OREANDA-NEWS. December 17, 2009. Russia's Ministry of Communication is reportedly preparing a tender for a 15MHz wide frequency band (in the 1700-1800MHz part of the spectrum). The frequency has already been freed across the country and the tender should be held in 1Q10, reported the press-centre of OTKRITIE FC.

View: In our view, this is very good news for Svyazinvest and bad news for MTS and VIP. If Svyazivest receives these frequencies, we estimate that it would require an investment of US2bn to build a sufficient network. Ten million additional clients would be needed to cover the investment costs, which is certainly achievable in a market with 200m Sim cards. It would be an uphill battle given the current level of market penetration, but the business case is sufficient to warrant a green light, in our view. 

Action: This news partially explains the recent strength of Svyazinvest subsidiaries versus the mobile operators, and we expect further weakness in MTS and VIP. We reiterate Buy ratings for both MTS and VIP, and recomend that investors use their weakness as a buying opportunity.