Russian Fixed Line Tariffs to Incease by 11% in 2010
OREANDA-NEWS. On July 16, 2009 Economics Ministry published regulated tariff increase information in its economic prognosis for 2010-2012. In this study, local fixed line tariffs are estimated to grow 11% in 2010, 8.6% in 2011 and 7% in 2012, reported the press-centre of OTKRITIE FC.
View: Increasing the ceilings for the tariffs does not necessarily mean that the operators will be able to increase prices, since competitive mobile networks are likely to keep prices stable (or reduce them slightly). We think that Moscow represents a special case in which clients are far less price sensitive, thus the tariff increase could translate into an increase in revenue. For example, for a major player like Comstar, we estimate local calls to represent just 25% of consolidated sales in 2009E.
Valuation: Regional Telecoms trade at 2.5-3.2x EBITDA, while Comstar trades at 3.7x, based on consensus estimates for 2009.
Action: Though the news appears positive at first glance, the impact is limited.
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