FOCUS: Financial skills propel telecom managers to top positions

By Yekaterina Yezhova

MOSCOW, Oct 22 (PRIME) -- MegaFon will soon become the last of Russia’s top three mobile operators to change its general director within a year. Like in case with MTS, MegaFon is likely to get an executive with a strong financial expertise at the helm, which analysts explain by a trend of merging mobile and financial technologies.

MegaFon’s CEO Sergei Soldatenkov is quitting the company before his contract expires in 2019, after having worked with it for 20 years, since its creation. The board of directors recommended shareholders to support Executive Director Gevork Vermishyan as his replacement at a meeting on November 13.

“There have been rumors about a possible approaching resignation of Sergei Soldatenkov from the position of MegaFon’s general director since long ago, and the then Chief Financial Officer Gevork Vermishyan was said to succeed him. The rumors were partly confirmed when Vermishyan was appointed executive director in charge of operating activities and the company’s strategy (in late November 2017),” investment company Veles Capital analyst Artyom Mikhailin told PRIME.

“Such rearrangements were most likely made for a gradual and painless transfer of management functions. The other candidate for the CEO position was Chief Commercial Officer Vlad Wolfson. Vermishyan has been part of the operator’s top management since long ago and occupied more important positions, which is why we do not expect any strong worries among investors or subscribers during the change of the director and confirmation of Vermishyan’s candidacy.”

Soldatenkov said in a statement that he decided “that the time has come to hand the reins over to Gevork.”

“We have been conscious for a long time of the need for a management succession plan. With this in mind, we asked Gevork to take on the role of executive director last October, with a view to having me focus on strategy and government relations and having Gevork take on operational issues. In this way it was possible to gradually transit responsibilities to Gevork,” MegaFon’s head said.

Chairman of MegaFon’s board of directors Yevgeny Bystrykh said Vermishyan’s candidacy had the board’s unanimous support.

Investment company Freedom Finance analyst Anastasia Sosnova said the company has handpicked its own specialist, because “hiring a candidate of such qualification from outside could entail a noticeable reshuffle in the company that could result in a loss of top class specialists. Possibly, this is why the company decided to stick to continuity.”

“MegaFon’s potential new head has a profound background, and I think his appointment will do good to the company’s reputation,” she told PRIME.

Mikhailin at Veles Capital said a telecom company director should have skills and competences in the local telecommunications industry, ideally in the same company, and should have a vision and developed abilities to work in a constantly changing environment.

Group of companies Finam analyst Leonid Delitsyn said the operators need funding to upgrade networks and develop digital projects, this is why an effort of rejoining an exchange is probable. MegaFon withdrew from the London Stock Exchange earlier in October, and its free float on the Moscow Exchange is minuscule, meaning the operator could leave this floor soon as well.

“In this situation, it will be easier for potential new shareholders to see a single person at the helm of the company so that this person could always have financial results and structure of corporate finances close at hand. So, a financial director is a quite logical candidate to head the company in such a period,” Delitsyn told PRIME.

The analysts shared the opinion that the country’s telecommunications market is currently in a difficult situation and will have to undergo significant transformations in the future.

“The mobile connection industry is at the saturation point, and new vectors of development have naturally drawn attention, in particular, digital technologies. It’s worth noting that it is financiers who usually become general directors. A rumor circulates that the shareholders’ hopes are not only tied to the need to raise financial results, but also to invest in new technologies, integration of mobile and financial businesses,” Sosnova said.

VimpelCom, known widely under the Beeline brand, has become the first of the three market leaders, comprising also MTS and MegaFon, to change directors: VimpelCom’s sole owner, VEON, appointed Vasyl Latsanych, a former vice president for strategy and marketing at mobile operator MTS, as CEO of the Russian business in November 2017.

MTS was headed by Alexei Kornya, the operator’s vice president for finance, investment, mergers and acquisitions, in March.

Mikhailin said that while the change of directors in MTS was more likely necessary because of promotion of the then CEO Andrei Dubovskov to the leading position at multi-industry holding Sistema, the operator’s major shareholder, after its CEO Mikhail Shamolin headed the holding’s other asset, pulp and paper maker Segezha Group.

“The change of top management in MegaFon was well thought through,” the analyst said.

Delitsyn at Finam traced a certain trend in coming of new faces into the light. “Such replacements are typical of the times when shareholders are looking for a new strategy, but neither them, or consultants, or former management are sure that variants of this new strategy would truly improve the results,” he said.

“For example, former heads, connection professionals, have no reason to risk by persuading everyone that a new digital strategy would work and increase revenue. Like coaches of sports teams, who used to win matches in the past but are going through bad times now, they can look for new ways of development for themselves in other industries. On the contrary, a top manager who is given a chance to head a company would willingly take the risk, because if the new strategy works, he will win.”

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