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bne TMT weekly ListExecutive Summary:
This is bne's Technology, Media, Telecoms newsletter, a list of the top stories in Emerging Europe this week. You can receive the list as a plain text or html email or as a pdf file. Manage your delivery options: click here: | ||
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| 1. Anonymous Hackers Target Putin Inauguration |
| RIA Novosti |
| 4 May 2012 Internet activists from the hacking group Anonymous vowed on Friday to attack Russian government websites ahead of the May 7 inauguration of President-in-waiting Vladimir Putin. The first target is the website of the Russian government, which was formed through deception and fraud, intoned a heavily-distorted voice on a YouTube clip featuring images of this winters mass anti-Putin protests. Join us! All it takes is a few simple actions to bring this rotten and corrupt system to its logical end. The Anonymous group has gained worldwide notoriety for its hacking activities, which have reportedly included shutting down the websites of the U.S. Department of Justice and the F.B.I. The loose alliance of hackers has also been accused of tapping into the phone lines of Scotland Yard and hack attacks against MasterCard, Visa, and Sony, as well as the governments of the U.S., U.K., Turkey, Australia, Iran and New Zealand. But Putin's spokesman dismissed the threat. "Taking into account the great experience of the special services and their effective work in countering hacker attacks, we hope that everything will be ok, " Dmitry Peskov told journalists. The Russian branch of Anonymous hacked and disabled earlier this year two websites belonging to regional branches of United Russia, the party Putin headed until last month. At least two demonstrations are due to take place in Moscow on the eve of Putins return to the Kremlin for a third term. Putin was forced to step down in 2008 by a constitution that forbids more than two successive terms, but is silent on further stints. Both last Decembers parliamentary polls and Putins landslide victory at March 4 presidential elections were marred by allegations of vote fraud. |
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| 2. Facebook files IPO papers read thru for Mail.ru |
| VTB Capital |
| 4 May 2012 The valuation of the company could be as high as USD 77-96bn, implying USD 28-35 per share. Facebook aims to sell 337mn shares, nearly half of which are primary ones, on 18 May. Facebooks high-end IPO valuation range creates upside risks to our SOTP valuation for Mail.ru Group (Buy, TP of USD 55). The company acquired 2.38% in Facebook in 2009-10. In our sum-of-the-parts valuation for Mail.ru (the owner of Russias #2 and #3 social networks OK and MyWorld, and 40%-owner in Russias largest SNS VK), we use a value of USD87.7bn (2011-1Q12 OTC market transaction average) to estimate Facebooks impact, which accounts for 20% of our SOTP valuation. This equates to the mid-point of Facebooks pre-IPO valuation range of USD 77-96bn. The valuation implies 2011 EV/EBITDA of 32-41x and 2012F EV/EBITDA of 27-34x (assuming 20% YoY growth in FY12 EBITDA) for Facebook. By way of comparison, we note Mail.ru Groups 2012F EV/EBITDA of 14.3x. Mail.ru may sell 11.27mn shares (22% of its shares in Facebook) ending up with a 1.5% stake in the global SNS; might raise USD 316-394mn at IPO. We also believe the IPO could: i) be a trigger for Mail.rus stock performance; ii) as Mail.rus 26% free-float is partly spread out among non-Russia dedicated funds, the latter may start exiting the stock to gain direct exposure to the largest global SNS story; iii) Mail.ru Groups still attractive valuation might attract new investors. The company might spend the cash on M&A, and increasing the 40% stake it already holds in Vkontakte (VK), Russias #1 social network, to a controlling one might be a key target, in our view. This would allow Mail.ru Group, which already is uniquely positioned on the Russian market via the two largest local SNSs, to benefit from consolidation and broadening in this segment. In 1Q12, FBs revenues rose 45% YoY, EBITDA was up 12%YoY while 1Q12 earnings fell 12% YoY (vs. +88% to USD 3.7bn, +78% to USD 2.079bn and 65% YoY to USD 1bn, respectively, in 2011). While Facebook still derives the lions share of its top line from online ads (89%), IVAS revenues (virtual gifts, revenue stream from SNS applications and social games) are catching up, and accounted for about 11% of the 2011 top line (up from 7% in 2010). As of March 2012, Facebook had 901mn monthly active users or 526mn daily ones, up 44% and 41% YoY, respectively, while in October it had some 13.4mn monthly users in Russia (the Russian interface was launched in June 2008). The key stakeholders in the company are Mark Zuckerberg, the co-founder and CEO (28%); Facebook employees and management (about one third).?????Anastasia Obukhova? |
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| 3. Mobile penetration in Russia starts declining in 1Q12 |
| UralSib |
| 3 May 2012 Total number of subscribers decreased by 1.8 mln The number of mobile subscribers in Russia contracted 0.8% QoQ to 225.8 mln in 1Q12 according to the AC&M report released yesterday. Total mobile penetration in Russia fell 1.2 ppt to 155.6% with Moscows penetration falling 3.6 ppt QoQ to 208.5% and penetration in St. Petersburg dropping 5.5 ppt QoQ to 210.0%. In the regions, mobile penetration declined at a somewhat slower pace, contracting 0.7 ppt to 145.3%. The decrease in the number of SIM cards indicates that the major operators have started shifting their focus more on client retention and away from aggressive customer growth, which we see as a positive trend, supportive for profitability across the industry in the near term. as all Big-3 operators posted a decline in subscribers. MTSs (MBT US Buy) mobile subscriber base in Russia declined 0.6% QoQ to 69.4 mln and that of VimpelCom (VIP US Buy) declined by 2.8% QoQ to 55.6 mln, while MegaFons subscriber base in Russia remained flat QoQ at 61.6 mln subscribers. MTS was the first of the Big 3 operators to stop aggressively attracting customers last year (its Russian mobile subscriber base dropped 3% YoY in 1Q12), which proved to be positive for the companys profitability as MTS posted the strongest EBITDA margin among the Big-3 operators in 3Q11 and 4Q11. VimpelCom followed MTS with subscriber growth decelerating from 4.3% QoQ in 2Q11 to 0.7% in 4Q11. As MegaFon seems to have joined the trend, competitive pressure on the highly saturated Russian market may subside. Positive for margins. We welcome stabilization of the mobile subscriber base in Russia as it reduces the risks of margin erosion in the industry due to high marketing costs. We remain positive on the fundamental prospects of the Russian telecom sector which generates healthy cash flows from traditional business, but should benefit from increasing demand for mobile broadband services. We reiterate our Buy recommendations for VimpelCom, MTS and Rostelecom, which are traded at a 2012E EV/EBITDA of 5.0, 4.1 and 4.2 and offer 6%, 38% and 38% upside potential to our target prices. VimpelCom shares are now cheaper than MTS and Rostelecom preferred shares remain our top-pick in the industry. |
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| 4. Mail.ru Group and VK may merge assets |
| VTB Capital |
| 30 April 2012 Mail.ru Group and VKs founders might combine their stakes in VK. Alisher Usmanov, who owns 27% in Mail.ru Group, has given an interview to Rossiya 24. According to him, Mail.ru Group (the owner of a 39.99% stake in Vkontakte (VK), the largest Russian social network) and Pavel Durov (one of VKs founders and the owner of about a 12% stake in it) might combine their stakes while giving the founder a controlling position over VK. Usmanov did not elaborate on the details of the agreement. Economic control in VK to Mail.ru Group and voting control to founder? Usmanovs statement might mean that Mail.ru Group is to obtain economic control over VK, while the founder gets the majority of the voting stake. The saga between Durov and Mail.ru Group seems to be coming to an end. In our view, this would allow Mail.ru Group, which is uniquely positioned on the Russian market via the two largest local SNSs, to benefit from consolidation and broadening in this segment. DST-type deal at Facebook: all votes to the founder. We note that during the interview, Usmanov mentioned his experience of entering Facebook via DST investment fund (controlled by Yuri Milner and Usmanov). According to him, DST worked out a so called DST-type deal: when an investor gives the votes to the founder while remaining the shareholder. Usmanov highlighted that giving votes to the founder of Facebook (while purchasing a stake in the largest global SNS) was, in his view, one of the key components that allowed DST to enter the transaction. Facebook founder Mark Zuckerberg currently owns 28% in Facebook while having 57% of votes. Mail.ru Group does not confirm any shareholding changes in VK. Dmitry Grishin, Mail.ru Groups CEO, quoted by Vedomosti, said that there had been no changes in VKs shareholding or the types of shares. In addition, Durov was quoted by Forbes as saying that he had found a common language with Usmanov who now supports VKs strategy. The rest of VKs shareholding is split between the Mirashvilli family (40%) and Lev Leviev (8%). Mail.ru Group to benefit from highly concentrated Russian SNS market. The Russian social network market is concentrated on three main networks: Odnoklassniki (OK), My World (Moi Mir) (both 100% owned by Mail.ru) and VK. Launched in 2006, VK is Russias #1 social network with 29.1mn monthly users vs 25.3mn for OK and 22.8mn at MyWorld. We believe that Russias growth potential will remain high until internet penetration converges to Western levels. VK accounts for 6% of our SOTP valuation of Mail.ru Group. We value the 40% stake in VK based on the most recent transaction value: in the summer 2011, the company exercised its option to acquire an additional 7.5% in VK for about USD 112mn, which equates to USD 1.5bn for the equity of the acquired company (considering that debt is immaterial). While we do not have VKs financials for 2011, Mail.ru Groups revenues generated by its social networks (with OKs users bringing in the lions share), amounted to USD 164mn (or one third of Mail.ru Groups FY11 revenues). Of this, 75% came from IVAS (almost doubled YoY), which includes revenue sharing from SNS games, e-commerce applications and the sale of virtual gifts, with the balance coming from online ad (+59% YoY). |
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| 5. Avito.ru gets $75m in additional funding |
| bne |
| 3 May, 2012 The website Avito.ru has received $75m in a new round of private-equity and venture-capital financing, the company said. It will use this funding to establish classifieds listings for more locations across Russia and roll out television and online advertising campaigns in those places. Avito.ru allows people to select a geographic location from a menu and then post ads. Currently, its business is in European Russia, with Chelyabinsk and Yekaterinburg its easternmost major cities. It has listings for eight other large cities, plus about 40 regions. Baring Vostok Private Equity Fund IV, created by Russia-focused investment firm Baring Vostok, and Accel Partners, a venture-capital firm with investments worldwide, provided most of the money in this round. Also contributing this time were Swedish investment firm Kinnevik and pan-Nordic venture fund Northzone, as well as Nordlander and his fellow Swede and Avito.ru co-founder, Filip Engelbert. |
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| 6. Dvorkovich sees Russia's future in IT, pharmaceuticals, cars, power |
| bne |
| 2 May, 2012 Russia's core growing economic sectors are IT, pharmaceuticals, car production, agriculture and power, including nuclear, presidential aide Arkady Dvorkovich said in an interview with RIA Novosti. Dvorkovich said Russia's place in the world economy has not significantly changed within the last four years. However, in car production and the pharmaceuticals sector, Russia was considered one of the largest markets for the foreign investors, he said. "Everyone understands that Russia is gradually becoming a strong player, otherwise we would not have faced such opposition while joining the WTO, referring to agriculture and automobile production; there would not be such a counteraction, if people did not understand that we can become a threat on the markets." Dvorkovich also said the major achievements of Medvedev's presidency were the beginning of modernization, which was later continued in the form of political liberalization, and the successful fight with the 2008-2009 economic crisis. |
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| 7. MTS returns to Turkmenistan |
| bne |
| 3 May, 2012 Cellular operator MobileTeleSystems says it is returning in Turkmenistan almost 1 1/2 years after its operations in the country were suspended, The Associated Press reported. According to Vladimir Yevtushenkov, chairman of the holding company that owns MTS, the services would be resumed within three to six months. The mobile-phone sector in Turkmenistan suffered crisis since late 2010, when authorities pulled MTS' license, leaving about 2.4m subscribers without service. That left government-owned Altyn Asyr as the only provider available to the population of 5m. Because of the poor quality of landlines, most people in Turkmenistan rely on mobile connections to surf the Internet, but speeds are dismally slow. MTS had proven popular for its marginally better service. |
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| 8. Sberbank's Website Rated Most Effective Russian Corporate Website by Bowen Craggs & Co |
| DGAP |
| April 26, 2012 Sberbank ranked first among Russian companies in FT Bowen Craggs Index of Corporate Website Effectiveness compiled by Bowen Craggs & Co., a renowned consulting company. Sberbank's website http://www.sberbank.ru ranked 37th and outperformed two other Russian companies included in the index - Gazprom (46) and Rosneft (70). Sberbank has significantly improved its website since 2009, when Sberbank climbed only to 60th position. 'Redesigned English version has become one of the most important innovations on our website,' - said Sberbank VP Yuri Rovensky. 'Now, complete information about Sberbank products and services is available to our English speaking client, and also navigation has improved.' The index covered 81 largest-cap companies from the United States, Europe and other countries of the world. Index was determined by adding points received by websites following analysis of a number of parameters, including user-friendliness of navigation, visual and text message, effectives of contacts and solving of interaction-related problems through FAQs, etc.??'We have approved a website development concept,' - emphasized Yuri Rovensky. 'Already this year, we will introduce a number of revolutionary improvements. This, first of all, includes interactive and multimedia components.' |
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| 9. VimpelCom to launch NFC service in St. Petersburg metro in May |
| bne |
| April 28, 2012 VimpelCom plans to launch mobile metro fare payments in St. Petersburg based on the Near Field Communications (NFC) technology in May, RIA Novosti reported. NFC technology enables data exchange between devices over a 10-centimeter distance. City authorities consider that mobile fare payments should be applied to all the types of the city's public transport. MTS said it is also considering the possibility to provide similar services. According to publications by MegaFon, its subscribers are able to make city transport fare payments via a special sticker equipped with a microchip that is connected to a cell phone. |
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| 10. Yandex aims to obtain 30% of Turkey's traffic |
| bne |
| May 2, 2012 Web search engine Yandex wants to become a major player in Turkey by accounting for 20-30% of the country's market share, Yandex' CTO Ilya Segalovich said in an interview with The Wall Street Journal. "The first stage of success will be to have 20-30% market share. If we can get to the end of the year 5% that would be great for us. So far we have less than 1%," Segalovich said, adding that business in Turkey offers strong possibilities for Yandex as well as great growth opportunities. In 2011, following Yandex' launch of a local Web search engine in Turkey in September, CEO Arkady Volozh said that the search engine was seeking to account for 20% to 30% of the total search traffic in the country. |
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| 11. Rostelecom to announce tender to set up retail chain |
| bne |
| 28 April, 2012 Rostelecom plans to announce a tender for the creation and management of a monobrand retail chain in the near future, President Alexander Provotorov said, cited by Prime. "We are now finalizing the tender documents, and will announce the tender soon," Provotorov said. He said earlier that the company planned to set up its monobrand retail chain comprising about 2,500 stores throughout the country within the next two years. In 2012, Rostelecom plans to launch 14 flagship stores in Russia that are to operate under the company's own brand, Provotorov said. |
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| 12. Air safety violations up 16% in 2011 |
| bne |
| 2 May, 2012 The number of air safety violations in 2011 went up 16%, from 124,000 in 2010 to 144,000 last year, due in part to higher numbers of checks by watchdogs, a Prosecutor General's Office official said, cited by The Moscow Times. Russia ranked as the most dangerous country in the world in which to fly in 2011, with nine crashes claiming 140 lives, surpassing even the Democratic Republic of Congo for aircraft-related fatalities. The top reason for airplane crashes in Russia is errors made by airline personnel, which are to blame in 80% of cases, experts say. The pilots were flying who had not had the necessary training and that flight schools do not have adequate numbers of teachers, planes or flight simulators, they add. |
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| 13. FAS finds VimpelCom and MTS guilty of price collusion |
| bne |
| 2 May, 2012 FAS has found VimpelCom and MTS guilty of price collusion on sales of Apple's iPhones, according to publications of Amsterdam-based VimpelCom Ltd., the sole owner of VimpelCom. The two operators face fines of 15% of their revenue, including income from iPhone sales. However, the antimonopoly watchdog has yet to decide on the fines, as VimpelCom and MTS had voluntary corrected the violations. In October 2011, the service opened a price collusion case against VimpelCom and MTS, after it had learned that prices for the iPhone 4 were the same in the majority of both operators' retail outlets and had not changed since September 2010. VimpelCom and MTS denied charges of collusion, saying that the prices of iPhones had been set in line with those of the market. |
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| 14. Auction for LTE frequencies: game to start soon |
| Alfa Bank |
| 6 May 2012 The Federal Telecommunications Inspection Service (Russian acronym: Roskomnadzor) yesterday announced the timing and published detailed conditions for the upcoming LTE auction. The application period was set from May 24 until June 14, with the final decision to be declared on July 12. Four lots will be at stake, each covering a frequency consisting of two 7.5 MHz bands within the 791_862 MHz range and implying countrywide service provision, with no regional lot separation. The winner of each lot will be chosen based on the number of scores collected, and the scoring scheme does not imply the opportunity for a single operator to win more than one lot. Scores will be assigned for the length of time that an operator has offered voice and data services, ownership of a fiber optic network, willingness to offer network access to other operators as MVNOs, etc. Participants will also be degraded for already having frequencies in the 2.3_2.4 MHz and 2.5_2.7 MHz ranges, given the coverage of the entire country. This concerns Scartel (Yota brand) and Osnova Telecom, while the Big 4 operators will not be cut in grade due to their having frequencies in the abovementioned ranges only locally. Each winner will also receive frequency bands in the 2,500_2,690 MHz, 720_750 MHz and 761_791 MHz ranges in accordance with the lot won. This implies usage of 2,530_ 2,570 MHz frequencies withdrawn from MTS and Cosmos TV, for which the two operators will obtain compensation of a respective R126.8 mln ($4.3 mln) and R274.1 mln ($9.3 mln) from each winner within 30 days after the auction is closed. Given the four lots traded, total compensation to MTS will exceed R500 mln ($17 mln), while Cosmos TV will receive more than R1,000 mln ($34 mln) for its frequencies. The timing for the LTE rollout is set to be seven years starting from 2013, with each winner providing technical opportunities for LTE service to all cities with a population of more than 50,000 by 2019. The minimum annual cost threshold for each operator is set at R15 bln ($0.5 bln) and the total investment is estimated at R485 bln ($16.5 bln) by 2019 for all four winners, Interfax reports. Troikas view: The announced terms are generally in line with our previous expectations. We consider the news to be positive for telecom companies, as it finally eliminates uncertainty over the timing of the LTE rollout in Russia. Moreover, the conditions published by Roskomnadzor shed more light on the possible winners of the auction, the latter likely being Russias Big 4 operators. Anna_Lepetukhina |
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| 15. Yandex Weekly search share data |
| Renaissance Capital |
| 2 May 2012 Weekly share of Russian internet data released: On Monday (30 April), LiveInternet released its Russian internet search engine market share statistics for 23-29 April. During the week under review, the search shares of Yandex, Google and Mail.ru were 60.0%, 26.3% and 8.7%, respectively. ? Yandexs share shows signs of stabilisation: Yandexs share is currently slightly below its four-week average of 60.2% and above its three-month average of 59.6%. Googles share of search is above its four-week average of 25.8% and its three-month average of 25.6%. Mail.rus current share is below its four-week average of 8.8% and its three-month average of 9.2%. ? Yandexs share on Google Chrome is stable: Yandexs search share on the Google Chrome browser currently stands at 44.1%, below its four-week average of 44.8% and above its three-month average of 43.4%. Googles share of search among Chrome users amounted to 39.8%, above both its four-week average of 39.1% and its three-month average of 39.4%. Currently Mail.rus share on the Chrome browser stands at 11.7%, slightly above its four-week average of 11.5%, but below its three-month average of 12.0%. Chromes share of the browser market is showing tentative signs of stabilisation following rapid market share gains; Operas share appears to be stabilising as well, but at a lower level. ? We continue to prefer Mail.Ru Group (BUY, TP: $48/share, current price: $43.2) over Yandex: We see it as positive that Yandexs share of search has stabilised, helped by a slowdown in the growth of the Chrome browser. Although Yandexs 1Q12 results were above our forecast, we believe uncertainty remains as to whether Yandex can deliver on FY12 consensus EBITDA margin forecasts. In the medium-term, we remain sceptical about Yandexs ability to improve its margins given competitive pressures. Shares in Yandex are currently trading at 16.7x and 13.8x 2012E and 2013E EV/EBITDA multiples, while Mail.ru trades at 17.9x and 14.3x 2012E and 2013E EV/EBITDA. We believe Mail.ru should trade at a slight premium; we prefer its more diversified business model and we see scope for Yandexs multiples to contract further, given that both companies have similar medium-term growth outlooks. In our view, ongoing media reports around Facebooks IPO could also contribute to a multiples expansion for Mail.ru. |
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| 16. Medvedev orders to end 'mobile slavery' |
| bne |
| 2 May, 2012 President Dmitry Medvedev wants to force mobile providers to let customers keep their cell-phone numbers while switching providers, his top economic adviser Arkady Dvorkovich said, cited by RIA-Novosti. "Mobile slavery" will be ended as a result of this measure, Dvorkovich said. FAS chief Igor Artemyev said that the government "can simply use its authority" to implement portability and that "the outlays by the [mobile] companies are minimal," RIA-Novosti reported. According to experts, portability probably wouldn't happen for "several years." If it comes into play, the service would increase competition for subscribers, they add. |
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| 17. Rostelecom reports strong 2011 results |
| bne |
| 28 April, 2012 Rostelecom posted a 7% increase in revenue and a 47% increase in net income for 2011, ramping up television and Internet services as part of strategies that are continuing this year, Vedomosti reported. According to the company's earning statement, Rostelecom revenue for last year was RUB296bn ($10.1bn) and net income was RUB46.1bn. The company had "significant growth" in revenue and net income "in spite of the newness of the merged company and the possible integration risks," Rostelecom president Alexander Provotorov said referring to company absorbing regional telecoms in 2011. The uptick in overall revenue came from corporate-subscriber and government-subscriber revenue, as well as from sales of broadband Internet services, say the analysts. This year, Rostelecom will be actively seeking market share in fixed-line broadband, wireless broadband and paid television services, experts add. |
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| 18. CTC Media 1Q12 US GAAP preview: strong growth, better profitability |
| Troika Dialog |
| 3 May 2012 CTC Media will report 1Q12 US GAAP results on May 3, which will be followed by a conference call at 17:00 Moscow time. We expect a strong set of financials, forecasting a 9.1% y_o_y boost in revenues to $180.6 mln and EBITDA rising 20.0% y_o_y to $55.4 mln (excluding stock_based compensation). Net income is expected at $32.4 mln, up 42.1% y_o_y. ? In 1Q12, CTC Medias channels showed encouraging dynamics in audience share. The targeted audience share of CTC, the companys flagship channel, was almost flat at 11.0%, while that of its niche channels, Domashny and Peretz, increased from a respective 2.0% and 2.8% in 1Q11 to 2.6% and 3.7% in 1Q12. This trend in the niche channels should translate to growth in inventory of around 30% on both Domashny and Peretz. On top of that, inventory growth should also see a boost from an increase in TV viewership in Russia in 1Q12, as both the amount of time people watch TV and daily reach have risen. ? That said, we do not think this inventory growth will be fully monetized, as there have been no signs that advertisers have been increasing ad spend in excess of that budgeted for this year. Thus, it is likely that some extra inventory has remained unsold. However, we still think that advertising revenues will be up around 11% y_o_y in 1Q12 in ruble terms. We also expect growth in sublicensing revenues to skyrocket y_o_y, as while the company had no premieres to sell to other channels in 1Q11, four premieres aired on the CTC channel in 1Q12. As a result, we expect total revenues in dollar terms to jump 9.1% y_o_y to $180.6 mln. ? Though it can be assumed that CTC Media will face an increase in amortization of programming rights and subsequent pressure on margins as a result of the four premieres, we argue that despite the lack of premieres in 1Q11, the companys programming expenditures were excessive, as it was airing blockbusters to support audience share. In addition, the company recorded impairment charges related to programming of around $8.6 mln in 1Q11, whereas we do not anticipate any meaningful impairment charges this quarter. Thus, we anticipate amortization of programming rights to be flat y_o_y, driving EBITDA before stock_based compensation up 20%. We forecast that the EBITDA margin excluding stock_based compensation will increase from 27.8% in 1Q11 to 30.7% in 1Q12. We also expect stock_based compensation to decrease y_o_y, and thus EBITDA including stock_based compensation should see even higher growth. ? We reiterate our positive outlook on the stock and think that, after delivering poor performance over several quarters, the company can at last post results that will cheer investors and trigger a stock re_rating. As our positive stance on the company should be validated by the results, we consider CTC Media our top pick in the media universe. |
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| 19. CTC Medias 1Q12 results strong, beat consensus estimates |
| Alfa Bank |
| 6 May 2012 CTC Media has released strong US GAAP results for 1Q12. Revenues reached $191.1 mln, up 15.0% from 1Q11, while advertising revenues increased 10.8% y_o_y. During the conference call, the management mentioned that the companys advertising revenues in Russia grew 14% y_o_y in ruble terms, outpacing the market, which is estimated to expand 8_10% driven by higher prices and TV viewership. The company also posted an outrageous performance in sublicensing revenues, which grew fivefold y_o_y due to greater content sales to Ukraine. The company posted strong EBITDA growth of 38% y_o_y to $55.1 mln in 1Q12, implying an EBITDA margin of 28.8%. This was far above the respective consensus estimates of $47.8 mln and 26.3%. For the same period, net income grew 43% y_o_y to $32.6 mln, exceeding the consensus by 17%. We had a much more positive outlook than the market, our earnings estimates being on the high end of the consensus and in line with the actual figures. The growth in inventory was partially due to TNS changing the measurement metric by adding more households with more than one TV set into the range. The company will now focus on the second half of the year and expects softer ratings in 2Q12 and early 3Q12, with a high pace of growth resuming in 4Q12 driven by primetime premieres and other promising launches. The full_year 2012 EBITDA margin is expected to decline to around 30%. Moreover, the management is considering a target audience shift from the 6_54 to 14_44 age demographic, but no earlier than in September 2012. Troikas view: We consider the results as positive for the share price. The programming strategy chosen by CTC Media seems promising in terms of strengthening audience share and has already started to bear fruit. If further launches meet the same success as in 1Q12 and 2H12, we may also see advertisers increase their spending and the company might return to investors radar screens. |
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