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Why Russian Telecom Stocks Tanked Today

By Brian D. Pacampara, CFA - Mar 3, 2014 at 1:53PM

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Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Mobile TeleSystems OJSC ( MBT -1.33% ) and VimpelCom Ltd. ( VEON -1.10% ) both plunged about 10% today after Russian soldiers advanced into Ukraine's Crimean peninsula over the weekend.

So what: MTS is Russia's largest mobile operator while VimpelCom (Russia's third-largest) generates about 40% of its business from the country, prompting investors to brace themselves for any potential hit to demand. Of course, the sell-off is naturally being exacerbated by funds looking to pull money out of Russia entirely, so shareholders shouldn't be too worried over today's double-digit beat-down.

Now what: I wouldn't pounce on today's plunge just yet. While bulls should certainly take Mr. Market's reaction today with a big grain of salt, the strong competitive and consumer demand headwinds that have been pressuring Russian telecoms over the past several months are certainly worth paying attention to. So unless you're willing to accept an inordinate amount of volatility, remaining on the sidelines seems prudent.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

VEON Ltd. Stock Quote
VEON Ltd.
VEON
$1.80 (-1.10%) $0.02
Public Joint-Stock Company Mobile TeleSystems Stock Quote
Public Joint-Stock Company Mobile TeleSystems
MBT
$8.13 (-1.33%) $0.11

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