INTERVIEW: Russia’s ER-Telecom to invest 6 billion rubles in 2012

Interview with ER-Telecom CEO Andrei Semerikov

MOSCOW, Feb 7 (PRIME) -- Russian wireline operator ER-Telecom plans to invest more than 6 billion rubles in 2012, slightly up from 2011, the operator’s CEO Andrei Semerikov said in an interview with PRIME on Tuesday.

In 2011, ER-Telecom allocated 6 billion rubles in investments to launch its services in 15 more cities, Semerikov said, adding that the company currently operates in a total of 42 cities. In 2012–2013, ER-Telecom plans to develop its existing networks, the CEO said, adding that the operator has no plans to expand its business to other cities. The total population of the cities, in which ER-Telecom currently operates, amounts to 35 million people, Semerikov said, adding that these cities have more than 10 million potential customers.

By expanding its operations to a total of 42 cities, the company successfully met its expansion goals for 2010–2011, Semerikov said, adding that ER-Telecom operated in 17 cities as of the end of 2009.

ER-Telecom’s user base grew by more than 1 million subscribers in 2011, while in 2012, the company plans to increase its user base by about 1.5 million subscribers, Semerikov said. “That is why the investment program is going to be a slightly bigger,” Semerikov said.

Under its strategy, ER-Telecom plans to account for 20% of the country’s broadband and pay TV market in terms of revenue by 2014, Semerikov said. The total investment in this project was planed at U.S. $500 million, he also said, adding that the company has already spent $300 million of the total sum and managed to get a 9%–10% market share.

Commenting on the losses and negative earnings before interest, taxes, depreciation, and amortization (EBITDA) the company showed in 2011, Semerikov said that ER-Telecom expected to already get a positive EBITDA of 300 million rubles minimum in 2012. Meanwhile, the company expects its revenue to increase 44.5% on the year to more than 14 billion rubles in 2012, the CEO also said, adding that the company expects its revenue to increase to 30 billion rubles in 2013.

“In 2012, the net profit is very likely to be negative, while in 2013 we expect to get a positive net profit,” Semerikov said.

Semerikov also said that ER-Telecom was considering making an initial public offering (IPO). “ER-Telecom is considering listing on an exchange but has not seen projects requiring the attraction of money in this way yet,” he said, adding that ER-Telecom perceives an IPO as an instrument rather than as a goal in itself.

ER-Telecom’s management currently estimates the company at more than $1 billion, Semerikov said, adding that in 2014, this value is expected to increase to $2.5 billion.

ER-Telecom’s CEO also said that the company sees almost no Russian cities, where it would like to launch its network. In the future, the company might expand its businesses to the countries of the Commonwealth of Independent States (CIS) or European countries, Semerikov said. ER-Telecom is examining the situation in those CIS and European countries, where low quality services come with high prices, he said. In April–June 2013, ER-Telecom plans to reconsider its strategy for 2015 and the following years, Semerikov said, adding that he does not exclude the possibility of buying a company in Europe or the CIS or expanding its businesses there on its own after an IPO in 2015 or later.

Semerikov stressed that ER-Telecom’s management has not considered buying any companies in the CIS or Europe or building networks there yet. “We are just looking and comparing the quality of services,” he said.

ER-Telecom, established in 1997, provides fixed-line telephone, broadband, and cable TV services.

(30.2324 rubles – U.S. $1)

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