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РБК-Украина
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Ukrtelecom — On the Way to Profit

ID (артикул):
4546
Автор:
Количество страниц:
11
Язык отчета:
Английский
Дата выпуска:
26.08.2011
Способ предоставления:
В электронном виде
Формат исследования:
Word

Executive summary

Ukrtelecom will finish 2011 with a net profit if its mobile division is sold at a price of USD 316 mln, as we expect. In this case, net income in 2011 will amount to USD 257.93 mln. However, if the deal does not go through before the end of the year, according to our forecast, the Company will suffer losses of USD 58.53. In 2008-2010, the Company  incurred losses that were explained by: rendering of universally accessible services that were unprofitable for the Company; fixed-mobile substitution that led to a decline in fixed-line revenues; constant increases in energy prices, which could not be offset by tariff hikes, as they are controlled by National Communications Regulatory Commission; devaluation of the Hryvnia.

Fixed line revenues continue to decline, influenced by competition from IP telephony and mobile communications. We assume that this tendency will be maintained, but its pace will slowed by -1% CAGR in 2011-2018. The number of fixed line subscribers is also declining; retaining existing subscribers as well as attracting new subscribers is becoming more and more complicated while not providing bundled fixed line services.

Provision of Internet services is the most successful division of the Company. Ukrtelecom’s market share in this segment equals 30%. The number of broadband Internet access subscribers in 1Q 2011 grew by 4.8% YtD – up to 1.189 mln. Over the past 4 years, the Company invested USD 218 mln in the development of broadband internet access that will result in a subscriber base increase in the future. The Company’s plans to launch a budget internet offer will also have a positive impact on the subscriber base. We expect that the number of subscribers will grow by 17.5% CAGR in 2011-2018.

To increase the Ukrtelecom’s efficiency, the decision was made to sell the company’s mobile divisionUTEL – at the AGM held on June 14. This decision entails changes that will affect the Company's revenue structure, where the revenues from mobile services account for a share of only 3%. Money raised from the sale of UTEL will be invested in the development of broadband Internet access.

Valuation. We used two different valuation methods – comparative valuation and the DCF method. The Company trades with the discount by P/S, EV/EBITDA and P/E multiples to its developed, emerging and Russian market peers, suggesting an upside of 17%. Our DCF method assumes a 90% upside. We recommend BUYing Ukrtelecom’s shares, with a target price of USD 0.087.

 

Applications:

 

Figure 1. Key indicators

Figure 2. Telecommunication sector revenues, UAH bln

Figure 3. Ukrtelecom’s revenues, UAH bln

Figure 4. Ukrtelecom's margins to net sales, UAH bln

Figure 5. Fixed telephone penetration, % of total population

Figure 6. Fixed telephone subscriber base, mln

Figure 7. Fixed internet penetration, % of total population

Figure 8. Fixed internet subscriber base

Figure 9. Fixed Internet market structure by the number of subscribers, 1Q2011

Figure 10. Mobile market structure by the number of subscribers, June 2011

Figure 11. Valuation summary

Figure 12. DCF model

Figure 13. Comparative valuation

Figure 14. Income statement\

Figure 15. Balance sheet

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