Both UFG and Morgan Stanley issued updated notes on Comstar UTS after they reported 1H (?) numbers.
Both focused almost exclusively on Comstar's failure to conclude the acquisition of the balance MGTS which is owned by the Government.
They managed to hide the almost complete failure of a very expensive marketing campaign to acquire pay-TV subscribers by including the real RUR/$ exchange rate as opposed to, well what precisely? One of the houses managed to cut its EOY pay-TV subscriber subs in half. That's right - they are precisely 50% less than forecast just three months ago - but that's OK because a new marketing campaign which does not focus on pay-TV might attract more broadband subscribers.
Having previously decided that most of Comstar's competitors would disappear, which their models continue to show, they are beginning to admit that the competition looks stronger than previously admitted. Albeit that they believe that one of the greatest threats to Comstar's broadband business is unbundling of the local loop.
In case the analysts ever get to read blogs - guys you need to take your head out of your ass. None of its competitors gives a flying f**k whether the local loop is unbundled this year, next year or indeed next century. ADSL is an old solution which is fairly irrelevant to the Moscow market. Do a straw poll on customer satisfaction, look at the up/down speeds which Comstar offers, compare this with its competitors and understand why this matters when offering more than just Internet. Understand the capex/opex costs in comparison with its competitors. Look at the network reliability, try to understand why subscriber uptake for pay-TV has been so poor and why it will continue to be so whilst companies slavishly follow US pay-TV models.
And then finally ask yourselves whether management is capable of responding to these challenges. I would suggest that Comstar might well be able to acquire MGTS - that is a core management talent. Running the business is much harder.
[composed and posted with ecto]
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