Ukrtelecom grows DSL base 20% yoy as of April

Ukrtelecom (UTLM UK) reported its DSL subscriber base reached 1,406 ths as of early April (+4.7% qoq, +20.4% yoy), and said active marketing efforts were the key driver. The company added 63 ths customers over the 1Q, 70% more than in 1Q11 (+35 ths), but 24% less than the strong 4Q11 (+83 ths).

Alexander Paraschiy: Broadband is Ukrtelecom’s only growth segment, and the company fittingly directs all of its marketing efforts that way. The segment’s share of Ukrtelecom’s total revenues increased from 15% in 2010 to an estimated 18% last year. So far, the company has retained its leading position on the local DSL market (2.5x larger than its nearest competitor by customer base). The DSL segment is the most attractive one (ARPU is USD 10/month, many times more than in the fixed or mobile voice segments) and competition is ratcheting up: according to IKS-Consulting, Ukrtelecom’s share in the Ukrainian DSL market fell from 35% as of end-2010 to 25% at end-2011. This implies that the operator has no choice but sacrifice ARPU in order to grow its customer base, and we estimate ARPU will decline 10-12% this year and at even a faster rate afterwards. All in, we expect Ukrtelecom’s DSL revenues to grow 8-10% yoy in 2012, and remain flat in 2013.