Even though many companies continue to see great success in the telecom market, the dire economy is giving just about every solid earnings report a mix of good and bad news. Even in faraway Russia, telecom firm Vimpel Communications
Just like peer Mobile TeleSystems
But while VimpelCom's results show that big can still be beautiful, the company clearly sees things changing rapidly, and is refocusing the business to accommodate. Anticipating further deterioration in the economy, VimpelCom is now primarily focused on paying down its debt load. To do this, the company will slash its capital budget for next year and is considering cutting back dividends paid to shareholders, instead directing that money to debt payments.
Normally, a cutback in expansion and a dire outlook on the future would send a stock reeling. But management's change in operating plans at the Russian carrier helped soothe some nerves, and VimpelCom's stock stayed stable following the release -- if you can call anything stable these days. Also, VimpelCom's stock has already plunged nearly 60% in the past three months as the company has taken on more debt and fought off rumors that its CEO would resign right as things were turning bleak.
While I do have to say a big "mea culpa" for favoring VimpelCom when it was priced at a premium earlier this year, it's hard for me not to recommend the Russian carrier at its discounted price today. While there are always significant risks in international investments, the potential reward from a fundamentally strong, well-run company like VimpelCom makes it more attractive to me than stateside peers like Verizon
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