OREANDA-NEWS. March 17, 2010. Regulators have permitted Smolenskaya Mobile, a Tele2 subsidiary, to retain GSM licenses in three regions in which the company had failed to build out the required network in the time limit specified according to the license agreement, reported the press-centre of OTKRITIE Financial Corporation.

View: The government issued a series of GSM licenses in 2007 -- primarily to Tele2, Svyazinvest subsidiaries, and to Skylink (likely a future subsidiary  of Svyazinvest)-- which required the operators to build a certain number of base stations by the end of 2009. When this period expired, regulators brought a number of cases against those operators who had failed to fulfill their obligations. In February 2010, it revoked three licenses from Volga Telecom. The new-found willingness of regulators to negotiate with operators is good news for Svyazinvest, which has the bulk of cases that are still pending. 

Valuation: Regional telecoms trade on a 2010 EV/EBITDA in the range of 3.0x-4.3x. 

Action: We do not expect much reaction to this news, as the impending swap ratios will continue to drive dynamics (until they are finally announced). We reaffirm our view that even incorporating all mobile assets, there will be insufficient value in the combined Rostelecom to satisfy all shareholders.