OREANDA-NEWS. February 11, 2010. The Big 3 domestic telecom companies have started discussions with the state-owned Russian TV & Radio Broadcasting Network (RTRS) to lease its towers for operations, Kommersant reported on Wednesday. Vimpelcom initiated the formation of a working group at the beginning of the year and received a favorable response from RTRS, which is in the process of expanding and upgrading its infrastructure in order to support the digitalization of television broadcasting, reported the press-centre of OTKRITIE Financial Corporation.

View: Leasing the network could reduce capex and allow operators to expand into more rural areas. However, the benefits would depend upon the terms of the lease, which are under discussion. Such discussions show that while the Big 3 are competing for subscribers, they can cooperate on network buildout. This is positive development for the mobile market in Russia, and our preferred play remains MTS. 

Valuation: MTS trades on a 2010 EV/EBITDA of 4.2x, while Vimpelcom trades at 4.4x. 

Action: We expect neutral market reaction, as talks are still ongoing.