Having considered options in the past to invest in emerging markets, the giant Russian operator, Mobile TeleSystems (MTS), has now turned its attention to forming links with a European operator.
Mikhail Shamolin, the CEO of MTS, confirmed to Dow Jones Newswires that the company is looking at several companies in Europe, but declined to reveal the names any of the potential targets.
The driver behind this move would seem to be a desire by the board of MTS to counter the discounted valuation of MTS shares --estimated by Shamolin at around 30 per cent--compared to its rivals. The company believes its poor valuation is due to fears from investors over Russia's weak judiciary, political corruption and worries over nationalisation.
Illustrating his reluctance to pursue opportunities in developing regions, the CEO pointed to the high cell phone penetration present today in many emerging markets and the number of operators already established in these countries. He pointed to India as an example: "There are currently too many competitors there, about 15. If and when it dropped to four or five, MTS would be more interested," he told Dow Jones.
However, commenting on the likelihood of any links or acquisitions removing the discount on MTS shares, Shamolin admitted he didn't have an answer.
At a local level, the CEO confirmed that the company was working towards the launch of a mobile payment service. The mobile wallet would enable subscribers to purchase Metro tickets and consumer goods, and would be linked to Russian banks such as Sberbank.
The CEO also declared that, while the Russian market is becoming more competitive following the entry from Sweden's Tele2, he firmly dismissed any notion that MTS would be sold: "Our shareholders wouldn't agree." The company is controlled by Sistema, a closely held Russian investment company with a 53 per cent holding in MTS's shares.
Separately, MTS, Vimpelcom, Beeline and Rostelecom have announced the appointment of a CEO, Alexander Volkov, to the consortium formed by the operators to test LTE. The unit has been formed to provide conclusions for the Russian telecoms regulator recommending the frequencies required for LTE in Russia.
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