Ruminations on Russia

Tuesday's IPO of Comstar UTS adds another stock to the list of recent Russian IPO's and to the more exclusive list of Russian companies listed on foreign markets which should be shorted (RBC and Rambler if you are interested are the others).

I have a copy of an analysts report on Comstar in my hands. It is specious nonsense. Other than a failure of editing the front page has me writing "rubbish" twice and placing a large line through an entire paragraph. No Mr. Spitzer in Russia.

I have been meaning to write a major piece on the Russian technology and telecom sector for a while - this has accelerated the requirement. If you wondered across this post by accident two lines of enlightenment. The analyst believes that Comstar's % penetration of broadband subs will soak up 50% of incremental subs and 49% of all Moscow broadband subscribers by end 2009. Today in no region of Moscow do they have more than 5% of broadband subs and they are the easiest competitor to steal subs from because their ADSL offer has about 60% reliability. An heroic assumption.

If you can bare with me let me have a quick go at the PayTV assumptions. These are not only heroic but have no basis in fact. As no one in Russia has yet worked how to sell premium PayTV assuming $18 of PayTV ARPU in 2006 is a little bit of a stretch. It's probably not wise to back a bunch of guys with 20 plus years in the Soviet telecom system to generate content that will drive meaningful premium PayTV uptake.

Oh and then I am asked to believe, and value, Comstar as the acquirer of Svyazinvest at privatization - get real.

Valued in the grey market at just over $3bn ($350mn more than the heroic analysts heroic assumptions) the GDR's dropped in when-issued trading. That's my trend line.

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