Daily analyst comments
MTS to buy Multiregion?
24.03.10 15:26
The acquisition would allow the company to expand in the fixed-line telecoms segment and achieve a substantial synergy effect in cooperation with Comstar. We estimate the news as positive as the potential synergy effect on the transaction may exceed its value.
MTS was reported to have been in talks for the acquisition of Multiregion, a regional cable TV and broad band access operator. The sources value the transaction at USD 150 million. Aside from the Perm-based ER-Telecom, Multiregion is the only major independent broad band access operator on the Russian market. The company is represented in 37 Russian cities and has a base of around 300,000 broad band access users and over 850,000 cable TV users.
In our view, the negotiations fully fit into the MTS strategy to expand in the fixed-line phone segment, including broadband Internet access. Multiregion could be effectively incorporated into MTS, enabling the operator to achieve a synergy effect on cooperation with Comstar, its other asset. Operations by the two fixed-line operators overlap just in six cities; therefore, a synergy effect on a net discounted value is expected to be significant, at above USD 200 million, as cited by the same sources. We are upbeat on the possible acquisition of Multiregion, as the potential synergy effect on the transaction exceeds its value.
Our target price for MTS common shares is USD 12.2 per share at the end of 2010, with a BUY rating.