OREANDA-NEWS. July 09, 2010. The CEOs of the three leading mobile operators in Russia – MTS, Vimpelcom and Megafon – reportedly sent a letter to the Ministry of Communications urging that the 4G frequencies be assigned via an open transparent auction rather than given to the military, reported the press-centre of OTKRITIE Financial Corporation.

View: The urgent request by the mobile operators shows that there is a serious threat that the 4G frequencies might first be handed over to country’s military establishment rather than be made available for the commercial use as soon as possible. One of the primary causes of the 5-7 year delay in the development of 3G networks in Russia was the unwillingness of the military to free up the necessary frequencies for commercial use. The risk that this situation is repeated with regard to 4G is negative news for the mobile operators in Russia. Having said that, we do not expect any impact on financials for next 3 years because mobile operators are currently able to serve the demand for data services with the existing resources. 

Valuation and Action: We expect a neutral or slightly negative impact on mobile stocks. We continue to assign BUY ratings to both Vimpelcom and MTS, with Vimpelcom as our preferred play in the Russian mobile universe.