’s Vice President Igor Parfyonov said that
the company had installed 104 LTE base stations operating within
the 800 MHz and 2.6 GHz frequency bands in Moscow.
bne
In 2013, VimpelCom also plans to launch commercial operations of
4G LTE networks in six regions, including Kaliningrad, Astrakhan,
and Altai regions, as well as republics of Adygeya, Ingushetia, and
Kalmykia.
At a press conference on Tuesday, Preet Bharara, the U.S.
attorney in Manhattan announced the apprehension of a large
The operator was assigned with licenses to develop 4G LTE
networks within the 806.0–813.5 and 847.0–854.5 MHz bands
bne:TMT
June 3, 2013
at a tender held in July 2012. VimpelCom also received radio
frequencies in the 2.5–2.7 GHz range.
Under the terms of the tenders, VimpelCom must start providing
LTE services no later than July 1, 2013.
20. Yandex.Money teams up with
British payment integrator
Page 8
can use Skrill to connect themselves to any payment system
without adapting their websites to each system. Skrill hasn't
had a partner in Russia until recently, Yandex.Money says: the
British company cooperated only with international systems (Visa,
MasterCard) and with European companies in certain countries,
including Giropay and ELV in Germany, iDeal in the Netherlands,
and mBank in Poland.
Yandex.Money expects to engage through Skrill the shops that plan
to make a monthly turnover of up to USD 10,000 in Russia. "They
are small-size shops. If at least 2,000 shops from Skrill's base
uniting 140,000 companies start accepting payments in rubles, the
turnover of cross-border purchases will increase to $20m," says
Asya Melkumova, a representative of Yandex.Money.
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Yandex.Money and the British payment integrator Skrill, the largest
one in Europe uniting 140,000 Internet shops, made a cooperation
agreement. It will enable Yandex.Money users to pay for purchases
in foreign shops which don't accept cards of Russian banks,
Kommersant reported.
Among Skrill's partners are eBay, Skype, Thomas Cook, etc. They
The partners will receive 5% from each payment, but they don't
disclose how the fee will be split between them. If the turnover
is expected to be up to $20m, revenue for six months may be
$1m. "They are likely to go halves," says Victor Dostov, Chairman
of the Management Board of the Electronic Money Association.
"However, one should remember that Yandex.Money will pay the
difference of exchange as it will accept rubles and pay in foreign
currency."
Other news
21. Ukraine is ready to give control over
its GTS to Russia
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Kyiv could give Russia control over Ukraine’s gas transport system
in exchange of lower gas prices, Kommersant-Ukraine reported
citing its sources in Ukraine’s Ministry of Energy. According to the
sources, the matter was discussed during the meeting between
Russian President Vladimir Putin and Ukrainian President Viktor
Yanukovych in Sochi on Sunday, May 26.
Russia earlier proposed to set a consortium under Gazprom’s
lead to manage Ukraine’s gas transport system. According to
Kommersant-Ukraine, during Sunday talks two sides agreed that
Russian monopoly would get control only over magistral pipelines.
The network that distributes gas from stations to consumers
is said to go under control of VETEK Group owned by Sergei
Kucherenko.
Russia, Ukraine, and EU have been discussing the long-needed
modernization of Ukraine’s gas transport system for years.
Gazprom repeatedly said it’s ready to participate in modernization.
Ukraine refused to pass the control to Russian monopoly as
pipeline system brings huge amount of money in country’s budget.
However, Kyiv now admitted that it couldn’t afford managing the
GTS on its own.
Earlier in March, Viktor Yanukovych said that if Gazprom wanted
to control country’s pipeline network it must guarantee certain
amount of gas transit in Europe. In April, Russian ambassador
in Ukraine Mikhail Zurabov said that Russia could guarantee to
transit 60 bcm of gas a year through Ukraine’s territory if Kyiv
creates two-side consortium for managing GTS, thus excluding EU
from the discussion.
22. Digital River opens office in Moscow
bne
Digital River announced it has recently opened a new office in
Moscow, Business Wire reported. The new Russian office adds
to Digital River's already extensive global presence, including
31 offices across North and South America, Asia and Western
Europe. Digital River has been helping Russian developers sell and
distribute software on a global basis since 1998.
"Our move into Russia is a reflection of our ongoing commitment
to this high growth e-commerce market," said John Strosahl,
executive vice president at Digital River. "Managing e-commerce
operations in Russia requires a deep understanding of local
buying behavior, fulfillment requirements and legal regulations.
Our on-the-ground presence serves as the entrée we needed to
more effectively open this notable sales region to multi-national
companies that otherwise would find operating an e-business in
Russia to be cost-prohibitive and risky from a legal compliance
perspective."
bne:TMT
June 3, 2013
Page 9
23. IT Specialist Convicted for Siberian
25. MTS - Uber-confident
Closed City Security Breach
VTB Capital
RIA Novosti
The court of Seversk, a closed satellite city of Tomsk, Siberia, on
Tuesday found a local IT specialist guilty of copying databases of
the city’s residents, the court said in a statement.
The man, employed at the city’s municipal company overseeing
utility payments and offering payment services, made copies of the
company’s databases, including payers’ personal data and other
sensitive information.
“Acting on motives of hooliganism, he copied files containing
personal data of Seversk residents to his laptop. The man also
copied a database containing information on utlity payments and
other insider information and subsequently deleted it from the
company’s server,” the court’s statement reads.
The judge found the man guilty of illegal access to computer
information protected by the law, as well as copying and deleting it
through his official position.
The man pleaded guilty to all charges. He was sentenced to
eighteen months custodial restraint.
Custodial restraint is a form of punishment introduced in Russia in
December 2009. As part of the punishment, a convict faces various
restrictions, such as a ban on leaving home at certain hours, on
visiting specific places, on leaving their city, on attending mass
events, and on moving to a new residence without the permission
of a supervisory body.
24. Key shareholders streamline
ownership in Russia’s MegaFon
bne
The key shareholders of major Russian mobile operator MegaFon
- companies owned by tycoon Alisher Usmanov and SwedishFinnish telecommunications group TeliaSonera - have closed a
deal to streamline their ownership in the operator, MegaFon said
Wednesday, Prime reported.
Under an agreement reached in April 2012, Usmanov's
Telecominvest Holdings Ltd bought 9.300m shares, or 1.5%
of MegaFon's charter capital, from TeliaSonera's subsidiary
Kontakt-S. Another subsidiary of TeliaSonera, Sonera Holding,
bought the same amount of shares from Telecominvest.
After the deal, Kontakt-S and Telecominvest are no longer
shareholders of MegaFon.
Usmanov's AF Telecom Holding holds a 50.0% plus 100 shares in
MegaFon, and TeliaSonera owns a 25.17% stake.
MTS hosted a management meeting today with CEO Andrey
Dubovskov and CFO Alexey Kornya. The team came across as
rather upbeat on the competitive and regulatory environment.
Capex remains fairly high, but FCF generation ability is great,
in our view. We forecast a 9% FCF yield for 2013. With the
MSCI 1040 rebalancing headwind behind, we reiterate our Buy
recommendation on the stock. MTS local stock, which trades at a
17% discount to ADRs, is our top pick in the Russian universe.
Data pricing. MTS has lagged behind in data, and wanted to get
its fair share. Having said that, MTS does not want to trigger any
aggressive competitive response, so has not introduced aggressive
data pricing. MTS does not provide unlimited tariffs, but offers
bundles instead, in order to get optimal network utilisation. Voice
is getting more and more commoditised, with many subscribers
having a zero rate on on-net (50-60% of total base). MTR would be
an issue over time, as it would put pressure on the gross margin,
and therefore MTS would like to see MTRs go down in the long run.
Competition. Market participants understand the advantages
of market stability, according to management. Therefore, MTS
does not expect the Big Three players to rock the boat. Still,
the emergence of regional players (including Rostelecom) is
a downside risk. Management thinks that the combination of
the need for network investment by regional rivals, an unlikely
unfavourable change in the regulatory environment and execution
risks would keep the competitive environment stable.
Regulation. Management identified unexpected regulatory actions
as one of the most important downside risks. Having said that, the
company does not expect any drastic pure telecom measures, or
broader actions either (e.g. increased taxation). MNP is unlikely to
be introduced before mid-2014, and management does not expect
significant market share redistribution in Moscow (possibly higher
effect in other regions where network utilisation varies).
Capex. MTS has a strong 3G network; however, investment over
the next several years is not set to go down significantly. MTS
misjudged the speed of LTE network development and these
investments had to be brought forward, especially as MegaFon
and Yota were quick. Moreover, the significant GPON project in
Moscow, which serves as a tool to defend revenues, is still ongoing.
Capex is set to remain fairly elevated over 2013-15F.
Cost side. Management is optimising retail network costs as well
as network-related costs, following the rapid network roll-out.
Besides, the gross margin could be improved further on higher
on-net, while there is more room to address commercial and
administrative costs. Still, significant profitability gains are unlikely
in the short term, in our view.
Risks. The key downside risks are higher competition, possible
regulatory pressure, rouble weakening, M&A and corporate
governance.
Ivan Kim
bne:TMT
June 3, 2013
26. MegaFon enters partnership
agreement with Telefonica
VTB Capital
News: MegaFon has joined Telefonica's Partners Programme, which
already includes partners such as China Unicom and Telecom Italia
among others. Telefonica said its partnership with MegaFon will
involve joint procurement, the exchange of technological know-how
and the provision of services to their respective multinational clients.
The two companies' specialised subsidiaries might also work
together to develop new businesses, including OTT, cloud services
or M2M. Telefonica and its partners currently serve customers in 52
countries covering a population of 1.5bn people.
Our View: The strategic partnership would allow MegaFon to get
better equipment prices, access to know-how and better roaming
rates. We note that MTS has a strategic partnership agreement
with Vodafone.
Page 10
in 2012 when Estonian film celebrated its 100th birthday. 13
of these were full-length feature films and 33 were full-length
documentaries.
In 2012, in total there were 241 films released, of which 195 were
short films. Nevertheless, the total number of released films was
smaller than in record year 2003, when there were released 261
films, among these 240 short films.
There were 332 films in total shown in Estonian cinemas in 2012
which is the highest number of Estonian re-independence years.
There were 28 Estonian, 134 European, 154 USA’s and 16 other
countries’ films. The share of the European and other countries
has increased and the share of the USA’s films has decreased
during last years. The number of Estonian films was the highest
in 2011 when there were 40 Estonian films running in Estonian
cinemas.
There were near 2.5 million cinema visits in 2012, which is the
highest level of the last 20 years. Compared to 2011, there were
over 100,000 cinema visits more.
Ivan Kim
27. New MTV Russia to start working
in October
bne
Viacom International Media Networks will launch a new MTV
Russia channel on cable television in October which will be more
aligned to its global brand, according to a statement issued by the
company, The Moscow Times reported.
Now the company is holding talks with cable, satellite and mobile
operators to include MTV in its basic package.
As of June 1, MTV Russia will be fully owned and operated by
Viacom for the first time in its 15-year history.
Previously, the channel was operated jointly with ProfMedia. Last
September, the company decided to replace the channel with a
new youth, information and entertainment-based channel called
Pyatnitsa, or Friday.
The new MTV Russia will air shows such as "Pimp My Ride" and
"Punk'd," the newspaper reported.
"The promotion of the channel will begin in the summer, including
its new website. In September, a full-scale advertising campaign will
begin," said Elena Balmont, chief executive of Viacom in Russia.
28. Production of full-length films hit
record in Estonia last year
Statistics Estonia
According to Statistics Estonia, 46 full-length films were released
The most popular films were “Ice Age 4” (171,000 visits), “Skyfall”
(95,000 visits) and “Madagascar 3” (88,000 visits). The most
popular Estonian film placed on the fourth position and it was
“Seenelkäik“ (“Mushrooming“) of Toomas Hussar (73,700 visits).
“Eestlanna Pariisis“ ("Une Estonienne à Paris") of Ilmar Raag was
on the 15th position (36,600 visits) and “Vasaku jala reede“ (“Bad
Hair Friday“) of Andres Kõpper and Arun Tamm was on the 21st
position (33,000 visits). Estonian films gathered nearly 250,000
visits or 10% of the total number of cinema visits.
The average cinema ticket price was 4.1 euros and it stayed on the
same level compared to the previous year.
Full-length film — a film of duration of at least 60 minutes (52
minutes in case of TV formats).
29. Rostelecom’s ex-CEO Provotorov
appointed president of Tele2 Russia
bne
Telecommunications giant Rostelecom's former CEO Alexander
Provotorov has been appointed president of mobile operator Tele2
Russia, state-run VTB Bank, the owner of the operator, said,
Prime reported.
Provotorov replaced Jere Calmes, who was appointed president of
Tele2 Russia in February following Dmitry Strashnov's resignation
on December 31, 2012.
Both Provotorov and Calmes, who is now first vice president of
Tele2 Russia, will become members of the operator's board of
directors.
Provotorov was dismissed from the position of Rostelecom's CEO
in late March, after his investment strategy repeatedly received
criticism from the Communications and Mass Media Ministry for
being inefficient.
bne:TMT
June 3, 2013
30. Russia's Mikron buys 12.5% in JV
with Rusnano for RUB2bn
bne
Russian microchip maker Mikron has acquired 12.5% of the
shares in a joint venture with state-run nanotechnology company
Rusnano for RUB2bn and increased its stake to 62.25%, the
company said, Prime reported.
Rusnano holds 37.25% in the JV called Sitronics - Nano, and the
remaining 0.5% share belongs to little-known firm Amex.
The deal was held within Mikron's production assets consolidation
program.
32. Sitronics IT to operate under NVision
brand in Ukraine from June 1
bne
Sitronics Information Technologies Ukraine from June 1 will
start operating under the NVision brand, according to a report by
NVision Group.
"In September 2012, Sitronics Information Technologies, including
the division in Ukraine, entered the united company NVision
Group. As part of NVision, the Ukrainian team has already
implemented a number of large projects," reads the report seen
by Interfax-Ukraine.
NVision Group develops information and communications
technology (ICT) solutions and services. In September 2012,
following a merger with the ICT assets of JSFC Sistema, the
united company NVision Group included Sitronics Information
Technologies and CJSC Sitronics Telecommunications Solutions.
The subsidiary of Sistema, OAO RTI, holds a 50% plus half a share
stake in NVision Group.
OJSC Sitronics in Ukraine and some other countries operated
under the brand Kvazar-Micro prior to 2009. The company's
activities include management consulting, the implementation
of enterprise control systems, system integration, software
development, and providing services and training.
33. The Western Paradox
Page 11
TeliaSonera and Ericsson The Swedish telecoms company
TeliaSonera has played a pivotal role in expanding the regime’s
internal surveillance within the country. Through it’s 38 per cent
share of Turkish operator Turkcell, which in turn has an 80 per
cent share of Life (Belarusian Telecom), the Belarusian regime has
been able to phone tap, track and trace the calls of anti-regime
activists. A particular example pertains to the presidential election
protests in December 2010 where the Life network supplied black
box surveillance equipment to the country’s security services.
This equipment enabled the regime to monitor phone calls between
the activists, intercept text messages and locate which activists
attended the protests on Independence Square. As a consequence,
activists were tracked down, arrested and prosecuted. Iryna Khalip,
a notable journalist and critic of the Lukashenka regime, represents
one of those activists who was detained by the authorities and later
handed a two-year suspended prison sentence.
Similarly, Ericsson, the Finnish telecoms company has also
helped the regime to increasingly spy on opposition activists. The
independent Belarusian new agency BelaPAN reported that the
company sold communications equipment to the regime vis-à-vis
the run up to and during the 2010 presidential elections. Andrei
Sannikov, a 2010 presidential candidate, disclosed that his phone
was tapped during the entirety of the presidential election campaign
that year. During his trial, the Belarusian authorities reviewed text
messages and phone conversations from Sannikov’s mobile phone,
which subsequently led to a five-year prison sentence.
Western governments Alongside the secret role of Western
telecom companies in Belarus, Western governments themselves
are hindering their own efforts to promote democracy and human
rights in the country. Notably, the training of the Belarusian police
force by their German counterparts in ICT software products is at
the centre of this development.
IBM manufactured software Analyst’s Notebook, used by European
police forces to process terrorist information, analyse complex
data sets and recognise criminal patterns, represents one of these
products which has been used by the Belarusian regime. The
Belarusian police force has confirmed that training in Analyst’s
Notebook software is used in day-to-day operations against
opposition activists within the social networking environment.
It is therefore important to distinguish between the words and
actions of Western actors. What has become clear, however, is that
there is a gulf between the two. If Western governments continue
to denounce the actions of the Lukashenka regime, their actions
must follow in the same direction. Furthermore, the European
Commission must stand up to Western corporations such as
Ericsson and TeliaSonera by restricting the sale of surveillance
technology which continues to endanger the freedom of speech of
individuals within Belarusian society.
New Eastern Europe
While Western governments continue to criticise the lack of
democracy and scope of human rights violations in Belarus,
it seems the governments themselves, alongside Western
technology companies are aiding its development. The telecoms
sector and online environment represent two key areas in which
Western hands are continuing to allow President Alyaksandr
Lukashenka to enforce authoritarian rule and breach human
rights.
34. VimpelCom: Analyst visit creates
positive impression
UralSib
Focus on data and operating efficiency. Yesterday, VimpelCom
bne:TMT
June 3, 2013
(VIP US – Buy) held an analyst meeting with the management of
its Russian business unit, which left us with a generally positive
impression.
VimpelCom Russia confirmed its focus on improving operating and
capex efficiency, as well as developing the data business.
Data network quality prioritized. With data becoming the major
revenue driver, management is committed to improving the data
network quality to compensate for the previous underinvestment
in the 3G network. It expects to close the gap in the quality
of the 3G network to its competitors in Moscow by the end of
this year and for most of the country in 2013-14, having set
the goal of achieving the best customer experience for high
ARPU subscribers in 2013-14 and for high- and medium-value
subscribers in 2015-16. VimpelCom’s retail strategy is based on
developing a mono-brand network which should reach parity in
terms of area with MegaFon and MTS by the end of 2014. The
excellence program to improve operations, which was launched
in 2011, has resulted in opex savings exceeding the initial target
of $150 mln by about 100% and management believes there are
Page 12
opportunities for further improvements in dealer commissions,
retail and headcount. Infrastructure sharing, which is helping
optimize capex, has become common: 95% of the transportation
networks and 30% of base station towers are co-invested. For the
LTE networks, infrastructure sharing will be even more intensive.
VimpelCom remains our preferred choice in the sector. The
meeting generally underpinned our positive view on VimpelCom,
which offers reasonable growth and secure cash flows. VimpelCom
remains our top-pick in the Russian telecom sector, with the other
two members of the Big-three, MTS (MBT US – Hold) and MegaFon
(MFON LI – Hold), being more expensive and Rostelecom looking
cheap but risky, given the change in management, lack of clarity
on strategy and focus on reorganization. Vimpel- Com is traded at
a discount of 17% to MTS and a discount of 26% to MegaFon on
2013E EV/EBITDA and offers 36% upside to our 12-month target
price of $14/ADR. We therefore reiterate our Buy recommendation
on the stock.
Konstantin Chernyshev
Sector snapshots
35. 25% of Russian Internet users make
36. Russian mobile retail report for 1Q13
online payments
- smartphone sales keep growing
bne
VTB Capital
A quarter of Internet users in Russia pay for services online,
and 30% of them are from the Moscow region, according to an
e-commerce market research sponsored by PayU Group, The
Moscow Times reported.
News: MTS has issued its regular report on mobile retail in Russia
for 1Q13. According to the company, the handset market (in units)
contracted 8% YoY and was down 26% QoQ due to the adverse
effect of seasonality. In value, the handset market increased 12%
YoY. The smartphone market (in units) was up 36%. The average
smartphone price went up 5% YoY and was flat QoQ. The share of
smartphone sales in the total value of the market increased 16pp
YoY to 78% (40% in units). MTS’s retail network was roughly stable
QoQ at 4,400 stores, of which 2,900 are owned.
A study, conducted in collaboration with Data Insight agency,
showed that to date in 2013, 50% of online payments were done
with a credit card, with an average amount of RUB2,800 ($89).
58% of such payments came from cities with over 300 thousand
residents.
The research showed that people under 35 were responsible for
61% of transactions, 56% men and 44% women.
"Every year, the number of Russians preferring online non-cash
payments is growing with a faster rate," Pyotr Kozyakov, a sales
director from PayU said. "With the introduction of high-speed
[Internet] and quality [Internet] links in the regions, one can expect
another boom in online payments," he added.
Every month, seven million Internet users in Russia made an
average of 3.8 payments, research showed.
Nearly half paid with a credit card (44%), while the rest used
electronic money (19%), online banking (19%), mobile phone
payments (8%), credit cards attached to virtual wallets (7%) and
SMS (3%).
Our View: We think the ongoing increase of smartphone sales as
a percentage of the total handset market is helping data growth.
MTS said that switching from a feature phone to a smartphone led
to a RUB 70-100 ARPU increase, which is a healthy 20-30% ARPU
expansion. We note that MTS pushed lower value smartphones in
1Q13, in order to increase penetration. As a result, smartphones
that cost RUB 1,500-5,000 (USD 50-150) contributed 37% of total
smartphone sales in 1Q13, up from 21% in 1Q12. The turnover
of financial services in MTS’s retail network tripled YoY in 1Q13
(including the issuance of MTS Dengi cards). The expansion of
financial services will, in our view, help the top line and customer
loyalty.
Ivan Kim
bne:TMT
June 3, 2013
Page 13
37. Russia’s mobile phone sales rise
38. Survey: 80% of Russians support
12% in January–March
development of e-government
bne
bne
Russia's mobile phone sales increased 12.4% on the year to
RUB49.1bn in January-March, major mobile operator MTS, which
operates its own monobrand retail chain, said in a report seen by
Prime.
About 80% of the Russian population supports the development
of e-government, a system aimed at making government
services available via the Internet, RIA Novosti's hi-tech and
telecommunications division Digit.ru reported late on Tuesday,
citing Russian Public Opinion Research Center's General Director
Valery Fyodorov.
Smartphone sales stood at RUB38.3bn, or 78% of the total sum,
up 42.5% from the same period a year earlier, MTS also said.
In terms of units, 8.7m mobile phones were sold in Russia in
January-March, which is 8.4% below the figures registered during
the same period of 2012, MTS said.
Of the total amount, smartphone sales grew 36.2% on the year to
3.5m units in January-March.
The average market price of mobile phones rose by 22.7% on the
year to 5,687 rubles in January-March, according to MTS.
According to the survey conducted by the public opinion research
center, 71% of citizens think that the e-government services are
necessary for paying for and solving issues with public utilities, 58%
believe them to be necessary in the healthcare, 50% believe them to
be necessary in social support, 46% believe them to be necessary for
communicating with the police, 45% believe them to be necessary for
solving transport problems, 42% would like to use them to seek jobs,
and 42% would like to use them for education services.
However, the quality of services has decreased, according to
the head of the e-government expert board Pavel Khilov. Half
of Russia's regions stopped providing e-government services
after receiving information that telecommunications operator
Rostelecom would share the authorities in the project with several
contractors, he said.
Regulation, reforms
39. Russian minister wants to distribute
all frequencies at auctions
If the full range is recognized as a limited resource, the
management of the frequencies will improve, and the decisionmaking process will be more transparent, the ministry said in the
statement.
bne
Russia' Communications and Mass Media Minister Nikolai
Nikiforov has suggested that all radio frequencies should be
recognized as limited resources and distributed at auctions, the
ministry said in a statement seen by Prime.
Under the current rules, separate bands could be recognized
as limited resources and put up for an auction. Other frequency
bands are mainly distributed through tenders.
The radio frequency commission has instructed a working panel to
prepare draft proposals on the matter to be submitted at the next
meeting.
Deputy communications minister Denis Sverdlov said earlier that
the distribution of all the radio frequencies at auctions will be
stipulated under the communications law, which is currently being
prepared. Under the proposed law, the operators will also be able
to sell the frequencies they have or exchange the bands.
bne:TMT
June 3, 2013
Page 14
Company results
40. IBS Group 4Q12 operating update:
revenue misses guidance
UralSib
Sales up 8% YoY to $198 mln. Yesterday IBS Group (IBSG – Buy)
published an operating update for 4Q12 (the quarter ended on 31
March 2013) which confirmed the trend of strong revenue growth
in the software development segment and limited growth in the
IT services segment. Consolidated revenues increased 8% YoY
to $198 mln. Total revenues for 2012 rose 6.6% YoY to $870 mln,
which was somewhat weaker than the guidance of 9-13%. No data
on profitability was disclosed.
Software development segment sales increase 18% YoY. Luxoft,
IBS Group’s software development unit posted 18% YoY revenue
growth to $86 mln (implying 19% growth in constant currency
terms) or 43% of total sales. Revenue in the IT Services segment
rose by just 1.1% YoY to $93 mln, which corresponded to 4% YoY
growth in constant currency terms. Of the total 2012 revenues,
67% were generated in Russia and the CIS, 17% in Europe and
16% in North America. The headcount increased 4.5% YoY to 8,597,
including 5,846 employees in the Software development segment.
Net debt rose 73% YoY to $41.4 mln due to the increase in working
capital in both of the segments the company operates in.
Terms of separate listing for Luxoft is key for minorities. IBS
Group’s 4Q12 trading update mostly confirms our positive outlook
for growth in the software business. That said, plans to IPO
Luxoft may represent a risk for current minorities in IBS, and
this would decrease exposure to the most rapidly growing part
of the company’s business and increase exposure to the more
sluggish part of the company’s business that is more vulnerable
to a slowdown in Russia’s economy. That said, fundamentally,
IBS shares are undervalued, traded at a 2013E EV/EBITDA of 4.6,
offering 22% upside to our target price of $29/GDR. We reiterate
our Buy recommendation for the stock.
41. IBS Group reports operating results
for the quarter and full year ended
March 31, 2013
IBS
Ramsey, the Isle of Man, 30 May 2013 — IBS Group Holding
Limited (IBSG:GR; IBSGq.DE), a leading software developer and IT
services provider in Central and Eastern Europe, today announced
its preliminary unaudited operating results for the fourth quarter
of the financial year ending March 31, 2013 as well as full year
ending March 31, 2012 (4Q and FYE March 31, 2013).
FYE March 31, 2013 hhighlights
· Consolidated revenues amounted to US$870.5 mn, a 6.6%
increase y-o-y, with growth in comparable revenues* of 10.9%
y-o-y.
· Revenues in the IT Services segment came to US$483.8 mn,
up 1.5% y-o-y. The segment’s comparable revenues* growth
amounted to 8.6% in US$ terms and 11.1% in Russian Ruble
terms.
· Revenues in the Software Development segment amounted to
US$314.6, up 16.0% in US$ terms and 18.9% in constant currency
terms.
· Revenues generated in Europe and North America amounted to
US$291.2 mn, and now account for 33.5% of consolidated Group
revenues against 31.4% a year ago.
· Our headcount reached 8,597, due to an increase of personnel in
the Software Development segment.
· Total debt amounted to US$56.5 mn, an increase of US$14.0 mn
y-o-y. The net debt position came to US$41.4 mn, up US$17.4 mn
y-o-y.
* Comparable revenues defined as revenues that exclude results of
OOO Borlas Group for the FYE March 31, 2012.
42. RBC 1Q13 preliminary financials
show unimpressive performance
UralSib
EBITDA loss in 1Q13. Yesterday, RBC (RBCM RX – Hold) released
1Q13 preliminary financial and operating results, which confirmed
our cautious view on the company. Revenues rose 21% YoY
to RUB1.2 bln ($39 mln) mainly driven by the consolidation of
RUCenter.
The company remained loss making on the EBITDA level with a
RUB72 mln ($2.3 mln) loss, roughly the same as last year.
All media segments post YoY revenue decline. RBC posted a
decline in media revenues across all major segments driven by
weak demand for advertising targeted at the business audience.
Internet revenues dropped 8% YoY to RUB489 mln ($16 mln),
including a 9% drop in advertising revenues (to RUB395 mln or
$13 mln) and a 4% YoY drop in services to RUB94 mln ($3 mln).
TV segment revenue dropped 2% YoY to RUB150 mln ($5 mln) and
print media revenues dropped 5% YoY to RUB179 mln ($6 mln).
Hosting revenues surged 222% YoY to RUB383 mln ($12 mln)
boosted by the consolidation of RU-Center.
Weak operating performance combined with high debt undermines
investment case. Despite decent revenue growth, the 1Q13 results
are weak considering the company posted a decline in media
revenues, which underperformed the general advertising market,
bne:TMT
June 3, 2013
including the important Internet market. The company’s high debt
load continues to remain a major concern, as servicing it will divert
cash flows from capex and the development of new projects. We
thus reiterate our Hold recommendation for the stock despite it
being traded at relatively low levels (just 3% above its 52 week low).
43. Yandex - Weekly internet search
share
Renaissance Capital
- Weekly share of Russia internet search data released. Today (27
May), LiveInternet released its Russian internet search engine
market share statistics for 20-26 May 2013. During the week
under review, the respective search shares of Yandex, Google (not
covered) and Mail.ru (BUY, TP $39.1, current price $29.1) were
61.9%, 25.9% and 8.6%.
- Yandex’s overall share of search solid. Yandex’s was ahead of
its four-week average of 61.5% and its three-month average of
61.8%. Google’s share for the week was below its four-week and
three-month averages of 26.3% and 26.0%, respectively. Mail.ru’s
share was just below its four-week and three-month averages,
both 8.7%.
- Yandex share on Chrome strengthens. Yandex’s share on
Chrome-based browsers rose to 53.4% for the period under
Page 15
review, ahead of its three-month average of 52.7%. At the same
time, Google’s share slipped to 33.1% share – below its threemonth average of 33.8%. On Google’s Chrome browser, Yandex’s
share stood at 47.8% – ahead of its three-month average of 47.4%;
while Google’s share of search on its own browser reached 40.3%,
remaining just below its three-month average of 40.8%. On mobile,
Yandex’s share of search on the Android platform stood at 35.9% –
ahead of its three-month average of 35.3%; while Google’s share,
at 61.9%, remained below its three-month average of 62.4%.
- Stock trading close to fair value. Having recently tested new
52-week highs, reaching $29.26/share last Monday (20 May), the
stock has sold off 9% over the week. However, even after this
profit taking, the stock remains up 35% over the past month on
the back of strong 1Q13 financials and continued solid operating
results and now implies only 2% upside potential based on our
TP of $27.6. With Yandex trading at 14.2x and 12.5x 2013E and
2014E EV/EBITDA, the stock is currently trading at 39% and 42%
premiums to Mail (10.2x and 8.8x on the same metrics),on our
estimates. Given that the operational outlook for both stocks looks
equally positive on a 6-12 month view, on a relative value basis, our
preference remains with Mail. Furthermore, with the current lockup on Baring Vostok’s remaining 10% stake in Yandex set to expire
on 11 June following the placement in March at $22.75/share, we
see some further placement risk which may place a limit on nearterm gains.
David Ferguson
Nick Robinson