FOCUS: MTS rebranding points to no acquisition plans on M&A-ready mkt

By Yekaterina Yezhova

MOSCOW, Apr 10 (PRIME) -- Major Russian mobile operator MTS has spent 30 million rubles on a new brand to replace an egg with a square and keep the red colour while analysts said rebranding means abandonment of acquisition plans.

“I would say that the rebranding’s main signal is that MTS does not plan to acquire another connection operator, there were such assumptions,” investment company Finam analyst Leonid Delitsyn told PRIME.

“If MTS intended to expand dramatically on the back of acquisitions, it would probably get rebranded as a new company to communicate the ideas of a new epoch. MTS President Vyacheslav Nikolayev put it clearly in an interview to RBC Daily, ‘We are not in the process of an acquisition of any telecommunications company now.’

Delitsyn said the market was ripe for the acquisition of a couple operators with an ensuing rebranding of buyers.

Media reported in January that state-controlled telecom operator Rostelecom, which now owns the country’s fourth largest mobile operator Tele2, was in talks to buy MegaFon, the second largest mobile firm, from USM Group, but hit financial limitations. The most probable bidders are now Sberbank, VTB Bank, and Gazprombank, according to media sources.

VimpelCom, the country’s third major mobile operator, working under brand Beeline, is also about to have new owners as its current parent VEON intends to sell it to the local management. VimpelCom said it obtained a patent on March 13 to use a shorter version of its logo with a small letter “b” with a full stop.

Delitsyn said quoting media reports that neither MTS’ management nor the shareholders liked the previous brand that appeared in 2006. “However, they decided to trust the authority of London brand consultancy Wolff Olins. In those times many firms that positioned themselves as growing and advanced ordered branding in London, including the competing operators,” he said.

“Despite forecasts galore of a failure, the British were right. But the company did not like their visual emblem and now the moment has come to get rid of it.”

The company slightly revised the logo in 2019.

On March 30, MTS got a new logo in the form of a square of red color, which clients associate with the company, with the letters M, T, and S written along the perimeter. It was designed by agencies Signal (part of ONY), and BBDO, while agencies UtterDesign and Ony designed a new concept. The work cost from 20 to 30 million rubles, according to RBC Daily.

Nikolayev said the decision on the logo was not final, but it will be made soon. MTS will rebrand entirely with the first step being changes in the design of digital products and websites, while the signs and stores will change gradually within several years as they wear out in what financial company Freedom Finance Global analyst Vladimir Chernov called creeping rebranding.

“This means investment will not be high,” Chernov said, adding that financing will be stretched over time strongly.

Delitsyn at Finam said that the investors would be unhappy with high rebranding costs. MTS’ upper-end cost estimate is below similar costs of other operators.

“This is why the market did not react to it,” he said.

MTS’ shares added 0.58% on March 30 to 259.95 rubles when the rebranding news was announced. “The rebranding will hardly impact the company’s perception by investors because according to the operator’s research, its old brand enjoyed a 98% awareness,” Chernov said.

The company’s ordinary shares fell by 0.4% over the month, but gained 9.3% since the beginning of the year and closed at 257.45 rubles on the Moscow Exchange on April 7.

Chernov expects the stock to advance to 300 rubles in 12 months.

He also said that large companies rarely undergo rebranding since they have no problems with brand awareness. “I see not prerequisites now for rebranding of the other mobile operators,” he said.

(82.3988 rubles – U.S. $1)

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