Maybe, just maybe, Mobile TeleSystems
While Rich Smith laid out a pretty good case for Russia's telecom market being far from saturated, I have a slightly different view of that same set of facts. I agree that there are likely plenty of Russians who don't have cell phones. But my view is more along the lines that those who don't have phones yet probably won't be getting them any time soon. In other words, the low-hanging fruit has been plucked and it will take real economic improvement over a course of years to nudge these folks into the cell phone-having camp.
After all, Mobile TeleSystems' numbers do suggest something is afoot. Revenue was up about 22% over last year, but down 3% sequentially. Operating income was down for both comparisons and the EBITDA margin is looking a bit softer as well.
To be fair, Mobile TeleSystems is not pretending as though everything's fine. The prior CEO quit because of the poor results, and the new top kick is promising that they'll be "aggressive" in examining costs. To that end, the company did scale back its capital expenditure plans by a noteworthy amount. But one can still wonder about the true state of the overall industry. After all, VimpelCom
I really don't know whether the company can hit its self-made return on capital target of 25% -- that's a pretty robust target for any company. But I do know that well-run phone companies can make money even in markets where there isn't a lot of growth (like Deutsche Telekom
And at today's prices, it just might be worth the gamble.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
