OREANDA-NEWS. March 17, 2010. Svyazinvest will reportedly develop an LTE network rather than WiMAX in the 39 regions in which it recently won frequencies in the 2.3-2.4GHz range, according to company sources cited by Vedomosti, reported the press-centre of OTKRITIE Financial Corporation.

View: We agree with the decision, as global mobile operators increasingly move toward LTE, WiMAX is increasing looking to be the also-ran of 4G technology. Although it is possible to switch from one to the other without great difficulty, this would still require 20-30% more capex than building an LTE network from the start. The primary technical obstacle will be that networks are required to be constructed using Russian-manufactured equipment. Svyazinvest is counting on current WiMAX manufacturers to be able to adapt to LTE. Since Svayzinvest does not have 3G technology, LTE could allow it to leapfrog into same-level technology as the Big Three in two years' time. 

Valuation: Rostelecom, which won the majority of the licenses, trades on a 2010 EV/EBITDA of 3.0-4.3x. 

Action: We reiterate our positive view on mobile operators relative to the incumbents, as we believe the two-year delay will be significant for Svyazinvest's ability to capture market share in the mobile data market.