It was in the reports of this company that these forecasts were presented at the beginning of this year, inbusiness.kz reports.
– Gauhar, your two reports on the difficulties in the sale of Kcell JSC and the sale of Mobile Telecom-Service LLP (the merged company Tele2/Altel) to foreign investors have become more relevant than ever. As we have seen, the majority of Kazakhtelecom shareholders at the annual general meeting of shareholders voted for the sale of Mobile Telecom Service LLP; there were 8.6 million votes for the sale option. Let's discuss your forecasts in light of recent events?
– As we previously noted in our analytical notes dated January 9, 2024 and February 12, 2024 regarding the telecommunications market of Kazakhstan, the sale of Kazakhtelecom JSC’s share in the mobile operator Kcell JSC is still unlikely, in our opinion. I'll explain why. Firstly, in the event of the sale of Kcell, Kazakhtelecom JSC will be left without a key income-generating asset. The second, no less important reason is the complex structure of shareholders of Kcell JSC, which includes, in addition to Kazakhtelecom JSC (51%), two other financial ecosystems - Jusan Bank and its owner Galimzhan Yessenov, who collectively own 23.95% of Kcell , and a structure allegedly affiliated with Timur Turlov, which, according to market data, owns more than 10% of Kcell. The third reason, in our opinion, is the growing importance of Kcell in the possible transformation of Kazakhtelecom itself. As we noted earlier, the new potential buyer of Tele2/Altel, the Qatari holding Power International Holding, will want to protect itself from the development of events that once happened to the Swedes in the Kazakhstan market, when through the issuance of new licenses for 4G frequencies, Kazakhtelecom JSC was able to significantly to win market share by 2018 from two private operators, which he sold in 2012. Qatari investors, with non-competition conditions as part of the deal in the form of possible moratoriums on new licenses, determined the situation in the telecommunications industry in Kazakhstan for the next 5 years. In turn, this leads us to assume that Freedom Telecom and Kar-Tel LLP (Beeline) will find more space for cooperation and convergence of their interests.
– Why is it so important for Kazakhtelecom to become a financial ecosystem?
– The telecommunications industry is increasingly stagnating in most of the world economy, and to be more precise, it has virtually no potential for growth in business margins. The heavy arms race of capital expenditures in new technologies only complicates the situation in this industry. We assume that to increase the capitalization of Kazakhtelecom, it is necessary to transform into an ecosystem that includes a marketplace with a wide logistics infrastructure, a streaming service, a banking license and a mobile operator. The interaction of all these structures can radically increase the number of unique users (Monthly Active Users or MAU), which will create the basis for revaluation of the company at new multiples. We believe that to achieve this task, Kazakhtelecom is suitable for purchasing the postal operator Kazpost JSC.
– In your report in April, you gave an analogy with the case of AT&T and T-mobile. Can you explain in more detail?
– Yes, indeed, there is a case on the international market regarding the history of the growth in the value of AT&T and T-Mobile. This precedent is important in terms of dividend expectations of minority shareholders, which in the future may affect the value of the company: today T-Mobile is trading with a capitalization of 27 of its profits, AT&T, in turn, 7 of its annual profits. T-Mobile has focused on technology upgrades through capital expenditures in recent years, while AT&T has followed the lead of minority shareholders by paying large dividends to shareholders and carrying out share buybacks. As a result, AT&T lost its competitive advantage and today looks much less attractive than its competitor T-Mobile. Therefore, in our opinion, Kazakhtelecom JSC today should refrain from large dividend payments and concentrate on diversifying its revenue.