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FOCUS: MTS pays 3.6 bln rbl for 25% of ticket market with 2 acquisitions

By Yekaterina Yezhova

MOSCOW, Feb 19 (PRIME) -- Branching out by MTS into online entertainment ticket services with the purchase of two firms, bringing the operator 25% of the event ticket market worth U.S. $1 billion, could pay off in terms of digital diversification, which is in line with the companys strategy, rather than in money, analysts say, adding that investors liked the deal despite its slightly excessive price.

Today MTS delivers a wide range of digital content: TV in various formats, mobile books, music, etc. With the ability to offer tickets to a range of live events, well be able to offer real-life experiences as part of our product range and do so with the benefits of discounts through our loyalty program, MTS Vice President Vyacheslav Nikolayev said in a statement.

Within our burgeoning app ecosystem and rising expertise in big data uses, our customers will be able to buy tickets directly from their mobile devices and receive personalized recommendations on interesting destinations and events.

MTS bought 100% of MDTZK, working under the brand, for 3.25 billion rubles, net debt included, from investors comprising Sergei Solonin, a founder of payment service Qiwi, and fund iTech Capital.

The operator also purchased a 78.2% stake in Kulturnaya Sluzhba, working as, whose 100% were valued at 495 million rubles, net debt included, via firm Cubichall from firms of the businesss co-founders Yury Sosnitsky and Vikenty Korsunsky, as well as from Buran Venture Capital.

Ponominalu.rus co-founder and CEO Mikhail Minin will keep the remaining 21.8% in the service with an option to sell his stake to MTS expiring in 2020.

Sberbank CIB said that is Russias second largest online event ticketing company after and is the leader in theater tickets in Moscow, while is the leader in concert ticketing and the fifth largest player on the countrys event ticket market.

The total addressable market is worth around $1 billion, with a split of 60% for theater tickets, 30% for concerts and 10% for the rest. About 80% of Ticketland.rus business is online, while it had around 80 offline points of sale in summer 2017. In addition to ticket sales at an average take rate of 10.5%, about 10% of revenues come from advertising and event promotion, the investment company said in a research note.

Finam analyst Leonid Delitsyn values the whole ticket market at 70120 billion rubles, depending on what is included there. Online sales account for 35% of all ticket sales in the country on average and 60% in Moscow and St. Petersburg. MTS says the companies will allow the operator to get 25% of the market, the analyst told Russian PRIME.

A bit costly, but worth the effort

The price of the deal seemed slightly excessive to Natalya Milchakova, deputy director of the analytical department of Alpari. According to our estimates, Ticketland.rus revenue for 2017 can hardly exceed 1.2 billion rubles, and MTS valued each ruble of revenue at 2.7 rubles. A purchase with the price-to-sales ratio of 2.7 is quite expensive, she said.

Perhaps MTS paid much for the services margin that reached 25% in 2016 and for its potential growth rates in view of the mobile operators subscriber base. Financial results of are not disclosed, but the service seemed to be a startup not so long ago. MTS probably counts on extremely high growth rates of this company with its subscribers.

MTS serviced the countrys biggest subscriber base of 78.5 million clients as of the end of September 2017.

Georgy Vashchenko, director of operations on the Russian stock market at investment company Freedom Finance, said that competition among online floors is high, and the market share of 25% does not guarantee a quick return on investment. Among the risks we could mention the governments initiative to regulate ticket touting, he said.

The strictest scenario is a ban on sale of tickets above the nominal value. In this case, the margin of resellers will not exceed 1015%, and some players may go bankrupt. But MTS now costs some $10 billion, and the volume of investments amount to $62 million. Even if they turn out to be a failure, there are no significant risks for the buyer, Vashchenko said.

The analysts agreed that entering the online ticket market was a right step for MTS as it will diversify its business. The deal complies with MTS so-called 3D strategy unveiled in March 2017 and grounded on the three pillars of data, digital and dividends.

Investors also welcomed the move as MTS common shares gained 2.3% on February 12, when the deal was made public, closing at 301 rubles, while the broader MOEX Russia Index went up 1.1%.

Delitsyn at Finam said tickets for entertainment events open a colossal horizon for cross promotion, and Milchakova at Alpari added that the acquisition expands the operators business in the new technologies industry and enables the company to raise incomes from digital services.

(56.3554 rubles U.S. $1)


19.02.2018 10:38
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