On October 1, Vedomosti reported that Vimpelcom had applied to the Anti-Monopoly Service for permission to buy 49% in the Yevroset retail network, which had been taken over by businessman Alexander Mamut a week earlier.
For the record: Yevroset is the largest cellular retailer in the CIS. In 2007, the company posted revenues of USD 5.6 billion. The company operates a network of roughly 5,000 phone shops in more than 1,400 cities and towns.
Judging by the strategy adopted by Vimpelcom, it is unlikely that the company will make financial investments into Yevroset, even if it buys a stake lower than a controlling interest. It is much more likely that the operator is eyeing the retailer's extensive distribution network as a springboard to boost its market share.
Should this be the case, a serious realignment of forces on the market for new connections is not unlikely. It is clear that if Yevroset, along with its trade outlets, became reliant on just one of the ‘big three' phone operators, other phone companies would suffer. If Vimpelcom gains direct or indirect control over the retailer, MTS may emerge as the main loser.
However, we are not planning to alter our financial model for MTS until the press report is officially confirmed. We do not currently have a recommendation for Vimpelcom shares, while our recommendation for MTS shares is to BUY, with a target price for the shares of USD 15.34.
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