Russian MTS sells Ukraine mobile operator to Bakcell

Russian leading telecom company MTS (MTSS RX, MBT US)
reported on Nov. 25 that it has agreed to sell its Ukrainian subsidiary
VF-Ukraine for a cash consideration of USD 734 mln and total EV of USD 848 mln.
The buyer is Bakcell, an Azerbaijani telecom operator. MTS said its board is
going to distribute part of its cash proceeds from the deal, about USD 413 mln,
into special dividends.

MTS acquired 100% of the shares in the Ukrainian
mobile operator in 2003-2014, paying total cash consideration of USD 378 mln. The
operator had a 1.8 mln customer base at the time of purchase, which has since
risen to 19.8 mln as of end-September 2019.

Alexander Paraschiy: The deal’s implied EV/12M OIBDA is just 2.8x, compared to MTS’
market-based indicator of 4.6x as of Nov. 21. Irrespective of the relatively
low exit multiple, MTS’ investment into Ukraine looks rather efficient. After
investing USD 378 mln into the purchase of Ukraine subsidiary’s equity in
2003-2004, MTS received USD 1,380 mln in dividends from it in 2010-2018, we
estimate. This cash flow, combined with the selling price, implies MTS has
earned dollar IRR of 20.5% from its investment in Ukraine. This looks like one
of the best investment stories out there.