OREANDA-NEWS. November 24, 2009. MTS, Vimpelcom, and Megafon, Russia’s ‘big three’ telecom operators, are set to negotiate with the Russian government for LTE frequencies, reported the press-centre of OTKRITIE Financial Corporation.

View: The strategy behind negotiating for LTE frequencies is to leapfrog the necessity of building 3G networks in Russia, and building LTE instead. This would require frequencies that were allocated for WiMax and also frequencies that should be freed by digitalization of TV. It is hard to quantify the level of capex that could be saved by skipping investments into a third generation network, however the end-product for the clients could put Russia on par with the most developed countries.

Valuation: MTS trades on a 2010 EV/EBITDA of 4.6x, compared to peers who trade at 5.0x.

Action: Success in negotiations for LTE licenses would be a positive development for Russia’s ‘big three’ mobile operators. Among them, our preferred play is MTS, and we reiterate a BUY rating for the stock.