Vedomosti reported on November 13 that there are rumors on the Kazakh wireless market about MTS gaining a foothold there. First and foremost, the possible sale of a 51% stake in Mobile Telecom Service by Kazakhtelecom is at issue. The business daily quoted MTS President Leonid Melamed as saying that "owners of the state's interest and private stakes in the company are aware our interest explicitly and in details. Therefore, they realize on what terms we are prepared to consider deals to acquire this company".
For the record. Four wireless companies operate in Kazakhstan. GSM Kazakhstan (the K'cell band, 51% is owned by TeliaSonera and 49% by Kazakhtelecom) holds 47.5% of the SIM card market, Kar-Tel (controlled by VimpelCom) 47.5%, Mobile Telecom Service (MTS, the Neo brand, controlled by Kazakhtelecom) holds 1.5% and CDMA-operator Altel 3.5%.
We are extremely upbeat on the company's efforts to expand into new markets. What's more, we view Kazakhstan as an appealing area from the standpoint of economic growth, GDP per capita and growth potential. The number of cellular users stood at 11.5 mln as of the end of September and penetration exceeded 75%.
Meanwhile, before detailed information is unveiled about the potential transaction, it is not possible to estimate its impact on the company's fair price. We reiterate our Buy recommendation on MTS at $12.75 per common share.
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