OREANDA-NEWS. October 12, 2009. MTS has announced the acquisition of a 100% stake in the handset retailer Teleforum for US11m. Teleforum has 180 stores in Russia out of which 50% are located in St.Petersburg, reported the press-centre of OTKRITIE FC.

View: This news confirms the view that it is MTS ‘strategy to build a strong distribution network in excess of 3000 stores. Because the large retail networks are either acquired or bankrupt, accomplishing this goal will entail several small size acquisitions and the opening of new stores by MTS.

The price per store is likely to remain stable, though the quality of the stores will probably decline. MTS lags about 6-12 months behind Vimpelcom in its retail chain buildout and is unlikely to match the size of Vimpelcom's distribution network. This is a major reason why the market assigns a premium to its valuations of Vimpelcom.

Valuation: MTS paid US 60k per Teleforum store, as compared to US 75k per store of Telefon.ru and US 60k per store of Eldorado. MTS trades at a 2009 EV/EBITDA of 5.9x, while Vimpelcom trades at 6.2x.

Action: The news is neutral for MTS stock.