WOOD Flash – Mobile TeleSystems: key takeaways from the investor day
MTS held an investor day yesterday (25 November). We appreciate MTS’ new strategy focused on convergence, further digitisation and automation, customer loyalty and the upselling of VAS, especially in terms of the pay-TV segment, where MTS plans to increase the number of customers from 4m currently to above 10m by 2022E, and financial services (MTS is targeting over c.10m customers by 2023E vs. 3m currently). However in our opinion, MTS’ strategy lacks some clarity on its financial targets, as the company only guides that it aims to generate growth in sales and OIBDA in 2020-22E. The dividend policy is also not fully clear and leaves a lot of flexibility for MTS in terms of the level of dividend payouts, as the only metric for the annual DPS is a minimum RUB 28/ordinary share (vs. RUB 28.66/ordinary share in 2019), with an aim of offering some upside. We see a dividend policy based on organic FCF as a more appropriate, sustainable and forecastable approach.Mobile Telesystems is a provider of mobile cellular communications services in the Russian Federation, Ukraine, Uzbekistan and Turkmenistan to consumers and corporate customers, employing technology based primarily on Global System for Mobile Communications (GSM). Co. had a mobile subscriber base of around 102.5 million (77.3 million in Russia, 20.4 million in Ukraine, 2.1 million in Turkmenistan, 1.6 million in Uzbekistan and 1.1 million in Armenia). In addition to standard voice services, Co. provides improved services, including voice mail, short message service, general packet radio service, and various SMS- and GPRS-based information and entertainment services.
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