Daily analyst comments

MTS not to acquire Kazakhstan’s Mobile Telecom Service


	MTS

Capitalization: 16 181 343 190,01 $

Common shares
Price	8,12 $
Target price	15,10 $

Price changing
week	month	year
-1,2%	-0,7%	29,3%

16.09.09 10:31

We are neutral about MTS’s withdrawal from a tender to acquire Kazakhstan’s third largest mobile operator: the idea of acquiring an operator that controls 6% of the market with 100% market penetration looks more like a marketing ploy that a business move.

On September 15, 2009, media reported that MTS had given up on the acquisition of a 51% stake in Kazakhstan’s third largest mobile operator, Mobile Telecom Service, operating under the Neo brand. For MTS, the acquisition would have been of no real economic benefit: ROI would not exceed 25%.

MTS’s withdrawal from the competition for Neo is not at all surprising: we have already said that the company’s entrance to the developed cellular communication market of Kazakhstan seemed more like a publicity stunt than a business initiative (for details, see our daily published July 20, 2009). MTS would have had almost no chance of winning any significant share of the Kazakh market because market penetration there is already 100%.

Our rating for MTS (RTS: MTSS) is BUY with a target price of USD 10.80 per share as of 31 December 2010.

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